nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒01‒15
fourteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Geographical Origins of Language Structures By Oded Galor; Ömer Özak; Assaf Sarid
  2. The Long-Run Effects of Agricultural Productivity on Conflict, 1400-1900 By Iyigun, Murat; Nunn, Nathan; Qian, Nancy
  3. Trust and Growth Revisited By Simplice Asongu; Oasis Kodila-Tedika
  4. Resistance to Institutions and Cultural Distance: Brigandage in Post-Unification Italy By Giampaolo Lecce; Laura Ogliari; Tommaso Orlando
  5. Innovation, Reallocation, and Growth By Acemoglu, Daron; Akcigit, Ufuk; Alp, Harun; Bloom, Nicholas; Kerr, William R.
  6. Infectious Diseases, Human Capital and Economic Growth By Lin Liu; Aditya Goenka
  7. An Overlapping-Generations Model of Firm Heterogeneity in Economic Development By Chen, Yu; Zhou, Haiwen
  8. Productivity and Pay: Is the link broken? By Anna M. Stansbury; Lawrence H. Summers
  9. Artificial Intelligence and Its Implications for Income Distribution and Unemployment By Anton Korinek; Joseph E. Stiglitz
  10. Working Paper – WP/16/04- Accounting for Productivity Growth- Schumpeterian versus Semi-Endogenous Explanations By Johannes Fedderke; Yang Liu
  11. Religious Tolerance as Engine of Innovation By Cinnirella, Francesco; Streb, Jochen
  12. The Human Capital Stock: A Generalized Approach. Comment By Caselli, Francesco; Ciccone, Antonio
  13. Innovation, Finance, and Economic Growth : an agent based approach By Giorgio Ffagiolo; Daniele Giachini; Andrea Roventini
  14. Demand-led growth with endogenous innovation By Mauro Caminati; Serena Sordi

  1. By: Oded Galor (Brown University); Ömer Özak (Southern Methodist University); Assaf Sarid (Brown University)
    Abstract: This research explores the geographical origins of the coevolution of cultural and linguistic traits in the course of human history, relating the geographical roots of long-term orientation to the structure of the future tense, the agricultural determinants of gender bias to the presence of sex-based grammatical gender, and the ecological origins of hierarchical orientation to the existence of politeness distinctions. The study advances the hypothesis and establishes empirically that: (i) variations in geographical characteristics that were conducive to higher natural return to agricultural investment contributed to the existing cross-language variations in the structure of the future tense, (ii) the agricultural determinants of gender gap in agricultural productivity fostered the existence of sex-based grammatical gender, and (iii) the ecological origins of hierarchical societies triggered the emergence of politeness distinctions.
    Keywords: Comparative Development, Cultural Evolution, Language Structure, Future Tense, Politeness Distinctions, Long-Term Orientation, Grammatical Gender, Gender Bias, Hierarchy, Emergence of States
    JEL: D01 D03 I25 J16 J24 O1 O10 O11 O12 O40 O43 O44 Z10 Z13
    Date: 2018–01
  2. By: Iyigun, Murat (University of Colorado, Boulder); Nunn, Nathan (Harvard University); Qian, Nancy (Northwestern University)
    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.
    Keywords: conflict, natural resources, long-run development
    JEL: D74 O13 Q34
    Date: 2017–11
  3. By: Simplice Asongu (Yaoundé/Cameroun); Oasis Kodila-Tedika (Kinshasa, Democratic Republic of Congo)
    Abstract: The paper extends Breggren et al. (2008, EE) on ‘trust and growth: a shaky relationship” by incorporating recent developments in the trust-growth literature and using a robust methodological underpinning that accounts for the presence of outliers. The empirical evidence is based on 63 countries. Two main findings are established. First, the substantially documented positive trust-growth nexus is broadly confirmed. Second, when initial levels of growth come into play in determining the relationship, only the 25th quartile and 90th decile confirm the positive nexus. The results suggest that the trust-growth nexus cannot be generalized for all countries as some previous studies have concluded. Accordingly, trust-growth policies should be contingent on existing levels of development and tailored differently across rich and poor countries.
    Keywords: Trust; Growth; Conditional Effects
    JEL: A13 O40 Z13
    Date: 2017–01
  4. By: Giampaolo Lecce (Cowles Foundation, Yale University); Laura Ogliari (Bocconi University); Tommaso Orlando (Bank of Italy)
    Abstract: We study how cultural distance affects the rejection of imposed institutions. To do so, we exploit the transplantation of Piedmontese institutions on Southern Italy that occurred during the Italian unification. We assemble a novel and unique dataset containing municipal-level information on episodes of brigandage, a form of violent uprising against the unitary government. We use the geographic distance from local settlements of Piedmontese descent as a proxy for the cultural distance between each municipality and the new rulers. We find robust evidence that cultural distance from the origins of the transplanted institutions is significantly associated with more intense resistance to these institutions. Our results further suggest that the rejection of the transplanted institutions may have a long-lasting effect on political participation.
