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on Economic Growth |
| By: | Samuel Bazzi; Martin Fiszbein; Mesay Gebresilasse |
| Abstract: | In a classic 1893 essay, Frederick Jackson Turner argued that the American frontier promoted individualism. We revisit the Frontier Thesis and examine its relevance at the subnational level. Using Census data and GIS techniques, we track the frontier throughout the 1790-1890 period and construct a novel, county-level measure of historical frontier experience. We document skewed sex ratios and other distinctive demographics of frontier locations, as well as their greater individualism (proxied by infrequent children names). Many decades after the closing of the frontier, counties with longer historical frontier experience exhibit more prevalent individualism and opposition to redistribution and regulation. We take several steps towards a causal interpretation, including an instrumental variables approach that exploits variation in the speed of westward expansion induced by national immigration inflows. Using linked historical Census data, we identify mechanisms giving rise to a persistent frontier culture. Selective migration contributed to greater individualism, and frontier conditions may have further shaped behavior and values. We provide evidence suggesting that rugged individualism may be rooted in its adaptive advantage on the frontier and the opportunities for upward mobility through effort. |
| JEL: | D72 H2 N31 N91 P16 |
| Date: | 2017–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23997&r=gro |
| By: | Montalvo, Jose G; Reynal-Querol, Marta |
| Abstract: | The relationship between ethnic heterogeneity and economic growth is complex. Empirical research working with cross-country data finds a negative, or statistically insigni cant, relationship. However, research at the city level usually fi nds a positive relationship between diversity and wages/productivity. Generally, the trade-off between the economic bene fits of diversity and the costs of heterogeneity implies that the relationship between diversity and growth depends on the size of the area used as the unit of observation. In this paper we perform a systematic analysis of the effect of the size of geographical units on the relationship between ethnic diversity and growth. We fi nd a positive relationship for small geographical areas and no effect for large areas and countries. There are potentially different mechanisms that can explain this result depending on the structure of the economy and its level of development. In the case of Africa, we argue that a possible explanation of the positive relationship between diversity and growth is the increase in trade at the boundaries between ethnic groups due to ethnic specialization. |
| Keywords: | Economic Growth; Ethnicity; Scale |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12400&r=gro |
| By: | Roland Hodler; Michele Valsecchi; Alberto Vesperoni |
| Abstract: | The effects of ethnic geography, i.e., the distribution of ethnic groups across space, on economic, political and social outcomes are not well understood. We develop a novel index of ethnic segregation that takes both ethnic and spatial distances between individuals into account. Importantly, we can decompose this index into indices of spatial dispersion, generalized ethnic fractionalization, and the alignment of spatial and ethnic distances. We use maps of traditional ethnic homelands, historical population density data, and language trees to compute these four indices for more than 150 countries. We apply these indices to study the relation between historical ethnic geography and current economic, political and social outcomes. Among other things, we document that countries with higher historical alignment, i.e., countries where ethnically diverse individuals lived far apart, have higher-quality government, higher incomes and higher levels of trust. |
| Keywords: | ethnic diversity, ethnic geography, segregation, fractionalization, quality of government, economic development, trust |
| JEL: | C43 D63 O10 Z13 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6720&r=gro |
| By: | Lopez-Uribe, Maria del Pilar; Castells-Quintana, David; McDermott, Thomas K. J. |
| Abstract: | The links between climate change, economic growth and economic development have gained increasing attention over recent years in both the academic and policy literature. However, most of the existing literature has tended to focus on direct, short run effects of climate change on the economy, for example due to extreme weather events and changes in agricultural growing conditions. In this paper we review potential effects of climate change on the prospects for long-run economic development. These effects might operate directly, via the role of geography (including climate) as a fundamental determinant of relative prosperity, or indirectly by modifying the environmental context in which political and economic institutions evolve. We consider potential mechanisms from climate change to long-run economic development that have been relatively neglected to date, including, for instance, effects on the distribution of income and political power. We conclude with some suggestions for areas of future research. |
| JEL: | J1 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:65147&r=gro |
| By: | Edwards, Jeremy |
| Abstract: | This paper investigates the Becker-Woessmann (2009) argument that Protestants were more prosperous in nineteenth-century Prussia because they were more literate, a version of the Weber thesis, and shows that it cannot be sustained. The econometric analysis on which Becker and Woessman based their argument is fundamentally flawed, because their instrumental variable does not satisfy the exclusion restriction. When an appropriate instrumental-variable specification is used, the evidence from nineteenth-century Prussia rejects the human-capital version of the Weber thesis put forward by Becker and Woessmann. |
| Keywords: | Human capital, Protestantism, economic history, instrumental variables |
| JEL: | C26 I20 N33 Z12 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:82346&r=gro |
| By: | Bazzi, Samuel; Fiszbein, Martin; Gebresilasse, Mesay |
| Abstract: | In a classic 1893 essay, Frederick Jackson Turner argued that the American frontier promoted individualism. We revisit the Frontier Thesis and examine its relevance at the subnational level. Using Census data and GIS techniques, we track the frontier throughout the 1790--1890 period and construct a novel, county-level measure of historical frontier experience. We document skewed sex ratios and other distinctive demographics of frontier locations, as well as their greater individualism (proxied by infrequent children names). Many decades after the closing of the frontier, counties with longer historical frontier experience exhibit more prevalent individualism and opposition to redistribution and regulation. We take several steps towards a causal interpretation, including an instrumental variables approach that exploits variation in the speed of westward expansion induced by national immigration inflows. Using linked historical Census data, we identify mechanisms giving rise to a persistent frontier culture. Selective migration contributed to greater individualism, and frontier conditions may have further shaped behavior and values. We provide evidence suggesting that rugged individualism may be rooted in its adaptive advantage on the frontier and the opportunities for upward mobility through effort. |
