nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒01‒29
ten papers chosen by
Marc Klemp
University of Copenhagen

  1. Distrust and Political Turnover By Nunn, Nathan; Qian, Nancy; Wen, Jaya
  2. One-child policy in China : A unified growth analysis By Xue, Jianpo; Yip, Chong K.
  3. Economic growth on the periphery: Estimates of GDP per capita of the Congress Kingdom of Poland (for years 1870−1912) By Piotr Koryś; Maciej Tymiński
  4. Tracking the slowdown in long-run GDP growth By Antolin-Diaz, Juan; Drechsel, Thomas; Petrella, Ivan
  5. Vintage effects in human capital: Europe versus the United States By Inklaar, Robert; Papakonstantinou, Maria Anna
  6. The mystery of TFP By Oulton, Nicholas
  7. Education and economic growth in post-Apartheid South Africa: An ARDL approach By Malangeni, Luxolo; Phiri, Andrew
  8. Directed technical change: A macro perspective on life cycle earnings profiles By Cragun, Randy; Tamura, Robert; Jerzmanowski, Michal
  9. The Shifting Scully Curve: International Evidence from 1870 to 2013 By Livio Di Matteo; Fraser Summerfield
  10. On the system-theoretical foundations of non-economic parameter constancy assumptions in economic growth modeling By Stijepic, Denis

