nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒03‒12
fourteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Religious Tolerance as Engine of Innovation By Francesco Cinnirella; Jochen Streb
  2. The logic of hereditary rule: theory and evidence By Besley, Timothy; Reynal-Querol, Marta
  3. Physiological Constraints and Comparative Economic Development By Carl-Johan Dalgaard; Holger Strulik
  4. A war is forever: The long-run effects of early exposure to World War II on trust? By Conzo, Pierluigi; Salustri, Francesco
  5. Birthplace Diversity and Economic Growth: Evidence from the US States in the Post-World War II Period By Frédéric Docquier; Riccardo Turati; Jérôme Valette; Chrysovalantis Vasilakis
  6. The Geography of Talent: Development Implications and Long-Run Prospects By Michal burzynski; Christoph Deuster; Frédéric Docquier
  7. Constitutional instability and Poverty: Some Empirical Evidence By Kodila-Tedika, Oasis; Mulunda Kabange, Martin
  8. The Effect of Population Aging on Economic Growth, the Labor Force and Productivity By Nicole Maestas; Kathleen J. Mullen; David Powell
  9. The determinants of economic growth in countries with high marine biodiversity By Laura Recuero Virto; Denis Couvet; Frédéric Ducarme
  10. Oil Price Volatility and Economic Growth: Evidence from Advanced OECD Countries using over One Century of Data By Mamothoana Difeto; Reneé van Eyden; Rangan Gupta; Mark E. Wohar
  11. "Who Grew Rich?: Determinants of Income Distribution and Intergenerational Mobility under Japan’s Industrialization" By Tomoko Matsumoto; Tetsuji Okazaki
  12. Dilution effects, population growth and economic growth under human capital accumulation and endogenous technological change By Bucci, Alberto; Eraydın, Levent; Müller, Moritz
  13. Institutional change and the development of lagging regions in Europe. By Andrés Rodríguez-Pose; Tobias Ketterer
  14. Inflation and Growth: A Non-Monotonic Relationship in an Innovation-Driven Economy By Zheng, Zhijie; Huang, Chien-Yu; Yang, Yibai

  1. By: Francesco Cinnirella; Jochen Streb
    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: tolerance, openness, pluralism, diversity, innovation, patenting activity
    JEL: N13 N33 O14 O31 Z12
    Date: 2017
  2. By: Besley, Timothy; Reynal-Querol, Marta
    Abstract: Hereditary leadership has been an important feature of the political landscape throughout history. This paper argues that hereditary leadership is like a relational contract which improves policy incentives. We assemble a unique dataset on leaders between 1874 and 2004 in which we classify them as hereditary leaders based on their family history. The core empirical finding is that economic growth is higher in polities with hereditary leaders but only if executive constraints are weak. Moreover, this holds across of a range of specifications. The finding is also mirrored in policy outcomes which affect growth. In addition, we find that hereditary leadership is more likely to come to an end when the growth performance under the incumbent leader is poor.
    Keywords: growth; hereditary institutions; political agency
    JEL: H11 N40 O11
    Date: 2017–02–15
  3. By: Carl-Johan Dalgaard; Holger Strulik
    Abstract: It is a well known fact that economic development and distance to the equator are positively correlated variables in the world today. It is perhaps less well known that as recently as 1500 C.E. it was the other way around. The present paper provides a theory of why the “latitude gradient” seemingly changed sign in the course of the last half millennium. In particular, we develop a dynamic model of economic and physiological development in which households decide upon the number and nutrition of their offspring. In this setting we demonstrate that relatively high metabolic costs of fertility, which may have emerged due to positive selection towards greater cold tolerance in locations away from the equator, would work to stifle economic development during pre-industrial times, yet allow for an early onset of sustained growth. As a result, the theory suggests a reversal of fortune whereby economic activity gradually shifts away from the equator in the process of long-term economic development.
