nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒02‒19
fourteen papers chosen by
Marc Klemp
University of Copenhagen

  1. "Geographical Origins of Language Structures " By Oded Galor; Omer Ozak; Assaf Sarid
  2. Frontier Culture: The Roots and Persistence of “Rugged Individualism†in the United States By Samuel Bazzi; Martin Fiszbein; Mesay Gebresilasse
  3. Getting to Denmark' : the Role of Elites for Development By Skovsgaard, Christian Volmar; Sharp, Paul; Lampe, Markus; Jensen, Peter Sandholt
  4. Mean Growth and Stochastic Stability in Endogenous Growth Models By Raouf Boucekkine; Patrick A. Pintus; Benteng Zou
  5. Heterogeneous R&D spillovers and sustainable growth: Limits to efficient regulation By Anton Bondarev
  6. Institutions and Economic Growth: Does Income Level Matter? By Aziz, Nusrate; Ahmad, Ahmad H.
  7. Schumpeterian Creative Class Competition, Innovation Policy, and Regional Economic Growth By Batabyal, Amitrajeet; Yoo, Seung Jick
  8. Oil Price Shocks and Economic Growth: The Volatility Link By Maheu, John M; Yang, Qiao; Song, Yong
  9. Development in Africa By Riccardo Pelizzo; Abel Kinyondo; Zim Nwokora
  10. Ecological barriers and convergence: a note on geometry in spatial growth models By Giorgio Fabbri
  11. Financing Ventures By Jeremy Greenwood; Pengfei Han; Juan M Sanchez
  12. Testing a model of UK growth - a causal role for R&D subsidies By Minford, Lucy; Meenagh, David
  13. Does democracy cause growth? A meta-analysis perspective By Marco Colagrossi; Domenico Rossignoli; Mario A. Maggioni
  14. Changing demand for general skills, technological uncertainty, and economic growth By Masashi Tanaka

  1. By: Oded Galor; Omer Ozak; Assaf Sarid
    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.
    Date: 2018
  2. By: Samuel Bazzi (Boston University and CEPR); Martin Fiszbein (Boston University and NBER); Mesay Gebresilasse (Boston University)
    Abstract: In 1893, Frederick Jackson Turner argued that the American frontier fostered individualism. We investigate the Frontier Thesis and identify its long-run implications for culture and politics. We track the frontier throughout the 1790-1890 period and construct a county-level measure of total frontier experience (TFE). Historically, frontier locations had distinctive demographics and greater individualism. Many decades after the closing of the frontier, counties with greater TFE exhibit more pervasive individualism and opposition to redistribution. Suggestive evidence on the roots fo rugged individualism points to selective migration, the adaptive advantage of self-reliance, and opportunities for upward mobility through effort.
    Keywords: Culture, Individualism, Preferences for Redistribution, American Frontier, Persistence
    JEL: D72 H2 N31 N91 P16
    Date: 2017–11
  3. By: Skovsgaard, Christian Volmar; Sharp, Paul; Lampe, Markus; Jensen, Peter Sandholt
    Abstract: We explore the role of elites for development and in particular for the spread of cooperative creameries in Denmark in the 1880s, which was a major factor behind that country's rapid economic catch-up. We demonstrate empirically that the location of early proto-modern dairies, so-called hollænderier, introduced onto traditional landed estates as part of the Holstein System of agriculture by landowning elites from the Duchies of Schleswig and Holstein in the eighteenth century, can explain the location of cooperative creameries in 1890, more than a century later, after controlling for other relevant determinants. We interpret this as evidence that areas close to estates which adopted the Holstein System witnessed a gradual spread of modern ideas from the estates to the peasantry. Moreover, we identify a causal relationship by utilizing the nature of the spread of the Holstein System around Denmark, and the distance to the first estate to introduce it, Sofiendal. These results are supported by evidence from a wealth of contemporary sources and are robust to a variety of alternative specifications.
    Keywords: Denmark; cooperatives; landowning elites; knowledge spillovers; technology; Institutions
    JEL: Q13 O13 N53
    Date: 2018–02
  4. By: Raouf Boucekkine (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Patrick A. Pintus (InSHS-CNRS and Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Benteng Zou (CREA, University of Luxembourg)
    Abstract: Under uncertainty, mean growth of, say, wealth is often defined as the growth rate of average wealth, but it can alternatively be defined as the average growth rate of wealth. We argue that stochastic stability points to the latter notion of mean growth as the theoretically relevant one. Our discussion is cast within the class of continuous-time AK-type models subject to geometric Brownian motions. First, stability concepts related to stochastic linear homogenous differential equations are introduced and applied to the canonical AK model. It is readily shown that exponential balanced-growth paths are not robust to uncertainty. In a second application, we evaluate the quantitative implications of adopting the stochastic-stability-related concept of mean growth for the comparative statics of global diversification in the seminal model due to Obstfeld (1994).
