nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒10‒22
twelve papers chosen by
Marc Klemp
University of Copenhagen

  1. Capital-Skill Complementarity and the Emergence of Labor Emancipation By Quamrul H. Ashraf; Francesco Cinnirella; Oded Galor; Boris Gershman; Erik Hornung
  2. Explaining Inequality Between Countries: The Declining Role of Political Institutions By Andrew J. Hussey; Michael Jetter; Dianne McWilliam
  3. Keeping up with the Joneses: Other-regarding Preferences and Endogenous Growth By Petach, Luke; Tavani, Daniele
  4. Automation and demographic change By Abeliansky, Ana Lucia; Prettner, Klaus
  5. Between the Engine and the Fifth Wheel: An Analytical Survey of the Shifting Roles of Agriculture in Development Theory By Andersson, Martin; Rohne Till, Emelie
  6. Human capital, pollution control, and endogenous growth By Kirschbaum, Birgit; Soretz, Susanne
  7. The Role of Entrepreneurial Human Capital as a Driver of Endogenous Economic Growth By Ehrlich, Isaac; Li, Dunli; Liu, Zhiqiang
  8. Heterogeneity in the Internationalization of R&D: Implications for anomalies in finance and macroeconomics By Grüning, Patrick
  9. The Optimal Use of Exhaustible Resources under Nonconstant Returns to Scale By Kaniovski, Serguei
  10. Evolution of Institutions in Ghana and Implications for Economic Growth By Wisdom Akpalu; George Agbenyo; Emmanuel Maluke Letete; Mare Sarr
  11. Government Size and Economic Growth in an Endogenous Growth Model with Rent-seeking By Wadho, Waqar; Ayaz, Umair
  12. Procyclical endogenous taxation and aggregate instability By Mauro Bambi; Siritas Kettanurak

  1. By: Quamrul H. Ashraf; Francesco Cinnirella; Oded Galor; Boris Gershman; Erik Hornung
    Abstract: This paper advances a novel hypothesis regarding the historical roots of labor emancipation. It argues that the decline of coercive labor institutions in the industrial phase of development has been an inevitable by-product of the intensification of capital-skill complementarity in the production process. In light of the growing significance of skilled labor for fostering the return to physical capital, elites in society were induced to relinquish their historically profitable coercion of labor in favor of employing free skilled workers, thereby incentivizing the masses to engage in broad-based human capital acquisition, without fear of losing their skill premium to expropriation. In line with the proposed hypothesis, exploiting a plausibly exogenous source of variation in early industrialization across regions of nineteenth-century Prussia, capital abundance is shown to have contributed to the subsequent intensity of de facto serf emancipation.
    Keywords: labor coercion, serfdom, emancipation, industrialization, physical capital accumulation, capital-skill complementarity, demand for human capital, nineteenth-century Prussia
    JEL: J24 J47 N13 N33 O14 O15 O43
    Date: 2017
  2. By: Andrew J. Hussey; Michael Jetter; Dianne McWilliam
    Abstract: Within the fundamental determinants of cross-country income inequality, ‘humanly devised’ political institutions represent a hallmark factor that societies can influence, as opposed to, for example, geography. Focusing on the portion of inequality explainable by differences in political institutions, we decompose annual cross-country Gini coefficients for 95 countries (representing 85 percent of the world population) from 1960-2012. Since 1988, inequality has marginally decreased (from a Gini of 0.525 to 0.521) but the portion that cannot be explained by political institutions has increased substantially (from 0.411 to 0.459). Specifically, the explanatory power of institutions fell rapidly from the late 1980s to the early 1990s. This result prevails when using alternative variables, expanding the sample, weighting countries by population size, and controlling for the remaining fundamental determinants of income: culture and education. Over the same timeframe, the explanatory power of geographical conditions has been rising. This phenomenon appears to be global and is unlikely to be driven by contemporary regional events alone, such as the fall of the Soviet Union, Asian success stories (e.g., China), or institutional monocropping in Africa. A corollary of our finding implies that, if we hold societies responsible for their political institutions, inequality has become notably less fair since the late 1980s.
