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on Economic Growth |
| By: | Noort, S. |
| Abstract: | Political scientists have long suspected that differences in the degree to which governments are able to effectively implement and enforce public policy (i.e. state capacity) are at the root of economic (under)development. Measurement error and endogeneity have, however, prevented researchers from obtaining a credible estimate of the effect of state capacity on economic performance. Using an improved measure of state capacity and exposure to 1700-1788 inter-state warfare as an instrument, I find that state capacity alone is able to explain 57% of all cross-country differences in GDP per capita and that its effect is larger than other prominent explanations for cross-country differences in economic development, such as: constraints on the executive, democracy, latitude, landlockedness, social capital, natural resources, legal origins, ethnic fractionalization, and others. Using mediation analysis I find that state capacity affects economic development through factors that enable markets to allocate resources more efficiently (law and order), and through better performance in sectors where market failures are prone to arise (education, infrastructure, and technology). I find that these results are robust to more than 100 controls and show empirically that the IV estimates are robust to relatively large violations of the exclusion restriction. I also find that state capacity explains a significant fraction of cross-country growth rates over the 1950 to 2010 period. |
| Keywords: | Institutions, Economic Development, State Capacity, Private Property Rights, Human Capital Accumulation, Public Goods, Law and Order, Technology. |
| Date: | 2018–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1821&r=gro |
| By: | Hiroaki Sakamoto; Ken-Ichi Akao |
| Abstract: | This paper develops a general framework that can be used to analyze the longterm relationship between disasters and economic growth. We first establish the basic existence and equivalence results. We then apply the framework to an endogenous growth model to consider the influence of disasters on the long-term equilibrium and the transition phase. The result shows that while experiencing disasters may lower the average growth rate of the affected countries, there exist various channels through which the risk of disasters and long-term economic performance are positively correlated. This finding reconciles the apparently contradictory evidence in recent empirical studies. Our result also suggests that care should be taken with the interpretation of disaster-driven economic growth because many of the channels identified are accompanied by a welfare decline. |
| Keywords: | disasters; dynamic optimization; long-term growth; endogenous growth; aggregate uncertainty |
| JEL: | O41 O44 C61 |
| URL: | http://d.repec.org/n?u=RePEc:kue:epaper:e-17-014&r=gro |
| By: | Francesco D'Acunto; Laurent Frésard |
| Abstract: | The growing finance wage premium is related to a modest net reallocation of skilled workers from non-finance sectors into finance in a broad sample of 24 countries over 35 years. The reallocation is higher when the finance wage premium grows faster than the contribution of the financial sector to the economy, which we proxy with the relative value added of finance. More innovative sectors and sectors exhibiting lower labor-transition costs face a higher reallocation of skilled workers. Yet, the growing finance wage premium is unrelated to sectoral or aggregate growth, to countries’ innovative capacity, to student enrollment in STEM degrees, and to the riskiness, efficiency, and competitiveness of banking sectors. Overall, the reallocation of skilled labor implied by a growing finance wage premium appears too modest to materially affect economic growth. |
| Keywords: | finance wage premium, skilled labor, misallocation, growth, innovation, banking sector. |
| JEL: | D72 G20 J23 J31 N20 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6883&r=gro |
| By: | Raouf Boucekkine (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales); Giorgio Fabbri (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Salvatore Federico (LPMA - Laboratoire de Probabilités et Modèles Aléatoires - UPMC - Université Pierre et Marie Curie - Paris 6 - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique); Fausto Gozzi (Dipartimento di Scienze Economiche e Aziendali - Libera Università INTERNAZIONALE DEGLI STUDI SOCIALI G. CARLI) |
| Abstract: | We provide an optimal growth spatio-temporal setting with capital accumulation and diffusion across space in order to study the link between economic growth triggered by capital spatio-temporal dynamics and agglomeration across space. The technology is AK, K being broad capital. The social welfare function is Benthamite. In sharp contrast to the related literature, which considers homogeneous space, we derive optimal location outcomes for any given space distributions for technology and population. Both the transitional spatio-temporal dynamics and the asymptotic spatial distributions are computed in closed form. Concerning the latter, we find, among other results, that: (i) due to inequality aversion, the consumption per capital distribution is much flatter than the distribution of capital per capita; (ii) endogenous spillovers inherent in capital spatio-temporal dynamics occur as capital distribution is much less concentrated than the (pre-specified) technological distribution ; (iii) the distance to the center (or to the core) is an essential determinant of the shapes of the asymptotic distributions, that is relative location matters. |
| Keywords: | Growth, agglomeration, heterogeneous and continuous space,capital mobility,infinite dimensional optimal control problems Journal of Economic Literature |
| Date: | 2018–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01713905&r=gro |
| By: | Pierre Barral; Mehdi Senouci (LGI - Laboratoire Génie Industriel - EA 2606 - CentraleSupélec) |
| Abstract: | We present an alternative to growth accounting à la Solow, on the same set of variables, that provides a metric for labor-saving technical change ('λ') and capital-saving technical change ('µ'). These two components are identified through the variations of the factor shares, which we assume to reflect marginal productivities. We run our algorithm using BEA data from 1948 to 2015, and compare the predictive power of our time series of (λ_t,µ_t) with the one of the Solow residual. Through simple regressions, we find: (i) that λ and µ are as good predictors of the growth rate of GDP per capita as the Solow residual, and (ii) that λ and µ, together with capital accumulation, are strong predictors of the variation of the factor shares, while the Solow residual is not. We conclude that a bi-dimensional representation of productivity has a stronger empirical relevance than the usual linear representation; however the former carries some different theoretical properties than the latter – notably on the consequences of capital accumulation. |
| Keywords: | Productivity,factor-saving technical change,capital accumulation |
| Date: | 2018–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01709599&r=gro |
| By: | Raouf Boucekkine (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales); Patrick Pintus (InSHS - CNRS - Institut des Sciences Humaines et Sociales - CNRS - INS1640, GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales); Benteng Zou (CREA - Center for Research in Economic Analysis - Uni.lu - Université du 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 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01705300&r=gro |