nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒09‒17
twelve papers chosen by
Marc Klemp
Brown University

  1. Industrial Development and Long-Run Prosperity By Franck, Raphael; Galor, Oded
  2. Historical Antisemitism, Ethnic Specialization, and Financial Development By Francesco D’Acunto; Marcel Prokopczuk; Michael Weber
  3. Are Ideas Getting Harder to Find? By Nicholas Bloom; Charles I Jones; John Van Reenen; Michael Webb
  5. Patents and Growth in OLG Economy with Physical Capital By Bharat Diwakar; Gilad Sorek; Michael Stern
  6. A Dynamic Model of the Choice of Technology in Economic Development By Zhou, Haiwen; Zhou, Ruhai
  7. A note on 2-input neoclassical production functions By Gwenaël Moysan; Mehdi Senouci
  8. Heterogeneous Growth and Regional (Di)Convergence in Bolivia: A Distribution Dynamics Approach By Mendez-Guerra, Carlos
  9. Human Barriers to International Trade By Fensore, Irene; Legge, Stefan; Schmid, Lukas
  10. The relationship between trade openness and economic growth: The case of Ghana and Nigeria. By Moyo, Clement; Kolisi, Nwabisa; Khobai, Hlalefang
  11. Coordination Frictions and Economic Growth By Gabrovski, Miroslav
  12. Welfare Effects of Patent Protection in a Semi-Endogenous Growth Model By Tatsuro Iwaisako

  1. By: Franck, Raphael; Galor, Oded
    Abstract: This research explores the long-run effect of industrialization on the process of development. In contrast to conventional wisdom that views industrial development as a catalyst for economic growth, the study establishes that while the adoption of industrial technology was conducive to economic development in the short-run, it has had a detrimental effect on standards of living in the long-run. Exploiting exogenous geographic and climatic sources of regional variation in the diffusion and adoption of steam engines during the French industrial revolution, the research establishes that regions in which industrialization was more intensive experienced an increase in literacy rates more swiftly and generated higher income per capita in the subsequent decades. Nevertheless, intensive industrialization has had an adverse effect on income per capita, employment and equality by the turn of the 21st century. This adverse effect reflects neither higher unionization and wage rates nor trade protection, but rather underinvestment in human capital and lower employment in skilled-intensive occupations. These findings suggest that the characteristics that permitted the onset of industrialization, rather than the adoption of industrial technology per se, have been the source of prosperity among the currently developed economies that experienced an early industrialization. Thus, developing economies may benefit from the allocation of resources towards human capital formation rather than towards the promotion of industrial development.
    Keywords: Economic Growth; Human Capital; Industrialization; Steam Engine
    JEL: N33 N34 O14 O33
    Date: 2017–09
  2. By: Francesco D’Acunto; Marcel Prokopczuk; Michael Weber
    Abstract: For centuries, Jews in Europe have specialized in financial services. At the same time, they have been the victims of historical antisemitism on the part of the Christian majority. We find that present-day financial development is lower in German counties where historical antisemitism was higher, compared to otherwise similar counties. Households in counties with high historical antisemitism have similar savings rates but invest less in stocks, hold lower bank deposits, and are less likely to get a mortgage–but not to own a house–after controlling for wealth and a rich set of current and historical covariates. Present-day antisemitism and supply-side forces do not appear to fully explain the results. Present-day households in counties where historical antisemitism was higher express lower trust in finance, but have levels of generalized trust similar to other households.
    JEL: D91 G11 J15 N90 Z10 Z12
    Date: 2017–09
  3. By: Nicholas Bloom; Charles I Jones; John Van Reenen; Michael Webb
    Abstract: In many growth models, economic growth arises from people creating ideas, and the long-run growth rate is the product of two terms: the effective number of researchers and their research productivity. We present a wide range of evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore's Law. The number of researchers required today to achieve the famous doubling every two years of the density of computer chips is more than 18 times larger than the number required in the early 1970s. Across a broad range of case studies at various levels of (dis)aggregation, we find that ideas—and in particular the exponential growth they imply — are getting harder and harder to find. Exponential growth results from the large increases in research effort that offset its declining productivity.