    Keywords: endogenous stochastic growth, mean growth, stochastic stability, AK model, global diversification
    JEL: O40 C61 C62
    Date: 2018–02
  5. By: Anton Bondarev (University of Basel)
    Abstract: This paper introduces heterogeneity of cross-technologies interactions into the double-differentiated R&D-based endogenous growth model. In this model new technologies appear continuously and older are outdated generating structural change. All technologies may interact with each other through knowledge spillovers which are technology-specific and this results in innovations' heterogeneity. The conditions on the shape of these interactions for the existence of the (sustained) growth path in the decentralized economy as well as for the social planner's problem are estab- lished. Next the necessity for government interventions depending on the complexity of these interactions is studied. At last the scale and duration of interventions are demonstrated to be functions of spectral properties of the interactions operator.
    Keywords: endogenous structural change; endogenous growth; technological spillovers; R&D policy; government regulation; dynamic stability; spectral theory; optimal control
    JEL: C61 O32 O38 O41 H3
    Date: 2018
  6. By: Aziz, Nusrate; Ahmad, Ahmad H.
    Abstract: This paper investigates whether a country’s level of income matters to the effectiveness of institutions in fostering economic growth. The institutional variables are represented by democracy, corruption levels, and armed conflicts. The countries in the data-set are divided into high-, middle- and low-income countries based on the World Bank criteria. The overall results indicate that institutional variables have offsetting effects on economic growth. The performance of these variables appears to have been influenced by the countries’ level of income. Labour, capital and human capital are found to be positive and significant variables for economic growth, irrespective of whether the countries are in high-, middle- and low-income groups. On the contrary, corruption affects GDP negatively in high- and middle-income groups, but positive, although insignificant in low-income countries. Democracy has a mixed effect on economic growth and largely negative in high- and low-income countries, but positive in middle-income group. Armed conflicts do not appear to have any statistically significant effect on high and middle-income countries’ economic growth. However, it has a significant negative effect on low-income countries’ economic growth.
    Keywords: Institutions, income level, economic growth, panel study
    JEL: C23 O43 O47
    Date: 2018–01–06
  7. By: Batabyal, Amitrajeet; Yoo, Seung Jick
    Abstract: We focus on a region that is creative in the sense of Richard Florida. The creative class is broadly composed of existing and candidate entrepreneurs. The general question we analyze concerns the effects of Schumpeterian competition between existing and candidate entrepreneurs on economic growth and innovation policy in this region. We perform four specific tasks. First, when the flow rate of innovation function for the existing entrepreneurs is strictly concave, we delineate the circumstances in which competition between existing and candidate entrepreneurs leads to a unique balanced growth path (BGP) equilibrium. Second, we examine whether it is possible for the BGP equilibrium to involve different levels of R&D expenditures by the existing entrepreneurs. Third, we show how the BGP equilibrium is altered when the flow rate of innovation function for the existing entrepreneurs is constant. Finally, we study the impact that taxes and subsidies on R&D by existing and candidate entrepreneurs have on R&D expenditures and regional economic growth.
    Keywords: Creative Class, Creative Destruction, Economic Growth, Innovation Policy, R&D
    JEL: O31 O38 R11
    Date: 2017–12–03
  8. By: Maheu, John M; Yang, Qiao; Song, Yong
    Abstract: This paper shows that oil shocks primarily impact economic growth through the conditional variance of growth. We move beyond the literature that focuses on conditional mean point forecasts and compare models based on density forecasts. Over a range of dynamic models, oil shock measures and data we find a robust link between oil shocks and the volatility of economic growth. A new measure of oil shocks is developed and shown to be superior to existing measures and indicates that the conditional variance of growth increases in response to an indicator of local maximum oil price exceedance. The empirical results uncover a large pronounced asymmetric response of growth volatility to oil price changes.