    Keywords: fairness of income inequality, fundamental determinants of development, international inequality, political institutions
    JEL: D63 D72 E02 O11 O43 O47
    Date: 2017
  3. By: Petach, Luke; Tavani, Daniele
    Abstract: We study a series of sustained growth models in which households' preferences are affected by the consumption of other households as summarized by average consumption. In endogenous growth models, the equilibrium paths involve lower savings and lower growth than the corresponding efficient paths. Both savings and growth are inversely related to the extent of social preferences. In semi-endogenous models, other-regarding preferences have no growth effects, but have positive level effects on the long-run research intensity, because they increase the market size for potential monopolists in the intermediate goods sector. To test the extent to which consumption is other-regarding, we use Consumer Expenditure Survey data: our identification strategy relies on a two-stage estimator that uses the Tax Reform Act of 1986 and the Omnibus Budget Reconciliation Act of 1993 as a positive and a negative consumption shocks to top incomes respectively. In the first stage, we use a difference-in-difference approach to exploit the exogenous variation in consumption caused by federal tax reform. We then use the predicted values for average within-cohort consumption by income deciles as an instrument to estimate the extent of social preferences. Our results point toward highly significant long-run `keeping up' effects on the order of 30%.
    Keywords: Keeping up with the Joneses,Endogenous Growth
    JEL: D12 E21 O41 O51
    Date: 2017
  4. By: Abeliansky, Ana Lucia; Prettner, Klaus
    Abstract: A standard theoretical framework of accumulation of traditional physical capital and automation capital predicts that countries with a lower population growth rate are the ones innovating/adopting new automation technologies faster. We test the model prediction using panel data for 60 countries from 1993 to 2013. Empirical estimates suggest that a 1% increase in population growth is associated with an approximate 2% reduction in the growth rate of robot density.
    JEL: J11 O14 O33 O40
    Date: 2017
  5. By: Andersson, Martin (Department of Economic History, Lund University); Rohne Till, Emelie (Department of Economic History, Lund University)
    Abstract: Over the last decade, attention to agricultural development in less developed countries has increased. However, two opposing views on its role in economic development exist within the scholarly debate, either as a potential engine for economic growth or as a fifth wheel unlikely to generate transformative growth. Taking these contrary opinions as a point of departure, this paper reviews the origins of prominent views of the role of agriculture in development theory. Next it bibliometrically assesses the pattern of fluctuating scholarly attention to agriculture, and attempts to understand the reasons behind this pattern. The paper identifies four influential views on agriculture in development theory; five distinct phases of ups and downs in the scholarly attention to agriculture and discusses five potential reasons behind these fluctuations.
    Keywords: agriculture; economic development; development theory; bibliometric analysis
    JEL: N50 O13 Q17 Q18
    Date: 2017–09–01
  6. By: Kirschbaum, Birgit; Soretz, Susanne
    Abstract: We analyse an endogenous growth model with pollution and abatement. Human capital is used in the production sector as well as in pollution control. We show that greener preferences may increase the pollution level, driven by the decrease in human capital intensity in the production sector and the human capital reallocation. This can help to explain why environmental quality in emerging countries frequently deteriorates.
    JEL: O1 O4 Q2 Q5
    Date: 2017
  7. By: Ehrlich, Isaac (University at Buffalo, SUNY); Li, Dunli (University College London); Liu, Zhiqiang (University at Buffalo, SUNY)
    Abstract: We model investment in entrepreneurial human capital (EHC) – the representative enterprise's share of production capacity allocated to investment in innovative industrial and commercial knowledge – as a distinct channel through which firm-specific human capital drives endogenous growth. Our model suggests that institutional factors supporting free markets for goods and ideas, and higher educational attainments of entrepreneurs and workers, enhance endogenous economic growth by augmenting the efficiency of investment in EHC rather than exclusively by themselves. We test these implications using data from Global Entrepreneurship Monitor's Adult Population Survey of 63 countries over 2002–2010 and find robust support for these hypotheses.