    Keywords: economic growth, ideas, research effort, research productivity
    Date: 2017–09
  4. By: Nadia Cuffaro
    Abstract: In this paper we review the literature on inequality and growth, with a focus on land inequality, and apply meta-analysis to the subset of studies that have focused on the impact of land inequality on long term growth. Next we discuss the relevance of the issue, focusing on Africa. The literature on inequality and growth has firmly established a strong role of land inequality as a determinant of income inequality, and the negative impact of land inequality on long term growth, and also that inequality in assets ownership, once established, is very difficult to reverse. Land inequality negatively affects growth essentially in the long run and in the developing areas. Next, the article argues the contemporary relevance of the topic, through the example of Africa, where complex land markets and strong commercial pressure on land, including large scale land acquisitions by foreign investors, may result in land concentration.
    Keywords: Economic Growth, Land Inequality, Meta-Analysis, Meta Regression, Large Scale Land Acquisitions.
    JEL: Q15 O47
    Date: 2017–09
  5. By: Bharat Diwakar; Gilad Sorek; Michael Stern
    Abstract: We study the implications of patents in an overlapping-generations model with horizontal innovation of differentiated physical capital. We show that within this demographic structure of finitely lived agents, weakening patent protection generates two contradicting effects on innovation and growth. Weakening patent protection lowers the (average) price of patented machines, thereby increasing machine utilization, output, aggregate saving, and investment. However, a higher demand for machines shifts investment away from the R&D activity aimed at inventing new machine varieties, toward the formation of physical capital. The growth maximizing level of patent protection is incomplete and we show that shortening patent length is more effective than loosening patent breadth in spurring growth. Shorter patent length has an additional positive effect on growth by decreasing investment in old patents. Finally, we show that the welfare implications of shortening patent breadth depend on consumer time preference and the degree of machine specialization.
    Keywords: IPR, Patents, Physical Capital, Growth, OLG
    Date: 2017–09
  6. By: Zhou, Haiwen; Zhou, Ruhai
    Abstract: Abstract In this overlapping-generations model, there is unemployment in the manufacturing sector. Manufacturing firms engage in oligopolistic competition and choose technologies to maximize profits. With capital as fixed costs of production, increasing returns in the manufacturing sector exist. In the unique steady state, first, when individuals become more patient, the saving rate increases while the level of income of an individual decreases. Second, an increase in population or percentage of income spent on the manufactured good does not change steady-state technology while decreases the level of income of an individual. Third, an increase in the wage rate leads a manufacturing firm to choose a more advanced technology and the steady-state capital stock increases. Finally, an increase in the level of subsidy to technology adoption does not change steady-state technology.
    Keywords: choice of technology, overlapping-generations model, unemployment, economic development, increasing returns
    JEL: D43 O10
    Date: 2017–09–13
  7. By: Gwenaël Moysan (Global market solutions); Mehdi Senouci (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec)
    Abstract: In this short note, we show how the space of elasticity of substitution functions maps into the space of 2-input neoclassical production functions. In doing so we derive a general analytical formula for every 2-input neoclassical production function of class C2. We present a simple set of sufficient conditions for the Inada conditions to hold; and prove that the Solow model under capital-augmenting (or investment-specific) technical change is asymptotically balanced if and only if the capital share converges to a non-degenerated limit as the capital-labor ratio tends to infinity.
    Keywords: Labor share,Capital share,Production function,Elasticity of substitution,Solow model
    Date: 2016–12
  8. By: Mendez-Guerra, Carlos
    Abstract: Bolivia has experienced high economic growth rates in the last decade and a half. This fast growth, however, varies largely across its administrative regions. Considering this heterogeneous-growth context, this article documents the evolution of income disparities and convergence patterns of the Bolivian regions over the 1988-2014 period. In particular, using a distribution dynamics approach, this article evaluates both the long-run equilibrium and the transition dynamics of the cross-sectional distribution of regional GDP per capita. The main results show a clear pattern of regional divergence for the period 1988-2000. In contrast, the 2000-2014 period points to a much more complex pattern of (di)convergence: the long-run equilibrium distribution is characterized by both a process of convergence arising from the top and a process of divergence near its bottom tail. Overall, the evolution of the external shape of the distribution and the intra-distribution dynamics suggest that the process of regional growth in Bolivia may be characterized by at least two convergence clubs. Moreover, these clubs are identifiable in periods of both low and high national growth.