    Keywords: long-run growth, evolution, nutrition, fertility, education, comparative development
    JEL: O11 I12 J13
    Date: 2017
  4. By: Conzo, Pierluigi; Salustri, Francesco (University of Turin)
    Abstract: This paper sheds lights on the historical roots of trust across European regions. We embrace a life-course perspective and estimate the effect of early exposure to World War II on present levels of trust among Europeans aged above 50. Our identification strategy combines the variation in place and time of conflict episodes with the variation in the respondents’ month-year of birth and region of residence during the war. We focus on the pre-school period, which is a crucial stage of life for the formation of persistent trust attitudes. Our evidence provides support to this hypothesis. Individuals exposed to war episodes in the first six years of life display lower levels of trust in the adulthood. The gap persists when controlling for region and date-of-birth fixed effects, current and past socio-economic status, parental investment in human capital and other socio-demographic and economic controls, including current mental and physical health. Placebo results corroborate the validity of our findings.
    Date: 2017–12
  5. By: Frédéric Docquier (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES), FNRS, National Fund for Scientific Research and FERDI, Fondation pour les Etudes et Recherches sur le Developpement International, France); Riccardo Turati (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Jérôme Valette (CERDI, University Clermont Auvergne, CNRS (France)); Chrysovalantis Vasilakis (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Bangor Business School (United Kingdom))
    Abstract: This paper empirically revisits the impact of birthplace diversity on economic growth. We use panel data on US states over the 1960-2010 period. This rich data set allows us to better deal with endogeneity issues and to conduct a large set of robustness checks. Our results suggest that diversity among college-educated immigrants positively affects economic growth. We provide converging evidence pointing at the existence of skill complementarities between workers trained in different countries. These synergies result in better labor market outcomes for native workers and in higher productivity in the R&D sector. The gains from diversity are maximized when immigrants originate from economically or culturally distant countries (but not both), and when they acquired part of their secondary education abroad and their college education in the US. Overall, a 10% increase in high-skilled diversity raises GDP per capita by about 6%. On the contrary, low-skilled diversity has insignificant effects.
    Keywords: Immigration, Culture, Birthplace Diversity, Growth
    JEL: F22 J61
    Date: 2018–02–20
  6. By: Michal burzynski (University of Luxembourg, CREA); Christoph Deuster (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Universidade Nova de Lisboa, Portugal); Frédéric Docquier (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES), National Fund for Scientific Research (FNRS), Belgium and Université d'Auvergne, FERDI, France)
    Abstract: This paper characterizes the recent evolution of the geographic distribution of talent, and studies its implications for development inequality. Assuming the continuation of recent educational and immigration policies, it produces integrated projections of income, population, urbanization and human capital for the 21st century. To do so, we develop and parameterize a two-sector, two-class, world economy model that endogenizes education decisions, population growth, labor mobility, and income disparities across countries and across regions/sectors (agriculture vs. nonagriculture). We find that the geography of talent matters for global inequality, whatever the size of technological externalities. Low access to education and the sectoral allocation of talent have substantial impacts on inequality, while the effect of international migration is small. We conclude that policies targeting access to all levels of education and sustainable urban development are vital to reduce demographic pressures and global inequality in the long term.
    Keywords: human capital, migration, urbanization, growth, inequality
    JEL: E24 J24 O15
    Date: 2018–02–20
  7. By: Kodila-Tedika, Oasis; Mulunda Kabange, Martin
    Abstract: Is constitution linked to poverty difference between countries? In this article, we attempt to answer this question. We gather ideas of the temporal incoherence and the utility functions of political entrepreneurs. We have established a positive strong link between the constitutional instability, and poverty. The more a country changes its constitution, the higher the level of poverty.
