nep-gro New Economics Papers
on Economic Growth
Issue of 2017‒12‒18
twelve papers chosen by
Marc Klemp
University of Copenhagen

  1. UNREAL WAGES? REAL INCOME AND ECONOMIC GROWTH IN ENGLAND, 1260-1850 By Jane Humphries; Jacob Weisdorf
  2. The Long-run Effects of Agricultural Productivity on Conflict, 1400-1900 By Murat Iyigun; Nathan Nunn; Nancy Qian
  3. Economic Origins of Cultural Norms: The Case of Animal Husbandry and Bastardy By Christoph Eder; Martin Halla
  4. Between Malthus and the industrial take-off: regional inequality in Sweden, 1571-1850 By Enflo, Kerstin; Missiaia, Anna
  5. Institutional copying in the 20th century: The role of 14,000 British colonial officers By Valentin Seidler
  6. Openness and growth in a historical perspective: a VECM approach By Giovanni Federico; Paul Sharp; Antonio Tena-Junguito
  7. The Origins of Cultural Divergence: Evidence from a Developing Country By Ho, Hoang-Anh; Martinsson, Peter; Olsson, Ola
  8. Endogenous growth and global divergence in a multi-country agent-based model By Giovanni Dosi; Andrea Roventini; Emanuele Russo
  9. R&D, growth, and macroprudential policy in an economy undergoing boom-bust cycles By Claudio Battiati
  10. Evidence on finance and economic growth By Popov, Alexander
  11. The Nexus Between Key Macroeconomic Determinants and Economic Growth in Zambia: A Dynamic Multivariate Granger-Causality Linkage By Chirwa, Themba G.; Odhiambo, Nicholas M.
  12. Financial Development, the Choice of Technology, and Comparative Advantage By Gong, Binglin; Zhou, Haiwen

  1. By: Jane Humphries (Professor of Economic History, All Souls College, Economics and Business, University of Oxford); Jacob Weisdorf (Professor of Economics, Department of Economics and Business, University of Southern Denmark, DK-5320 Odense)
    Abstract: Historical estimates of workers’ earnings suffer from the fundamental problem that annual incomes are inferred from day wages without knowing the length of the working year. This uncertainty raises doubts about core growth theories that rely on existing income estimates to explain the origins of the wealth of nations. We circumvent the problem by building an income series of workers employed on annual rather than casual contracts. Our data suggests that existing annual income estimates based on day wages are badly off target, because they overestimate the medieval working year but underestimate the working year during the industrial revolution. Our revised annual income estimates indicate that modern economic growth began almost two centuries earlier than commonly thought and was driven by an ‘Industrious Revolution’.
    Keywords: England; Industrial Revolution; Industrious Revolution; Labour Supply; Living standards; Malthusian Model; Modern Economic Growth; Real Wages
    JEL: J3 J4 J5 J6 J7 J8 N33
    Date: 2017–12
  2. By: Murat Iyigun; Nathan Nunn; Nancy Qian
    Abstract: This paper provides evidence of the long-run effects of a permanent increase in agricultural productivity on conflict. We construct a newly digitized and geo-referenced dataset of battles in Europe, the Near East and North Africa covering the period between 1400 and 1900 CE. For variation in permanent improvements in agricultural productivity, we exploit the introduction of potatoes from the Americas to the Old World after the Columbian Exchange. We find that the introduction of potatoes permanently reduced conflict for roughly two centuries. The results are driven by a reduction in civil conflicts.
    JEL: D74 O13 Q34
    Date: 2017–11
  3. By: Christoph Eder; Martin Halla
    Abstract: This paper explores the historical origins of the cultural norm regarding illegitimacy (formerly known as bastardy). We test the hypothesis that traditional agricultural production structures influenced the historical illegitimacy ratio, and have had a lasting effect until today. Based on data from the Austro-Hungarian Empire and modern Austria, we show that regions that focused on animal husbandry (as compared to crop farming) had significantly higher illegitimacy ratios in the past, and female descendants of these societies are still more likely to approve illegitimacy and give birth outside of marriage today. To establish causality, we exploit, within an IV approach, variation in the local agricultural suitability, which determined the historical dominance of animal husbandry. Since differences in the agricultural production structure are completely obsolete in today’s economy, we suggest interpreting the persistence in revealed and stated preferences as a cultural norm. Complementary evidence from an ‘epidemiological approach’ suggests that this norm is passed down through generations, and the family is the most important transmission channel. Our findings point to a more general phenomenon that cultural norms can be shaped by economic conditions, and may persist, even if economic conditions become irrelevant.