    Keywords: Institutions, Institutional Transplantations, Culture, Social Unrest, Electoral Turnout
    JEL: N43 D74 P16 Z10
    Date: 2017–08
  5. By: Acemoglu, Daron; Akcigit, Ufuk; Alp, Harun; Bloom, Nicholas; Kerr, William R.
    Abstract: We build a model of firm-level innovation, productivity growth and reallocation featuring endogenous entry and exit. A new and central economic force is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using US Census micro data on firm-level output, R&D and patenting. The model provides a good fit to the dynamics of firm entry and exit, output and R&D. Taxing the continued operation of incumbents can lead to sizable gains (of the order of 1.4% improvement in welfare) by encouraging exit of less productive firms and freeing up skilled labor to be used for R&D by high-type incumbents. Subsidies to the R&D of incumbents do not achieve this objective because they encourage the survival and expansion of low-type firms.
    Keywords: Entry; growth; industrial policy; Innovation; R&D; reallocation; selection
    JEL: E2 L1 O31 O32 O33
    Date: 2017–11
  6. By: Lin Liu (University of Liverpool); Aditya Goenka (University of Birmingham)
    Abstract: This paper investigates the joint determination of the transmission of infectious diseases, human capital accumulation and economic growth. We develop an economic epidemiological model by incorporating SIS epidemiological model into an endogenous growth model with human capital accumulation. Households choose how much to invest in human and physical capital, as well as in controlling the risk of infection. If an individual is infected, he is incapacitated and can neither work nor accumulate human capital. There are multiple balanced growth paths where the endogenous prevalence of the disease determines whether human capital is accumulated or not, i.e. whether there is sustained economic growth or a poverty trap. In the decentralized economy households fail to internalize the externality associated with controlling diseases. We further characterize the optimal solution and the subsidy that will decentralize it. With the optimal public health policy, economies are more likely to take off or grow at a higher rate. We show that there can be underinvestment in preventive health expenditures, and perversely for countries that are most afflicted with diseases and in a poverty trap, the optimal subsidy is lower than for growing economies. The poor health conditions are not only the result of tighter budget constraints, but more importantly the lack of incentives for investing in health capital.
    Date: 2017
  7. By: Chen, Yu; Zhou, Haiwen
    Abstract: We study firm heterogeneity in economic development in an overlapping-generations general equilibrium model in which manufacturing firms engage in oligopolistic competition. Individuals differ in their productivities in the manufacturing sector and choose to become entrepreneurs or workers. The model is surprisingly tractable. In the steady state, an increase in the entry barrier in the manufacturing sector or an increase in the percentage of income spent on the agricultural good decreases the wage rate, but the level of output in the manufacturing sector does not necessarily decrease. An increase in the degree of patience of an individual increases the steady state wage rate and the capital stock. Even with increasing returns in manufacturing and constant returns in agriculture, neither the wage rate nor the output level in the manufacturing sector may increase with the size of the population.
    Keywords: Firm heterogeneity, overlapping-generations model, oligopolistic competition, career choice, economic development
    JEL: D43 L13 O10
    Date: 2017–12–07
  8. By: Anna M. Stansbury; Lawrence H. Summers
    Abstract: Since 1973 median compensation has diverged starkly from average labor productivity. Since 2000, average compensation has also begun to diverge from labor productivity. These divergences lead to the question: to what extent does productivity growth translate into compensation growth for typical American workers? We investigate this, regressing median, average and production/nonsupervisory compensation growth on productivity growth in various specifications. We find substantial evidence of linkage between productivity and compensation: over 1973-2016, one percentage point higher productivity growth has been associated with 0.7 to 1 percentage points higher median and average compensation growth and with 0.4 to 0.7 percentage points higher production/nonsupervisory compensation growth. These results suggest that other factors orthogonal to productivity have been acting to suppress typical compensation even as productivity growth has been acting to raise it. Several theories of the cause of the productivity-compensation divergence focus on technological progress. These theories have a testable implication: periods of higher productivity growth should be associated with periods of faster productivity-pay divergence. We do not find substantial evidence of co-movement between productivity growth and the labor share or mean/median compensation ratio. This tends not to provide strong support for pure technology-based theories of the productivity-compensation divergence.
    JEL: E24 J24 J3
    Date: 2017–12
  9. By: Anton Korinek; Joseph E. Stiglitz
    Abstract: Inequality is one of the main challenges posed by the proliferation of artificial intelligence (AI) and other forms of worker-replacing technological progress. This paper provides a taxonomy of the associated economic issues: First, we discuss the general conditions under which new technologies such as AI may lead to a Pareto improvement. Secondly, we delineate the two main channels through which inequality is affected – the surplus arising to innovators and redistributions arising from factor price changes. Third, we provide several simple economic models to describe how policy can counter these effects, even in the case of a “singularity” where machines come to dominate human labor. Under plausible conditions, non-distortionary taxation can be levied to compensate those who otherwise might lose. Fourth, we describe the two main channels through which technological progress may lead to technological unemployment – via efficiency wage effects and as a transitional phenomenon. Lastly, we speculate on how technologies to create super-human levels of intelligence may affect inequality and on how to save humanity from the Malthusian destiny that may ensue.