    Keywords: Poverty, Constitutional instability
    JEL: I3 O1 O38 P16
    Date: 2018–02–11
  8. By: Nicole Maestas; Kathleen J. Mullen; David Powell
    Abstract: Population aging is widely assumed to have detrimental effects on economic growth yet there is little empirical evidence about the magnitude of its effects. This paper starts from the observation that many U.S. states have already experienced substantial growth in the size of their older population and much of this growth was predetermined by historical trends in fertility. We use predicted variation in the rate of population aging across U.S. states over the period 1980–2010 to estimate the economic impact of aging on state output per capita. We find that a 10% increase in the fraction of the population ages 60+ decreases the growth rate of GDP per capita by 5.5%. Two-thirds of the reduction is due to slower growth in the labor productivity of workers across the age distribution, while one-third arises from slower labor force growth. Our results imply annual GDP growth will slow by 1.2 percentage points this decade and 0.6 percentage points next decade due to population aging.
    Keywords: population aging, GDP growth, demographic transitions
    JEL: J11 J14 J23 J26 O47
    Date: 2016–08
  9. By: Laura Recuero Virto (MNHN and MAEDI); Denis Couvet (MNHN); Frédéric Ducarme (Centre Universitaire (CURF) de Mayotte)
    Abstract: In this paper, we explore the economic growth determinants in 74 countries with high marine biodiversity for the period 1960-2009 through methodologies that take into account theory and specification uncertainty and the presence of multiple growth regimes. We find, firstly, that neoclassical (income), demography, macroeconomic policy, natural capital, fractionalisation and institutions theories are robust determinants of economic growth in these coastal countries. These results suggest that a country’s capacity to deal with marine biodiversity is associated with factors that impact economic growth. Secondly, in contrast with worldwide data sets, macroeconomic policies and natural capital are additional robust determinants of economic growth. There is strong historical evidence on the role of macroeconomic policies and non-renewable natural resources in trade flows and economic growth in coastal countries. Both factors, together with demography, highlight the pressures that coastal areas can be subject to such as construction and public works, population growth and urbanisation which, in turn, may degrade marine biodiversity. In fact, compared to other countries, coastal countries with high marine biodiversity have higher fertility rates, higher international trade exchanges, greater government consumption and lower institutional endowments. Thirdly, we find that education plays an important role in these countries. The rate of economic convergence increases with the level of education. Moreover, education and investment in physical capital have a significant and positive impact on economic growth in countries with very high levels of marine biodiversity. All together, our results suggest that diversifying away from natural capital wealth by investing in education and, more generally, in intangible capital can enhance economic growth, particularly in countries with very high levels of marine biodiversity. In turn, this structural change can contribute to remove pressure from marine biodiversity hotspots, mainly through lower fertility rates as education increases and lower dependence on natural capital exports via coastal areas.
    Keywords: Economic growth, marine biodiversity
    JEL: O10 O13 Q20 Q22
    Date: 2018–02
  10. By: Mamothoana Difeto (Department of Economics, University of Pretoria, Pretoria, South Africa); Reneé van Eyden (Department of Economics, University of Pretoria, Pretoria, South Africa); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Mark E. Wohar (College of Business Administration, University of Nebraska at Omaha, Omaha, USA and School of Business and Economics, Loughborough University, Leicestershire, UK)
    Abstract: In this paper we make use of a number of different panel data estimators, including fixed effects, bias-corrected least squares dummy variables (LSDVC), generalised methods of moments (GMM), feasible generalised least squares (FGLS), and random coefficients (RC) to analyse the impact of real oil price volatility on the growth in real GDP per capita for 17 member countries of the Organisation for Economic Co-operation and Development (OECD), over a 144-year time period from 1870 to 2013. Our main findings can be summarised as follows: overall, oil price volatility has a negative and statistically significant impact on economic growth of OECD countries in our sample. In addition, when allowing for slope heterogeneity, oil producing countries are significantly negatively impacted by oil price uncertainty, most notably Norway and Canada.
