nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒03‒05
nine papers chosen by
Marc Klemp
University of Copenhagen

  1. Roman Roads to Prosperity: Persistence and Non-Persistence of Public Goods Provision By Dalgaard, Carl-Johan; Kaarsen, Nicolai; Olsson, Ola; Selaya, Pablo
  2. Ancient Origins of the Global Variation in Economic Preferences By Anke Becker; Benjamin Enke; Armin Falk
  3. Shaking Up the Equilibrium: Natural Disasters, Economic Activity, and Immigration By Ager, Philipp; Hansen, Casper Worm; Lønstrup, Lars
  4. Resources, Conflict, and Economic Development in Africa By Achyuta Adhvaryu; James E. Fenske; Gaurav Khanna; Anant Nyshadham
  5. Optimal taxes on capital in the OLG model with uninsurable idiosyncratic income risk By Krueger, Dirk; Ludwig, Alexander
  6. A contribution to the theory of fertility and economic development By Gori, Luca; Sodini, Mauro
  7. Fractal Attractors in Economic Growth Models with Random Pollution Externalities By La Torre, Davide; Marsiglio, Simone; Privileggi, Fabio
  8. On the Optimal Labor Income Share By Jakub Growiec; Peter McAdam; Jakub Muck
  9. Foreign Aid and Subnational Development: A Grid Cell Analysis By Juergen Bitzer; Erkan Goeren

