nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒11‒12
twelve papers chosen by
Marc Klemp
University of Copenhagen

  1. The Macrogenoeconomics of Comparative Development By Quamrul H. Ashraf; Oded Galor
  2. A Long-Run Perspective on the Spatial Concentration of Manufacturing Industries in the United States By Nicholas Crafts; Alexander Klein
  3. Institutions and Other Determinants of Total Factor Productivity in Sub-Saharan Africa By David Fadiran; Olusegun A. Akanbi
  4. The Productivity Slowdown and the Declining Labor Share: A Neoclassical Exploration By Gene Grossman; Elhanan Helpman; Ezra Oberfield; Thomas Sampson
  5. Sustainability with endogenous discounting By John M. Hartwick; Ngo Van Long
  6. Migration, Congestion and Growth By Leonid V. Azarnert
  7. Economic and Statistical Measurement of Physical Capital with an Application to the Spanish Economy By F. J. Escribá-Pérez; M. J. Murgui-García; J. R. Ruiz-Tamarit
  8. A Model of Diversification and Growth in Developing Economies By Manuel Agosin
  9. Coordination Frictions and Economic Growth By Miroslav Gabrovski
  10. Economic Growth, Income Distribution, and Climate Change By Rezai, Armon; Taylor, Lance; Foley, Duncan K.
  11. Public Expenditure and Economic Growth in Togo By Koffi Yovo
  12. Roots of Autocracy By Oded Galor; Marc P. B. Klemp