    Keywords: Oil price volatility, economic growth, OECD countries, panel data
    JEL: Q43 C33 O55
    Date: 2018–02
  11. By: Tomoko Matsumoto (Nagoya University and New York University); Tetsuji Okazaki (Faculty of Economics, The University of Tokyo)
    Abstract: Industrialization is a key to economic development and overall income growth. Industrialization, however, does not increase all people’s income equally. Income inequality tends to expand in the early phase of economic development, as illustrated by the “Kuznets Curve.†Furthermore, growing literature on social mobility suggest social mobility may be lower in the period. We aim to contribute with the newly constructed individual-level intergenerational data from early twentieth century Japan under industrialization. Our data include not only income tax data but also detailed data on biographical background. Using the data, we investigate the mechanisms of income distribution and its intergenerational mobility under early stage of economic development. Our results show that the new opportunities of working on business under the industrialization provided people chances to grow rich, although the existing old social order remained.
  12. By: Bucci, Alberto; Eraydın, Levent; Müller, Moritz
    Abstract: This paper answers the following two questions: 1) In the data, can we find a dilution effect of population growth also on per-capita human capital investment? If yes, 2) how can we use this fact to explain theoretically the existence of a differential impact of population change on economic growth across countries? In the first part of the article we document empirically the considerable across-countries heterogeneity of a dilution effect of population growth also in regard to the process of per-capita human capital formation and observe that, at a country's level, population growth may be relevant (either positively or negatively) for economic growth depending on the specific way it affects the process of schooling-acquisition by agents. In the second part of the paper we use these results in order to build a multi-sector growth model which is capable of accounting (depending on the strength of the found dilution effect of population growth on per-capita human capital formation) for the non-monotonous correlation between demographic and economic growth rates in the long-run.
    Keywords: Human Capital Investment,Economic Growth,Population Growth,Dilution Effects,Research & Development
    JEL: J10 J24 O33 O41
    Date: 2018
  13. By: Andrés Rodríguez-Pose; Tobias Ketterer
    Abstract: According to the dominant economic theories, economic growth is the result of a combination of three factors – physical capital, human capital or labour, and innovation –plus a residual factor or error term, which represents what we do not know or cannotexplain. Depending on whether a neoclassical growth (Solow, 1956; Swan, 1956) or an endogenous growth approach is adopted (Romer, 1986: Lucas, 1988), the weight attributed to each of the components varies, but they remain, in different guises the fundamental drivers informing development policies across the world. The European Union’s (EU) regional development and cohesion policy has been no exception. The bulk of cohesion investments have been channelled towards improving the infrastructure endowment and accessibility of the least developed regions of the EU, as well as increasing the availability and quality of human resources, and developing the innovative capacity of individuals and firms across lagging areas of Europe.
    Keywords: changes, development, regions, Europe.
    JEL: H76 O18 O21 R58
    Date: 2018–02
  14. By: Zheng, Zhijie; Huang, Chien-Yu; Yang, Yibai
    Abstract: This paper investigates the effects of monetary policy on long-run economic growth via different cash-in-advance constraints on R&D in a Schumpeterian growth model with vertical and horizontal innovation. The relationship between inflation and growth is contingent on the relative extents of CIA constraints and diminishing returns to two types of innovation. The model can generate a mixed (monotonic or non-monotonic) relationship between inflation and growth, given that the relative strength of monetary effects on growth between different CIA constraints and that of R&D-labor-reallocation effects between different diminishing returns vary with the nominal interest rate. In the empirically relevant case where horizontal R&D suffers from greater diminishing returns than vertical R&D, inflation and growth can exhibit an inverted-U relationship when the CIA constraint on horizontal R&D is sufficiently larger than that on vertical R&D. Finally, the model is calibrated to the US economy, and we find that the growth-maximizing rate of inflation is around 2.8%, which is closely consistent with recent empirical estimates.
    Keywords: Inflation; Endogenous growth; CIA constraint on R&D
    JEL: E41 O30 O40
    Date: 2018–02–21

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