  1. By: Dalgaard, Carl-Johan (University of Copenhagen, CAGE (Warwick) and CEPR (London)); Kaarsen, Nicolai (Danish Economic Council); Olsson, Ola (Department of Economics, School of Business, Economics and Law, Göteborg University); Selaya, Pablo (University of Copenhagen)
    Abstract: How persistent is public goods provision in a comparative perspective? We explore the link between infrastructure investments made during antiquity and the presence of infrastructure today, as well as the link between early infrastructure and economic activity both in the past and in the present, across the entire area under dominion of the Roman Empire at the zenith of its geographical extension (117 CE). We find a remarkable pattern of persistence showing that greater Roman road density goes along with (a) greater modern road density, (b) greater settlement for-mation in 500 CE, and (c) greater economic activity in 2010. Interestingly, however, the degree of persistence in road density and the link between early road density and contemporary economic development is weakened to the point of insignificance in areas where the use of wheeled vehicles was abandoned from the first millennium CE until the late modern period. Taken at face value, our results suggest that infrastructure may be one important channel through which persistence in comparative development comes about.
    Keywords: Roman roads; Roman Empire; public goods; infrastructure; persistence
    JEL: H41 O40
    Date: 2018–02
  2. By: Anke Becker; Benjamin Enke; Armin Falk
    Abstract: Variation in economic preferences is systematically related to both individual and aggregate economic outcomes, yet little is known about the origins of the worldwide preference variation. This paper uses globally representative data on risk aversion, time preference, altruism, positive reciprocity, negative reciprocity, and trust to uncover that contemporary preference heterogeneity has its roots in the structure of the temporally distant migration patterns of our very early ancestors: In dyadic regressions, differences in preferences between populations are significantly increasing in the length of time elapsed since the ancestors of the respective groups broke apart from each other. To document this pattern, we link genetic and linguistic distance measures to population-level preference differences (i) in a wide range of cross-country regressions, (ii) in within-country analyses across groups of migrants, and (iii) in analyses that leverage variation across linguistic groups. While temporal distance drives differences in all preferences, the patterns are strongest for risk aversion and prosocial traits.
    JEL: D03
    Date: 2018–02
  3. By: Ager, Philipp (Department of Business and Economics); Hansen, Casper Worm (University of Copenhagen); Lønstrup, Lars (Department of Business and Economics)
    Abstract: This paper examines the long-run effects on the spatial distribution of economic activity caused by historical shocks. Using variation in the potential damage intensity of the 1906 San Francisco Earthquake across cities in the American West, we show that more severely affected cities experienced lower population growth relative to less affected cities after the earthquake. This negative effect persisted until the late 20th century. The earthquake diverted migrants to less affected areas in the region, which, together with reinforcing dynamic agglomeration effects from scale economies, left a long-lasting mark on the location of economic activity in the American West.
    Keywords: Economic geography; Location of economic activity; Migration; Natural disasters
    JEL: O15 O40 R11 R12
    Date: 2018–02–12
  4. By: Achyuta Adhvaryu; James E. Fenske; Gaurav Khanna; Anant Nyshadham
    Abstract: Natural resources have driven both growth and conflict in modern Africa. We model the interaction of parties engaged in potential conflict over such resources. The likelihood of conflict depends on both the absolute and relative resource endowments of the parties. Resources fuel conflict by raising the gains from expropriation and by increasing fighting strength. Economic prosperity, as a result, is a function of equilibrium conflict prevalence determined not just by a region's own resources but also by the resources of its neighbors. Using high-resolution spatial data on resources, conflicts, and nighttime illumination across the whole of sub-Saharan Africa, we find evidence confirming each of the model's predictions. Structural estimates of the model reveal that conflict equilibria are more prevalent where institutional quality (measured by, e.g., risk of expropriation, property rights, voice and accountability) is worse.
    JEL: D74 O13 Q34
    Date: 2018–02
  5. By: Krueger, Dirk; Ludwig, Alexander
    Abstract: We characterize the optimal linear tax on capital in an Overlapping Generations model with two period lived households facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general equilibrium feedback of private precautionary saving. For logarithmic utility our full analytical solution of the Ramsey problem shows that the optimal aggregate saving rate is independent of income risk. The optimal time-invariant tax on capital is increasing in income risk. Its sign depends on the extent of risk and on the Pareto weight of future generations. If the Ramsey tax rate that maximizes steady state utility is positive, then implementing this tax rate permanently generates a Pareto-improving transition even if the initial equilibrium is dynamically efficient. We generalize our results to Epstein-Zin-Weil utility and show that the optimal steady state saving rate is increasing in income risk if and only if the intertemporal elasticity of substitution is smaller than 1.
    Keywords: Idiosyncratic Risk,Taxation of Capital,Overlapping Generations,Precautionary Saving,Pecuniary Externality
    JEL: H21 H31 E21
    Date: 2018
  6. By: Gori, Luca; Sodini, Mauro
    Abstract: The aim of this research is to build on a theory for explaining economic development in a (neoclassical) growth model with endogenous fertility. The economy is comprised of overlapping generations of rational and identical individuals and identical competitive firms producing with a constant-returns-to-scale technology with no externalities. From a theoretical perspective, the distinguishing feature of this work is that endogenous fertility per se is able to explain the existence of low and high development regimes. It provides alternative reasons (history driven or expectations driven) why some countries enter development trajectories with high GDP and low fertility and others experience under-performances with low GDP and high fertility. The model is also able to reproduce fertility fluctuations and explain the baby busts and baby booms observed in the last century in some developed countries.
    Keywords: Economic development,Endogenous fertility,Local and global indeterminacy,OLG model
    JEL: C61 C62 J1 J22 O41
    Date: 2018
  7. By: La Torre, Davide; Marsiglio, Simone; Privileggi, Fabio (University of Turin)
    Abstract: We analyze a discrete time two-sector economic growth model where the production technologies in the final and human capital sectors are affected by random shocks both directly (via productivity and factor shares) and indirectly (via a pollution externality). We determine the optimal dynamics in the decentralized economy and show how these dynamics can be described in terms of a two-dimensional affine iterated function system with probability. This allows us to identify a suitable parameter configuration capable of generating exactly the classical Barnsley’s fern as the attractor of the log-linearized optimal dynamical system.
    Date: 2018–02
  8. By: Jakub Growiec; Peter McAdam; Jakub Muck
    Abstract: Labor's share of income has attracted interest in recent years reflecting its apparent decline. These falls, witnessed across many countries, are usually deemed undesirable. Any such assertion, however, begs the question of what is the socially optimal labor share. We address this question using a micro-founded endogenous growth model calibrated on US data. We find that in our central calibration the socially optimal labor share is 17% (11 pp) above the decentralized equilibrium, calibrated to match the average observed in history. We also study the dependence of both long-run growth equilibria on model parameters and relate our results to Piketty's ''laws of Capitalism''. Finally, we demonstrate that cyclical movements in factor income shares are socially optimal and that the decentralized equilibrium typically does not generate excess volatility.
    Keywords: Labor income share, Endogenous growth, Factor augmenting, endogenous technical change, Social optimum, Decentralized allocation
    JEL: O33 O41
    Date: 2018–02
  9. By: Juergen Bitzer (University of Oldenburg, Department of Economics); Erkan Goeren (University of Oldenburg, Department of Economics)
    Abstract: We examine the impact of geo-referenced World Bank development programs on subnational development using equally sized grid cells with a spatial resolution of 0.5 decimal degrees latitude x longitude as the unit of investigation. The proposed grid cell approach solves a number of endogeneity problems discussed in the aid effectiveness literature that make it diffcult to identify the true effect of foreign aid on development outcomes due to the presence of unobserved heterogeneity, lack of key country-level controls, aggregation bias, simultaneity and/or the presence of reverse causality in the association between foreign aid and economic growth, measurement errors, and endogenous sample selection bias. The estimates reveal that World Bank foreign aid projects contribute signifcantly to grid cell economic activity measured by night-time lights growth. This finding is robust to the presence of unobserved country-year and grid-cell-specific unobserved heterogeneity, and to the inclusion of a full set of grid-cell-specifc socioeconomic, demographic, con ict-related, biogeographic, and climatic controls. Additional sensitivity tests confirm the robustness of the main findings to various econometric estimators, alternative model specifications, and different spatial aggregation levels.
    Keywords: Aid Effectiveness, Geo-Referenced Aid Projects, Economic Development, Economic Growth, Grid-Cell Analysis, GIS Data, Satellite Night-Time Light Data
    Date: 2018–03

This nep-gro issue is ©2018 by Marc Klemp. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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