    Keywords: regional growth, convergence, distribution dynamics, Bolivia
    JEL: O40 O47 R11
    Date: 2017–08–30
  9. By: Fensore, Irene; Legge, Stefan; Schmid, Lukas
    Abstract: This paper investigates whether the relatedness of populations across the world shapes international trade flows. Using data on common ancestry for 172 countries covering more than 99% of global trade, we document that country pairs with a larger ancestral distance are less likely to trade with each other (extensive margin) and, if they do trade, they trade fewer goods and smaller volumes (intensive margin). The results are robust to including a vast array of control variables capturing other sources of heterogeneity, including micro-geographic, political, linguistic, and religious differences. We discuss the role of several determinants of trade that lead to this negative relationship, namely differences in trust, values, consumption structures, political institutions, technology, as well as recent migration networks. Exploring the robustness of our findings, we use detailed census information on ancestry and show that U.S. states trade significantly more with ancestrally close countries.
    Keywords: Ancestral Distance, Trade Barriers, Trade Flows
    JEL: F14 F15 O33
    Date: 2017–09
  10. By: Moyo, Clement; Kolisi, Nwabisa; Khobai, Hlalefang
    Abstract: This study purposed to determine the long run relationship between trade openness and economic growth in Ghana and Nigeria covering the period between 1980 and 2016. It incorporated investment, exchange rates and inflation as the additional variables. To test for stationarity of the data, the augments Dickey-Fuller (ADF) (Dickey and Fuller, 1981), the Phillips and Perron (1988) and the DF-GLS test proposed by Elliot, Rothenberg and Stock (1996) were used. The Autoregressive distributed lag (ARDL) model was employed in this study to examine the long run relationship between the variables. The findings of the study suggested existence of a long run relationship among the variables for both countries. The results further showed that trade openness has a positive impact on economic growth and significant at the 1% level in Ghana while in Nigeria trade openness has a negative but insignificant effect on economic growth. These results imply that different policy measures should be put into place for each of these two countries.
    Keywords: Trade Openness, Economic growth, ARDL, Nigeria and Ghana
    JEL: C1 F14 F41 F43
    Date: 2017–09–12
  11. By: Gabrovski, Miroslav
    Abstract: In practice, firms face a mass of scarce innovation projects. They choose a particular research avenue towards which to direct their effort, but do not coordinate these choices. This gives rise to coordination frictions. Our paper develops an expanding-variety endogenous growth model to study the impact of these frictions on the economy. The coordination failure generates a mass of foregone innovation and reduces the economy-wide research intensity. Both of these effects decrease the growth rate. Because of this, the frictions also amplify the fraction of wasteful simultaneous innovation. A numerical exercise suggests that the impact of coordination frictions on both the growth rate and welfare is substantial. This paper also analyzes firm-level data on patents which provide an estimate of the severity of the coordination problems and further evidence in favor of the hypothesis that research avenues are scarce.
    Keywords: Growth; Frictions; Coordination; Simultaneous Innovation; Search for Ideas
    JEL: O30 O31 O32 O33 O40
    Date: 2017–02–16
  12. By: Tatsuro Iwaisako (Graduate School of Economics, Osaka University)
    Abstract: This paper examines how strengthening patent protection affects welfare in a nonscale qualityladder model, which was developed by Segerstrom (1998) and generalized by Li (2003). In the Segerstrom-Li model, patent protection creates no distortion in static allocation among the production sectors. In order to examine the welfare effects of strengthening patent protection adequately, we incorporate a competitive outside good into the Segerstrom-Li model. In the general model, we derive the welfare-maximizing degree of patent protection analytically by utilizing a linear approximation of the transition path. The result shows that the welfare-maximizing degree of patent protection is weaker when the market share of the competitive outside good is psitive than when it is zero. In other words, evaluating the welfare effect of patent protection without considering the static distortion which it creates leads to excessive patent protection.
    Keywords: R&D; patent protection; welfare analysis; semi-endogenous growth
    JEL: O33 O34 O40
    Date: 2017–08

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