  1. By: Quamrul H. Ashraf; Oded Galor
    Abstract: The importance of evolutionary forces for comparative economic performance across societies has been the focus of a vibrant literature, highlighting the roles played by the Neolithic Revolution and the prehistoric “out of Africa†migration of anatomically modern humans in generating worldwide variations in the composition of human traits. This essay surveys this literature and examines the contribution of a recent hypothesis regarding the evolutionary origins of comparative economic development, set forth in Nicholas Wade’s A Troublesome Inheritance: Genes, Race and Human History, to this important line of research.
    Keywords: comparative development, human evolution, natural selection, genes, race, the “out of Africa†hypothesis, genetic diversity
    JEL: O11 N10 N30 Z10
    Date: 2017
  2. By: Nicholas Crafts; Alexander Klein
    Abstract: We construct spatially-weighted indices of the geographic concentration of U.S. manufacturing industries during the period 1880 to 1997 using data from the Census of Manufactures and Bureau of Labor Statistics. Several important new results emerge from this exercise. First, we find that average spatial concentration was much lower in the late 20th - than in the late 19th - century and that this was the outcome of a continuing reduction over time. Second, the persistent tendency to greater spatial dispersion was characteristic of most manufacturing industries. Third, even so, economically and statistically significant spatial concentration was pervasive throughout this period.
    Keywords: manufacturing belt; spatial concentration; transport costs
    JEL: N62 N92 R12
    Date: 2017–08
  3. By: David Fadiran; Olusegun A. Akanbi
    Abstract: The primacy of factors of production, such as labour and capital, over Total Factor Productivity (TFP) in stimulating economic growth, has long been a contentious subject in discussions on the underlying causes of economic growth. While the roles of labour and capital have been exhaustively explored, TFP still has room for further exploration, more specifically in sub-Saharan Africa (SSA). This study empirically examines the link between institutions and TFP in SSA, while controlling for other frequently explored variables, for example, research and development, human capital, infrastructure and financial development. The estimations provided in the study are based on a panel of 26 sub-Saharan African countries over the period 1990–2011. We find that, while some of these factors affect TFP in the long-run, there is a consistent relationship with institutions as well. We also find that market-based institutions play a more prominent role than the more frequently explored political institutions.
    Keywords: Total Factor Productivity (TFP), economic growth, Sub-Saharan Africa, market-based institutions, Human Capital, financial development
    Date: 2017–10
  4. By: Gene Grossman; Elhanan Helpman; Ezra Oberfield; Thomas Sampson
    Abstract: We explore the possibility that a global productivity slowdown is responsible for the widespread decline in the labor share of national income. In a neoclassical growth model with endogenous human capital accumulation à la Ben Porath (1967) and capital-skill complementarity à la Grossman et al. (2017), the steady-state labor share is positively correlated with the rates of capital-augmenting and labor-augmenting technological progress. We calibrate the key parameters describing the balanced growth path to U.S. data for the early postwar period and find that a one percentage point slowdown in the growth rate of per capita income can account for between one half and all of the observed decline in the U.S. labor share.
    Keywords: neoclassical growth, balanced growth, technological progress, capital-skill complementarity, labor share, capital share
    JEL: O40
    Date: 2017
  5. By: John M. Hartwick; Ngo Van Long
    Abstract: We construct a dynamic competitive model with a stock of man-made capital and several stocks of natural resources and ask under what conditions consumption will be constant if in nitesimal households with heterogeneous preferences and endowments discount their utility ows at an endogenous rate that depends some macroeconomic variables. We show that for consumption to be constant, this function must be the marginal product ofcapital function. We demonstrate that Hartwicks Rule (that along the constant consumption path, resource rents must be invested in man-made capital) holds in a modi ed form that takes account of natural growth of resource stocks.
    JEL: Q01 Q32
    Date: 2017–10–30
  6. By: Leonid V. Azarnert
    Abstract: This article analyzes the effect of migration from a less advanced economy to a more advanced economy on economic growth. The analysis is performed in a two-country growth model with endogenous fertility, in which congestion diseconomies are incorporated. The model shows that out-migration increases fertility and reduces human capital in the source economy. At the same time, in-migration reduces fertility and can increase or decrease the average level of human capital in the host economy. I show how migration affects the inter-temporal evolution of human capital in the world economy. I also demonstrate that a tax imposed on immigrants in the host economy can increase human capital accumulation in the receiving and sending economies and the world as a whole.
    Keywords: migration, congestion diseconomies, fertility, human capital, growth, brain drain, brain dilution tax
    JEL: D30 F22 J10 O00
    Date: 2017
  7. By: F. J. Escribá-Pérez (Universitat de València (Spain), Department of Economic Analysis); M. J. Murgui-García (Universitat de València (Spain), Department of Economic Analysis); J. R. Ruiz-Tamarit (Universitat de València (Spain), Department of Economic Analysis and UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Empirical studies in macroeconomics and economic growth literature are highly dependent on the measure of the physical capital stock. The variables that contribute to explain the major problems in these areas of research always appear related, whether directly or indirectly, to capital stock and depreciation. The standard measurements of capital and depreciation are statistical measures based on assumptions about the average service life of capital goods, which are accumulated according to the perpetual inventory method. In this paper we propose an alternative method based on the equations that solve the dynamic optimization problem of the neoclassical firm. This method enables us to endogenously calculate the variables rate of depreciation and capital stock, yielding an economic estimation based on indicators of profitability such as the distributed profits and the Tobin's q ratio. This represents a change of paradigm in measuring capital and depreciation, which we supply along with an application to the Spanish economy. The results show an economic depreciation rate (endogenous) that fluctuates around the statistical rate (exogenous), and two time profiles for the economic and statistical capital stocks that are markedly different. In the context of a growth accounting exercise we show how capital intensity and total factor productivity play different roles in explaining growth over the past fifty years, depending on whether we are using statistical or economic measures. Finally, we analyze the paradox of productivity and conclude that the absence of positive correlation between investment in information and communication technologies and the rate of growth of total factor productivity may be due to a combination of the delay effect associated with such investment and the under-estimation of the true economic depreciation.
    Keywords: Capital, Depreciation, Growth, Slowdown, Total Factor Productivity
    JEL: C61 D92 E22 O47
    Date: 2017–11–02
  8. By: Manuel Agosin
    Abstract: I build a growth model that resembles the situation of many emerging/developing countries: they are far from the world technological frontier and they have a comparative advantage in one (or a few) primary commodity. Their great challenge is to introduce into the economy goods that are produced elsewhere in the world economy but the technology of which is unknown in the domestic economy. Building new sectors from scratch is hampered by two market failures. In the first place, entrepreneurs must be willing to invest in discovering production technologies abroad and adapting them to local conditions. This process has information externalities: the pioneers have to undertake investments in information that cannot be patented and that can easily be copied by others who haven’t made the investment (copycats). Second, there is a coordination problem. Success in establishing new industries is dependent on non-traded inputs that may serve a whole family of sectors (call them “infrastructure”, for short). In the absence of these inputs, no firms can emerge in any of the sectors composing a given family. This is a task that falls to an extra-market actor (call it the “government”). A simple model allows us to calibrate the conditions under which a government that balances its budget can succeed in maximizing growth. The solution involves subsidizing information investments of pioneers and taxing both the traditional sector and copycats in the modern sectors who may be induced to invest by the investment in information made by pioneers.
    Date: 2017–11
  9. By: Miroslav Gabrovski
    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. This 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.
    JEL: O30 O31 O32 O33 O40
    Date: 2017–10–26
  10. By: Rezai, Armon; Taylor, Lance; Foley, Duncan K.
    Abstract: We present a model based on Keynesian aggregate demand and labor productivity growth to study how climate damage affects the long-run evolution of the economy. Climate change induced by greenhouse gas lowers profitability, reducing investment and cutting output in the short and long runs. Short-run employment falls due to deficient demand. In the long run productivity growth is slower, lowering potential income levels. Climate policy can increase incomes and employment in the short and long runs while a continuation of business-as-usual leads to a dystopian income distribution with affluence for few and high levels of unemployment for the rest.
    Keywords: climate change, economic growth, integrated assessment, demand and distribution, energy productivity, unemployment
    Date: 2017
  11. By: Koffi Yovo
    Abstract: AbstractThis paper assesses the impact of the level and composition of public expenditure on growth in Togo. To this end, a neoclassical growth model was estimated using the Two-Stage Least-Squares method.The findings highlight that public expenditure during the period 1980–2009 had no significant positive effect on economic growth. However, public consumption had a negative impact and public investment a positive impact on growth. The maximum level at which public consumption becomes harmful to economic growth is estimated at 16%. Similarly, the minimum level of investment required to boost growth is estimated at 5.7%. All things being equal, a reallocation of public expenditure following the estimated optimal composition involves an additional increase in growth of 24%. Moreover, the study finds that increasing public expenditure involves a crowding-out effect, suggesting the need to review the way in which public expenditure can be financed more efficiently. Keywords:Public consumption, public investment, economic growth
    Date: 2017–02
  12. By: Oded Galor; Marc P. B. Klemp
    Abstract: Exploiting a novel geo-referenced data set of population diversity across ethnic groups, this research advances the hypothesis and empirically establishes that variation in population diversity across human societies, as determined in the course of the exodus of human from Africa tens of thousands of years ago, contributed to the di↵erential formation of pre-colonial autocratic institutions within ethnic groups and the emergence of autocratic institutions across countries. Diversity has amplified the importance of institutions in mitigating the adverse e↵ects of non-cohesiveness on productivity, while contributing to the scope for domination, leading to the formation of institutions of the autocratic type.
    Keywords: autocracy, economic growth, diversity, institutions, out-of-Africa hypothesis of comparative development
    JEL: O10 O43 Z10
    Date: 2017

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