| Keywords: | American Frontier; Culture; Individualism; Persistence; Preferences for Redistribution |
| JEL: | D72 H2 J11 N31 N91 P16 R11 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12406&r=gro |
| By: | Hakeem, Mohammad Abbas |
| Abstract: | The world population has crossed the 7 billion mark and simultaneously much has been researched and said on the subject from the economic perspective videlicet linking population growth to economic growth. With booming population, however, one issue remains not adequately addressed which is the concentration of this population at certain geographic points - urban centres, cities. Therefore, I have chosen to analyse in this paper the effect of population density on development. With established economic models such as Solow's, we know that population growth drives economic growth. But, is the same true about increasing density of population? We would, here, discuss the notion that increased density would strain the resources, make infrastructure more susceptible to rivalry, and increase costs of provision of public goods. |
| Keywords: | Population density; cities; economic development; technology; public goods; environment |
| JEL: | J0 J11 O15 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:82301&r=gro |
| By: | Sampson, Thomas |
| Abstract: | This paper develops an idea flows theory of trade and growth with heterogeneous firms. Entrants learn from incumbent firms and the diffusion technology is such that learning depends not on the frontier technology, but on the entire distribution of productivity. By shifting the productivity distribution upwards, selection causes technology diffusion and in equilibrium this dynamic selection process leads to endogenous growth without scale effects. On the balanced growth path, the productivity distribution is a traveling wave with a lower bound that increases over time. The free entry condition implies trade liberalization must increase the dynamic selection rate to offset the profits from new export opportunities. Consequently, trade integration raises long-run growth. Dynamic selection is a new source of gains from trade not found when firms are homogeneous. Calibrating the model implies dynamic selection approximately triples the gains from trade compared to heterogeneous firm economies with static steady states. |
| JEL: | F12 O33 O41 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:62623&r=gro |
| By: | Cai, Jie (Shanghai University of Finance and Economics); Li, Nan (International Monetary Fund); Santacreu, Ana Maria (Federal Reserve Bank of St. Louis) |
| Abstract: | We develop and quantify a multi-country and multi-sector endogenous growth model in which comparative advantage and the stock of knowledge are endogenously determined by innovation and knowledge diffusion. We quantify the effect of trade liberalization on innovation, comparative advantage and welfare in a framework that features intersectoral production and knowledge linkages that are consistent with the data. A reduction in trade frictions induces a reallocation of innovation and comparative advantage across sectors: innovation reallocates towards sectors that experience larger increases in comparative advantage, and comparative advantage reallocates towards sectors with stronger knowledge spillovers. Furthermore, knowledge spillovers amplify the effect of a trade liberalization as countries and sectors benefit from foreign technology. In contrast to standard one sector models of trade and innovation without knowledge spillovers, we find significant dynamic gains from trade. These gains are mainly driven by innovation and knowledge diffusion across sectors and countries. |
| Keywords: | Technology Diffusion; R&D; Patent Citations; International Trade |
| JEL: | F12 O33 O41 O47 |
| Date: | 2017–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2017-029&r=gro |
| By: | Greenwood, Jeremy (University of Pennsylvania); Han, Pengfei; Sanchez, Juan M. (Federal Reserve Bank of St. Louis) |
| Abstract: | The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, VCs provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital; viz., the average cash-on-cash multiple and statistics by funding round concerning the success rate, failure rate, investment rate, equity shares, and the value of an IPO. Raising capital gains taxation reduces growth and welfare. |
| Date: | 2017–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2017-035&r=gro |
| By: | King Yoong Lim; Ali Raza |
| Abstract: | The complex interactions between imitation and innovation are frequently examined in endogenous growth models: imitation serves as a stepping stone to innovation; innovation exhibits spillover to imitation; for both, the accumulative stock provides a standing-on-shoulders e¤ect to further growth. However, empirical estimation of these concepts in true Romerian product variety interpretation is scarce. This is due to variety expansion often being treated only as imitative activities in the relatively popular Schumpeterian interpretation to innovation. Using an overlapping generations framework that models innovation and imitation as semi-symmetric ideas production functions, this paper estimates these spillover e¤ects using cross-country data by treating each 4-digit ISIC industries as a separate industrial variety. We find robust and significant estimates for all three spillover effects, with both imitation and innovation being complementary to each other. In addition, the growth regressions also reaffirm the significance of product variety expansion as a source of innovation-driven growth. |
| Keywords: | Growth, Ideas Production, Imitation, Innovation, Product Variety Expansion |
| JEL: | O11 O40 O47 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:205618545&r=gro |
| By: | Giorgio Fagiolo; Daniele Giachini; Andrea Roventini |
| Abstract: | This paper extends the endogenous-growth agent-based model in Fagiolo and Dosi (2003) to study the finance-growth nexus. We explore industries where firms produce a homogeneous good using existing technologies, perform R&D activities to introduce new techniques, and imitate the most productive practices. Unlike the original model, we assume that both exploration and imitation require resources provided by banks, which pool agent savings and finance new projects via loans. We find that banking activity has a positive impact on growth. However, excessive financialization can hamper growth. Indeed, we find a significant and robust inverted-U shaped relation between financial depth and growth. Overall, our results stress the fundamental (and still poorly understood) role played by innovation in the finance-growth nexus. |
| Keywords: | Agent-based Models, Innovation, Exploration vs. Exploitation, Endogenous Growth, Banking Sector, Finance-Growth Nexus |
| Date: | 2017–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2017/30&r=gro |