  1. By: Nunn, Nathan; Qian, Nancy; Wen, Jaya
    Abstract: We present findings that document one way in which a society's culture can affect political outcomes. Examining an annual panel of democratic countries over six decades, we show that severe economic downturns are more likely to cause political turnover in countries that have lower levels of generalized trust. The relationship is only found among democracies and for regular leader turnover, which suggests that the underlying mechanism works through leader accountability and the electoral process. Moreover, we find that the effects of trust on turnover are greatest during years with regularly-scheduled elections, and within democracies with a parliamentary system, a fully free media, and greater stability. The estimates suggest that generalized trust affects political institutions by influencing the extent to which citizens attribute economic downturns to the mistakes of politicians.
    Keywords: Political Turnover; Recession; Trust
    JEL: D72 P16 P17 P51
    Date: 2018–01
  2. By: Xue, Jianpo; Yip, Chong K.
    Abstract: This paper examines the effects of China's One Child Policy (OCP) in a stylized unified growth model where demographic change plays a central role. Introducing a population constraint into Galor and Weil (2000) model, our theoretical analysis shows that parents are willing to invest in the education of their children immediately after the OCP intervention. Raising the education level, in turn, boosts rates of technological progress and economic growth over the short run, but the low population mass resulting from the OCP hampers the natural economic evolution. This eventually reduces the education gain and technology growth, retarding economic growth in the steady state. We next calibrate our model to match the key data moments in China. A permanent OCP is found to accelerate economic growth by up to 60% over the short run (40 years, or two generations under our assumed generation length), but depress long-run growth to 6:95% (8:94% under natural evolution). For a temporary OCP lifted after two generations, the economic growth shows an immediate decline of about 27%, followed by a gradual recovery to the steady state under natural evolution. While the OCP reduces welfare, the welfare loss from a temporary OCP is less than that from a permanent OCP. This suggests that the recent decision of the Chinese government to abandon the OCP and move to a two-child policy is likely to improve economic growth and welfare over the long run.
    JEL: J13 O43
    Date: 2017–12–29
  3. By: Piotr Koryś (Faculty of Economic Sciences, University of Warsaw); Maciej Tymiński (Faculty of Economic Sciences, University of Warsaw)
    Abstract: This paper presents the estimates of the GDP of Congress Kingdom of Poland for period 1870−1912. Authors used bottom-up methodology and calculated sectoral added values using historical economic, social and demographic data. Presented results offer first ever insight into the structure of sectoral added values in the Congress Kingdom of Poland during the period of first globalization (1870−1913) and first reliable estimates of GDP of Congress Kingdom of Poland. All results are presented in Geary-Khamis dollars PPP1990 and are compatible with Maddison dataset.
    Keywords: Congress Kingdom of Poland, Poland, 19th century economic history, economic history of Poland, little divergence, estimates of historical GDP
    JEL: N10 N13
    Date: 2018
  4. By: Antolin-Diaz, Juan; Drechsel, Thomas; Petrella, Ivan
    Abstract: Using a dynamic factor model that allows for changes in both the longrun growth rate of output and the volatility of business cycles, we document a significant decline in long-run output growth in the United States. Our evidence supports the view that most of this slowdown occurred prior to the Great Recession. We show how to use the model to decompose changes in long-run growth into its underlying drivers. At low frequencies, a decline in the growth rate of labor productivity appears to be behind the recent slowdown in GDP growth for both the US and other advanced economies. When applied to realtime data, the proposed model is capable of detecting shifts in long-run growth in a timely and reliable manner.
    Keywords: Long-run growth; Business cycles; Productivity; Dynamic factor models; Real-time data
    JEL: C32 E23 E32 O47
    Date: 2016–01–25
  5. By: Inklaar, Robert; Papakonstantinou, Maria Anna (Groningen University)
    Abstract: The standard assumption in growth accounting is that an hour worked by a worker of given type delivers a constant quantity of labor services over time. This assumption may be violated due to vintage effects, which were shown to be important in the United States since the early 1980s, leading to an underestimation of the growth of labor input (Bowlus and Robinson, 2012). We apply their method for identifying vintage effects to a comparison between the United States and six European countries. We find that vintage effects led to increases of labor services per hour worked by high-skilled workers in the United States and United Kingdom and decreases in Continental European countries between 1995 and 2005. Rather than productivity growth advantage of the US and UK, the primary difference with Continental European countries was human capital vintage effects instead.
    Date: 2017
  6. By: Oulton, Nicholas
    Abstract: I analyse TFP growth at the sectoral and aggregate level, using data for 10 industry groups covering the market sector for 18 countries over the period 1970-2007 drawn from the EU KLEMS dataset. TFP growth displays persistence at the aggregate level but not at the industry level, suggesting industry outputs are measured with error. In all countries resources have been shifting away from industries with high TFP growth towards industries with low TFP growth. Nevertheless I find that structural change (as measured by changes in value added shares) has favoured growth in most countries. Errors in measuring capital or in measuring the elasticity of output with respect to capital are unlikely to substantially reduce the role of TFP in explaining growth. The pattern of growth in these 18 countries is more consistent with an underlying two-sector model than with the one-sector (Solow) model. Standard theory suggests that TFP growth induces capital accumulation, at least in the long run. This is not the case with the raw EU KLEMS data used here. But standard theory finds some support when the data are smoothed to remove cyclical effects.
    JEL: J1
    Date: 2016–01
  7. By: Malangeni, Luxolo; Phiri, Andrew
    Abstract: Using annual data collected between 1994 and 2014, this current study investigate the long-run and short-run cointegration relations between education and economic growth in South Africa using the bounds approach to ARDL model. Our empirical results obtained in the study point to an insignificant relationship between education and economic growth in South Africa, a finding which goes contrary to both existing theoretical and empirical postulations. These obtained results hence imply that the issue with education may not so much with the quantity of existing education but rather the quality. Therefore, our study advises policymakers to place much emphasis on quality of education is such education is likely to promote economic growth.
    Keywords: Education; economic growth; ARDL model; cointegration, South Africa.
    JEL: C32 C51 I25 O40
    Date: 2017–11–29
  8. By: Cragun, Randy; Tamura, Robert; Jerzmanowski, Michal
    Abstract: We propose a new macroeconomic mechanism for generating patterns in age-earnings profiles based on directed technical change. The mechanism does not depend on changes in the human capital of the individual; rather differences in the human capital shares of age groups affect the profitability of developing age-specific technologies, biasing innovation toward improving the productivity of workers whose cohorts provide large shares of the labor force's human capital. The theory should be taken as supplemental to (rather than replacing) human-capital-based theories of age-earnings profiles. Using recently developed data and human capital estimates, we simulate reductions in wages due to age-biased directed technical change over workers' lives for most of the world's nations over two centuries. Our simulations indicate that age-specific directed technical change contributes to wage concavity for the average country by cohort group. Because younger workers make up a larger share of human capital in most years and countries, most cohorts in most countries experienced wage gains early in life and losses later in life from age-specific directed technology, making life-cycle earnings profiles flatter. The late-life losses are larger than the early-life gains, increasing concavity in life-cycle earnings profiles. We also calculate the present value of lifetime wage gains from age-specific endogenous technology, and find particularly large and economically-significant gains for baby boomers and losses for cohorts born during low population growth periods.
    Keywords: Directed technical change, directed technology, human capital, experience, wage profile, wage differential, age-earnings profile, endogenous technology
    JEL: J11 J24 J31 O31 O33 O4
    Date: 2017–11–20
  9. By: Livio Di Matteo (Department of Economics, Lakehead University, Canada); Fraser Summerfield (Rimini Centre for Economic Analysis; Department of Economics, St Francis Xavier University, Canada)
    Abstract: Scully curve predictions for growth-maximizing public sector size are estimated using panel data covering 17 industrialized nations from 1870-2013. Fixed-effects regression models find that government expenditure to GDP ratios between 27-32% are growth maximizing. The economic growth maximizing size shifted over time ranging from 9% pre-WWI to 25% Post WWII with less precise estimates suggesting 30% during inter-war years. A flattening out of the Scully curve occurs after the mid 1970s with the exception of the Nordic countries, which drive up government size considerably. As well, IV estimates of the Scully relationship suggest that the Scully curve may be subject to some reverse causality.
    Keywords: Scully Curve, Public Sector Size, Economic Growth
    JEL: E62 H50
    Date: 2018–01
  10. By: Stijepic, Denis
    Abstract: In general, positive/quantitative growth models assume that (some of) the model parameters that are determined in non-economic systems are exogenous and constant. Such non-economic parameter constancy assumptions (abbr. ‘NEPCAs’) are not necessarily consistent with the empirical evidence on significant cross-system interactions and, in particular, long-run interactions between the economic system and the non-economic systems (e.g. socio-cultural, political, and ecological system). We derive the system-theoretical/mathematical conditions under which NEPCAs are good approximations of cross-system interactions in economic growth models: we (a) discuss the standard types of dynamic equilibrium and the problems that arise when using them to justify NEPCAs in economic long-run models (in presence of cross-system interactions), (b) formulate an equilibrium type (a ‘stable partial dynamic equilibrium’) that solves these problems, and (c) demonstrate the applicability of this equilibrium type as a foundation of the NEPCAs used in the AK growth model. Finally, we discuss some topics for further research.
    Keywords: economic growth; long run; parameter conditions; cross-system interactions; economic system; socio-cultural system; political system; ecological system; dynamic systems theory; dynamic equilibrium; AK model; population growth
    JEL: A12 O40
    Date: 2017–11–14

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