    Keywords: Cultural norms, persistence, animal husbandry, illegitimacy.
    JEL: Z1 A13 J12 J13 J43 N33
    Date: 2017–12
  4. By: Enflo, Kerstin (Department of Economic History, Lund University); Missiaia, Anna (Department of Economic History, Lund University)
    Abstract: The causes and extent of regional inequality in the process of economic growth are at the core of historical economic research. So far, much attention has been devoted to studying the role of industrialization in driving regional divergence. But empirical studies on relatively unequal countries such as Italy or Spain show that inequality was already high when their modern industrialization began (Felice, 2011; Rosés et al., 2010). This paper studies the extent and drivers of pre-industrial inequality for the first time with reference to a pre-industrial European economy. Using new estimates of regional GDP for the regions of Sweden for the period 1571-1850 (Enflo and Missiaia, 2017), we find that regional inequality increased dramatically between 1571 and 1750 and stayed high until the mid-19th century. This result discards the view that industrial take-off was the main driver of regional divergence. Decomposing the Theil index for GDP per worker, we find that the bulk of inequality from 1750 onwards was driven by structural differences across sectors rather than different regional productivity within sectors. We then show that counties with higher agricultural productivity followed a classic Malthusian pattern in its population dynamics when experiencing technological advancement, while ones with higher industrial productivity did not. The difference in the two sectors is what boosted pre-industrial regional inequality. We suggest that institutional factors such as the creation of the Swedish Empire, the monopoly trading rights for Stockholm and the protective industrial policy explain this exceptional pattern.
    Keywords: regional GDP; Sweden; long-run regional inequality; pre-industrial regional development; Malthusian dynamics
    JEL: N01 N13 N93
    Date: 2017–12–12
  5. By: Valentin Seidler (University of Warwick (Visiting Fellow 2016/17))
    Abstract: Did individual British officers determine the institutional development of former colonies? The article presents a new research program into institutional reform and economic development based on a newly established dataset of over 14,000 biographical entries of senior colonial officers in 54 British colonies between 1939 and 1966. The rich data permit a new methodological approach towards the question of how institutions are copied into countries with a radical focus on the individual actors involved in the institutional reforms before independence. The article discusses fundamental background information on the British colonial service in the 20th century and presents first preliminary analyses from within the new research agenda.
    Keywords: JEL Classification:
    Date: 2017
  6. By: Giovanni Federico (University of Pisa, CEPR); Paul Sharp (University of Southern Denmark, CAGE, CEPR); Antonio Tena-Junguito (Universidad Carlos III Madrid)
    Abstract: Since Adam Smith, most economists have held the belief that trade fosters economic growth, although it has not been possible to establish a strong causal relationship. The results of growth regressions are, at best, mixed, and several historical studies have found a positive relationship between tariffs and economic growth in the nineteenth century. This paper adopts a different strategy. We look for cointegration between GDP per capita and openness for about thirty countries since 1830. About half return no cointegration – i.e. no relationship. The rest show mixed results, which change through time. An ordered probit model suggests that significantly positive relationships are more likely at low-to-middle income levels.
    Keywords: Openness, growth, VECM, cointegration, trade
    JEL: F1 N1 N7
    Date: 2017–12
  7. By: Ho, Hoang-Anh (Department of Economics, School of Business, Economics and Law, Göteborg University); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Olsson, Ola (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Cultural norms diverge substantially across societies, often even within the same country. In the present paper, we study the voluntary settlement hypothesis, proposing that individualistic people tend to self-select into migrating out of reach from collectivist states towards the periphery and that such patterns of historical migration are reflected even in the contemporary distribution of norms. During most of the first millennium CE, the modern north of Vietnam was under an exogenously imposed Chinese rule. From the eleventh to the eighteenth centuries, historical Vietnam gradually expanded its territory to the Mekong River Delta through various waves of conquest and migration. In contrast to some recent research, we find very little support from historical sources for any major discontinuities in this territorial expansion. Combining archives with household survey and lab-in-the-field experiment, we demon- strate that areas being annexed earlier into historical Vietnam are nowadays more (less) prone to collectivist (individualist) culture. We argue that the southward out-migration of individualistic people was the main mechanism behind this finding, which is also in line with many historical accounts.