    Keywords: innovation, entrepreneurship, the market for ideas, human capital, endogenous growth
    JEL: L26 O31 O43
    Date: 2017–09
  8. By: Grüning, Patrick
    Abstract: Empirical evidence suggests that investments in research and development (R&D) by older and larger firms are more spread out internationally than R&D investments by younger and smaller firms. In this paper, I explore the quantitative implications of this type of heterogeneity by assuming that incumbents, i.e. current monopolists engaging in incremental innovation, have a higher degree of internationalization in their R&D technologies than entrants, i.e. new firms engaging in radical innovation, in a two-country endogenous growth general equilibrium model. In particular, this assumption allows the model to break the perfect correlation between incumbents' and entrants' innovation probabilities and to match the empirical counterpart exactly.
    Keywords: Heterogeneous innovation,Technology spillover,Endogenous growth,Creative destruction,International finance
    JEL: E22 F31 G12 O30 O41
    Date: 2017
  9. By: Kaniovski, Serguei
    Abstract: The paper offers a complete analysis of the welfare-maximizing capital investment and resource depletion policies in the DHSS model with capital depreciation and any returns to scale. We establish a general existence result and show that an optimal admissible policy may not exist if the output elasticity of the resource equals one. We characterize the optimal policies by applying an appropriate version of the Pontryagin maximum principle for infinite-horizon optimal control problems.
    JEL: C61 O38 Q01 Q56
    Date: 2017
  10. By: Wisdom Akpalu; George Agbenyo; Emmanuel Maluke Letete; Mare Sarr
    Abstract: This report discusses the evolution of institutions and compares the quality of key formal institutions (Political and Civil Liberties, Political Instability, and Property Rights) from Ghana’s colonial era to its post-independence. The Political and Civil Liberties and Political Instability are studies from 1820 to 2010, while Property Rights were analyzed for the periods 1849-2010. It has been found that, on average, the post-independent democratic regimes guaranteed the best political and civil liberties, and property rights. However, the democratic regime recorded the highest documented political instability, which includes number of lives lost, political arrests and assassinations, declaration of State of Emergency, and armed related attacks. Further analysis revealed that within the post-independent era, compared to the military regimes, democratic regimes registered significantly higher economic growth rate, all else equal. By implication, better political and civil liberties, and property rights institutions positively correlate with economic growth
    Keywords: Ghana, economic growth, Political instability, Civil Liberties
    Date: 2017–09
  11. By: Wadho, Waqar; Ayaz, Umair
    Abstract: We explore the relationship between government size and economic growth in an endogenous growth model with human capital and an unproductive capital which facilitates rent-seeking. With exogenous as well as endogenous time discounting, we find a non-monotonic relationship between the size of government and economic growth. We find that with very high (low) discounting, there is a unique low (high) growth equilibrium, regardless of the size of government. For the intermediate range of discounting, there are multiple equilibria and the growth outcome depends on the size of government. With endogenous time discounting, the growth outcome is path-dependent and depends on the level of inherited human capital. However, there is only one stable growth regime and the economy endogenously switches to it. When the institutional constraints on rent seeking are not extremely high, the stable regime is the one in which there is a high-growth equilibrium for a smaller size of the government and for larger size, both the high-growth and the low-growth equilibrium coexist. When the institutional constraints on rent seeking are extremely high, there exists only a unique high-growth equilibrium irrespective of the size of government. Furthermore, economies with bigger size of the government and/or with poor quality institutions will take longer to endogenously switch to this stable growth regime.
    Keywords: Government size,Rent-seeking,Economic Growth,Human capital,Discounting
    JEL: O41 H11 D72 D90 J24 O43
    Date: 2017
  12. By: Mauro Bambi; Siritas Kettanurak
    Abstract: The existing contributions on endogenous taxation, and balanced budget rules, suggest that countercyclical taxes should be avoided, because they may lead to aggregate instability (i.e. sunspot equilibria); on the other hand, procyclical taxes have always been praised for their stabilizing role. In this paper, we re-examine this issue in an endogenous growth model with productive government investment, and we prove that an economy with procyclical taxes, and a sufficiently large income effect, can still be characterized by i) global indeterminacy because two balanced growth paths may exist; ii) aggregate instability around the balanced growth path with the lowest growth rate. Finally, we show that this dynamics may emerge for reasonable choices of the parameters.
    Keywords: Endogenous growth, time-varying consumption tax, local and global indeterminacy.
    JEL: C62 E32 H20 O41
    Date: 2017–10

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