    Keywords: Bayes factors, predictive likelihoods, nonlinear dynamics, density forecast
    JEL: C11 C32 C53 Q43
    Date: 2018
  9. By: Riccardo Pelizzo (Nazarbayev University, Kazakhstan); Abel Kinyondo (University of Dar Es Salaam, Tanzania); Zim Nwokora (Deakin University, Australia)
    Abstract: The purpose of the chapter is to analyze Africa’s economic successes in the past half century, to understand not only what made it possible but also and more importantly what risk factors may eventually bring it to an end or compromise it. While it may not be possible for Africa to alter, for now, its position in the world system, it may nonetheless create the conditions for sustained economic growth and development by deepening democracy, enhancing the stability of political regimes and by reducing the incidence of tropical diseases.
    Keywords: Africa, development, world system, poverty, institutions, globalization, international organizations, FDIs, debt
    JEL: O1 O10 O11 O15 O16 O19
    Date: 2018–01
  10. By: Giorgio Fabbri (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne)
    Abstract: We introduce an AK spatial growth model with a general geographical structure. The dynamics of the economy is described by a partial differential equation on a Riemannian manifold. The morphology interacts with the spatial dynamics of the capital and is one determinant of the qualitative behavior of the economy. We characterize the conditions on the geographical structure that guarantee convergence of the detrended capital across locations in the long run, and those inducing spatial capital agglomeration.
    Keywords: Riemannian manifolds,agglomeration,growth,Dynamical spatial model,infinite di-mensional optimal control problems,convergence
    Date: 2016–03
  11. By: Jeremy Greenwood (University of Pennsylvania); Pengfei Han (University of Pennsylvania); Juan M Sanchez (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., 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.
    Keywords: capital gains taxation, dynamic contract, endogenous growth, evaluating, funding rounds, growth regressions, IPO, monitoring, startups, research and development, venture capital
    Date: 2018–02
  12. By: Minford, Lucy (Swansean University); Meenagh, David (Cardiff Business School)
    Abstract: We show that a DSGE model in which subsidies to private sector R&D stimulate economic growth, following the predictions of semi-endogenous growth theory, can account for the joint behaviour of UK output and total factor productivity for 1981-2010. R&D subsidies are measured as government- funded R&D performed by the private sector as a proportion of total private sector R&D. We estimate and test the performance of the model using Indirect Inference, and also investigate the robustness of the results using a Monte Carlo exercise. Our f•ndings indicate that sharp cuts in R&D subsidies tend to have highly persistent growth e¤ects in the UK.
    Keywords: R&D, subsidies, economic growth, government policy.
    JEL: E00 O00 O38 O50
    Date: 2018–01
  13. By: Marco Colagrossi; Domenico Rossignoli; Mario A. Maggioni
    Abstract: The relationship between democracy and economic growth has long been investigated both in the political science and in the economic literature with inconclusive outcomes. By adopting a multi-level meta-analysis framework, we tried to shed lights on this conundrum. Our hierarchical sample includes 103 studies containing 942 point-estimates. Our random effects model suggests that the sign of this relationship, albeit positive, is statistically weak. We then address the high betweenstudies heterogeneity by adopting meta-regression analysis models. Results are striking: the effect sizes? variance is largely driven by spatial and temporal differences in the samples, indicating that the democracy and growth nexus is not homogeneous across world regions and time periods. Conversely, the large number of control variables included in the papers, do not impact the reported results. At the same time, models estimated by means of the within estimator have a significant, albeit negative, impact on economic growth. This seems to suggest that scholars have not yet found the appropriate control variables - or their suitable proxies - to explain such widely debated relationship.
    Date: 2017
  14. By: Masashi Tanaka (Graduate School of Economics, Osaka University)
    Abstract: We develop a simple endogenous growth model featuring individuals f choices between general and firm-specific skills, endogenous technological innovation, and a government subsidy for education. General skills are less productive than are specific skills, but they enable workers to operate all technologies in the economy. We show that demand for general skills increases as countries catch up to the world technology frontier. Further, using aggregated data for 12 European OECD counties, we calibrate the model and compare the theoretical prediction with the data. In cross-country comparisons, we find that the returns on general skills and the impact of general education expenditure on GDP are higher in countries with higher total factor productivity. These findings support our theoretical argument of the positive relationship between firms f demand for general skills and countries f stages of development.
    Keywords: General and specific skills, Technological uncertainty, Education policy, Distance to world technology frontier
    JEL: J24 O33 O40 I22
    Date: 2018–01

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