    JEL: D63 E64 O3
    Date: 2017–12
  10. By: Johannes Fedderke; Yang Liu
    Abstract: This paper examines the nature and sources of productivity growth in South African manufacturing sectors, from an international comparative perspective. On panel data estimations, we find that the evidence tends to support Schumpeterian explanations of productivity growth for a panel of countries including both developed and developing countries, and a panel of South African manufacturing sectors. By contrast, semi-endogenous productivity growth is supported for a panel of OECD (Organisation for Economic Cooperation and Development) manufacturing sectors. However, we also report evidence that suggests that sectors are not homogeneous. For this reason time series evidence may be more reliable than panel data. Time series evidence for South Africa suggests that prospects for the sustained productivity growth associated with Schumpeterian innovation processes, is restricted to a narrow set of sectors, strongly associated with the chemicals and related sectors, machinery and transport equipment, and basic iron and steel sectors. Semi-endogenous growth finds much weaker support. For the OECD manufacturing sectors, both semi-endogenous and Schumpeterian growth finds support, with semi-endogenous growth more prevalent than for South African manufacturing. The sustained productivity growth associated with Schumpeterian growth frameworks is relatively rare everywhere.
    Date: 2016–04–11
  11. By: Cinnirella, Francesco; Streb, Jochen
    Abstract: We argue that, for a given level of scientific knowledge, tolerance and diversity are conducive to technological creativity and innovation. In particular, we show that variations in innovation within Prussia during the second industrial revolution can be ascribed to differences in religious tolerance that developed in continental Europe from the Peace of Westphalia onwards. By matching a unique historical dataset about religious tolerance in 1,278 Prussian cities with valuable patents for the period 1877-1890, we show that higher levels of religious tolerance are strongly positively associated with innovation during the second industrial revolution. Religious tolerance is measured through population's religious diversity, diversity of churches, and diversity of preachers and religious teachers, respectively. Endogeneity issues are addressed using local variation across cities, within counties. Estimates using preindustrial levels of religious tolerance address issues of reverse causality. As for the channels of transmission, we find significant complementarity between religious tolerance and human capital. Furthermore, we find that cities with higher levels of religious tolerance attracted a larger share of migrants. Finally, higher levels of religious diversity in the population translated into higher levels of religious diversity in the workforce by industrial sector. This result suggests that religious diversity did not generate labor market segmentation by denomination but might have fostered interaction of different denominations.
    Keywords: diversity; Innovation; openness; Patenting Activity; Pluralism; Tolerance
    JEL: N13 N33 O14 O31 Z12
    Date: 2017–11
  12. By: Caselli, Francesco; Ciccone, Antonio
    Abstract: Jones (2014) considers development accounting when workers with different schooling are imperfect substitutes. His main result is that, using plausible values for the elasticity of substitution between workers with different educational attainment, measured human capital variation can be boosted to the point that factors of production account for the totality of the variation in income across countries. We show that the amplification of cross-country human capital differences achieved by Jones, and hence his success at removing the unexplained component of income differences, is entirely due to an assumption that the relative wage of skilled workers is solely determined by attributes of workers (once the supply of skilled workers is accounted for). If, as we argue, skill premia are also influenced by technology, institutions, and other features of the economic environment, cross-country differences in human capital as measured by Jones will embed differences in these technological, institutional, and other attributes. As a result, Jones's conclusion that human capital can account for all the variation in income across countries is unwarranted.
    Date: 2017–11
  13. By: Giorgio Ffagiolo (Scuola Superiore Sant'Anna Pisa Italy); Daniele Giachini (Scuola Superiore Sant'Anna Pisa Italy); Andrea Roventini (Scuola Superiore Sant'Anna Pisa Italy also OFCE Sciences Po Paris)
    Abstract: This paper extends the endogenous-growth agent-based model in Fagiolo and Dosi (2003) to study the finance growthnexus. 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. In- deed, 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
    JEL: C63 G21 O30 O21
    Date: 2017–11–27
  14. By: Mauro Caminati; Serena Sordi
    Abstract: This paper contributes to the recent macro-dynamics literature on demand-led growth, that borrows insights from the idea expressed long ago by J. Hicks (1950) that Harrodian instability may be tamed by a source of autonomous expenditure in the economy. Contrary to the other contributions in this literature, autonomous expenditure is not exogenous, but is driven by a flow of profit-seeking R&D and innovation expenditures, that raise labour productivity through time. If the state of distribution, hence the wage share, is exogenously fixed and constant, the model gives rise to a macro-dynamics in a two dimensional state space, that may converge to, or give rise to limit cycles around, an endogenous growth path. An exogenous rise of the profit share exerts negative e¤ects on long-run growth and employment, showing that growth is wage led.
    Keywords: wage-led growth; endogenous autonomous expenditure; labour-saving technological progress: limit cycles
    JEL: E11 E12 O41
    Date: 2017–11

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