    Keywords: Culture; Individualism-Collectivism; Voluntary Settlement
    JEL: N45 O53 Z13
    Date: 2017–12
  8. By: Giovanni Dosi; Andrea Roventini; Emanuele Russo
    Abstract: In this paper we present a multi-country, multi-industry agent-based model investigating the different growth patterns of interdependent economies. Each country features a Schumpeterian engine of endogenous technical change which interacts with Keyneasian/Kaldorian demand generation mechanisms. National growth trajectories are driven by firms' accumulation of technological knowledge, which in turn also leads to emergent specialization patterns in different industries. Interactions among economies occur via trade flows, stemming from the competition of firms in international markets. Simulation results show the emergence of persistent income divergence among countries leading to polarization and club formation. Moreover, each country experiences a structural transformation of its productive structure during the development process. Such dynamics results from firm-level virtuous (or vicious) cycles between knowledge accumulation, trade performances, and growth dynamics. The model accounts for a rich ensemble of empirical regularities at macro, meso and micro levels of aggregation.
    Keywords: Endogenous growth, structural change, technology-gaps, global divergence, absolute, advantages, agent-based models.
    Date: 2017–12–11
  9. By: Claudio Battiati (LUISS University, School of European Political Economy)
    Abstract: Recent evidence suggests that credit booms and asset price bubbles may undermine economic growth even as they occur, regardless of whether a crisis follows, by crowding out investment in more productive, R&D-intensive industries. This paper incorporates Schumpeterian endogenous growth into a DSGE model with credit-constrained entrepreneurs to show how shocks affecting firms' access to credit can generate boom-bust cycles featuring large fluctuations in land prices, consumption, and investment. During the expansion, rising land prices tend to crowd out capital and (especially) R&D investment: in the long run, this results in lower productivity levels, which in turn implies lower levels of aggregate output and consumption. Moreover, higher initial loan-to-value ratios tend to be associated with larger macroeconomic fluctuations. A counter-cyclical LTV ratio targeting credit growth has relevant stabilization effects but brings about small gains in terms of long-run consumption levels, and thus of welfare.
    Keywords: Schumpeterian Growth, Financial frictions, Land prices, Macroprudential policy
    JEL: E22 E32 E44 O30 O40
    Date: 2017–12–11
  10. By: Popov, Alexander
    Abstract: This paper reviews and appraises the body of empirical research on the association between financial markets and economic growth that has accumulated over the past quarter-century. The bulk of the historical evidence suggests that financial development affects economic growth in a positive, monotonic way, yet recent research endeavors have provided useful and important qualifications of this conventional wisdom. Moreover, the proliferation of micro-level datasets has enabled researchers to study more precise links between theory and measurement. The paper highlights the mechanisms through which financial markets benefit society, as well as the channels through which finance can slow down long-term growth. JEL Classification: O4, G1
    Keywords: financial markets, growth
    Date: 2017–12
  11. By: Chirwa, Themba G.; Odhiambo, Nicholas M.
    Abstract: This study investigates the nexus between key macroeconomic determinants and economic growth in Zambia by employing the Autoregressive Distributed Lag model to test for Granger-causality covering the period 1970???2015. The empirical results reveal that there are three distinct Granger-causality hypotheses that exist in Zambia related to economic growth. The dominant hypothesis is the feedback hypothesis between investment, population growth, foreign aid and economic growth in both the short and long run; between real exchange rate, trade openness and economic growth in the short run; and between government consumption, inflation and economic growth in the long run. The second is the supply-leading hypothesis that runs from government consumption and inflation to economic growth in the short run; and from real exchange rate and trade openness to economic growth in the long run. Lastly, the neutrality hypothesis holds between human capital and economic growth in the short run. These results have significant policy implications for the Zambian economy. They imply that the authorities should focus on promoting economic incentives that encourage the growth of real GDP per capita and investment, improve the quality of human capital, trade reforms, population control, macroeconomic stability, and the effectiveness of foreign aid
    Keywords: Zambia; Autoregressive Distributed Lag Models; Cointegration; Granger-causality; Economic Growth
    Date: 2017–12
  12. By: Gong, Binglin; Zhou, Haiwen
    Abstract: In this general equilibrium model, banks and manufacturing firms engage in oligopolistic competition. A more advanced manufacturing technology has a higher fixed cost but a lower marginal cost of production. We show that manufacturing firms located in a country with a more efficient financial sector choose more advanced technologies and this country has a comparative advantage in the production of manufactured goods. Even though the foreign country has a less developed financial sector than the home country, the opening up of trade with the foreign country leads domestic manufacturing firms to adopt more advanced technologies. An increase in the level of efficiency in the financial sector of one country causes manufacturing firms in both countries to adopt more advanced technologies.
    Keywords: Financial development, the choice of technology, comparative advantage, oligopolistic competition, increasing returns
    JEL: D43 F12 O16
    Date: 2017–12–07

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