nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒05‒21
twelve papers chosen by
Marc Klemp
University of Copenhagen

  1. Finding Needles in Haystacks: Artificial Intelligence and Recombinant Growth By Ajay Agrawal; John McHale; Alex Oettl
  2. Intergenerational policies, public debt, and economic growth: a politico{economic analysis By Real Arai; Katsuyuki Naito; Tetsuo Ono
  3. Property Rights, Predation, and Productivity By del Río, Fernando
  4. The strong porter hypothesis in an endogenous growth model with satisficing managers By Evens Salies; Dominique Bianco
  5. Technological changes and population growth: the role of land in England By Claire Loupias; Bertrand Wigniolle
  6. Endogenous growth - A dynamic technology augmentation of the Solow model By Murad Kasim
  7. The causal linkages between renewable electricity generation and economic growth in South Africa. By Khobai, Hlalefang
  8. Remittances, Human Capital, and Economic Growth: Panel Data Evidence from Asia and Sub-Saharan Africa By Chakra Pani Acharya; Roberto Leon-Gonzalez
  9. Education Expenditure and Economic Growth in Mauritius: An Application of the Bounds Testing Approach By Sunde, Tafirenyika
  10. Tracking the slowdown in long-run GDP growth By Antolin-Diaz, Juan; Drechsel, Thomas; Petrella, Ivan
  11. The relationship between energy consumption and economic growth: evidence from Thailand based on NARDL and causality approaches By Noh, Nadia Mohd; Masih, Mansur
  12. An AB-SFC Model of Induced Technical Change along Classical and Keynesian Lines By Fanti, Lucrezia

  1. By: Ajay Agrawal; John McHale; Alex Oettl
    Abstract: Innovation is often predicated on discovering useful new combinations of existing knowledge in highly complex knowledge spaces. These needle-in-a-haystack type problems are pervasive in fields like genomics, drug discovery, materials science, and particle physics. We develop a combinatorial-based knowledge production function and embed it in the classic Jones growth model (1995) to explore how breakthroughs in artificial intelligence (AI) that dramatically improve prediction accuracy about which combinations have the highest potential could enhance discovery rates and consequently economic growth. This production function is a generalization (and reinterpretation) of the Romer/Jones knowledge production function. Separate parameters control the extent of individual-researcher knowledge access, the effects of fishing out/complexity, and the ease of forming research teams.
    JEL: O3 O33 O4
    Date: 2018–04
  2. By: Real Arai (Department of Management, Kochi University of Technology); Katsuyuki Naito (Faculty of Economics, Asia University); Tetsuo Ono (Graduate School of Economics, Osaka University)
    Abstract: This study presents a two-period overlapping-generations model with endoge- nous growth. In each period, the government representing young and old gener- ations provides a public good financed by labor income taxation and public debt issuance, and the government's policies are determined by probabilistic voting. Increased political power of the old lowers economic growth. A debt-ceiling rule is considered to resolve the negative growth effect, but it creates a trade-off between generations in terms of welfare.
    Keywords: public debt; probabilistic voting; Markov perfect equilibrium; eco- nomic growth
    JEL: D72 H41 H63 O43
    Date: 2018–04
  3. By: del Río, Fernando
    Abstract: We develop a neoclassical growth model with imperfect property rights in which predation entails both waste of resources and deadweight losses, the latter becoming very large when the predation rate is high. According to the model, in the United States, the welfare costs of crime represent a loss of 18.6% of consumption per capita. For a country in the average of the last decile of the distribution of an index of business costs of crime across 94 countries, this loss is 57.8%. Moreover, a one standard deviation increase in the quality index of formal institutions securing property rights increases GDP per worker by 23% for a country with an institutional quality index equal to the average of the last decile of its distribution.
    Keywords: Rent-seeking, cross-country differences in TFP and GDP per worker, business costs of crime, institutional quality, welfare costs of crime.
    JEL: O10 O4 O43
    Date: 2018–02–13
  4. By: Evens Salies (Observatoire français des conjonctures économiques); Dominique Bianco (Université de Bourgogne)
    Abstract: Few endogenous growth models have focused attention on the strong Porter hypothesis that stricter environmental policies induce innovations, the benefits of which exceed the costs. A key assumption underlying this hypothesis is that policy strictness pushes firms to overcome some obstacles to profit maximization. This paper incorporates pollution and taxation in the model of Aghion and Griffith (2005) of growth which includes satisficing managers and non-drastic innovation. Our theoretical results predict the strong Porter hypothesis. However, assuming drastic innovation in the model, we predict the weak Porter hypothesis. We also consider several extensions, such as a simultaneous competition policy or a command and control policy.
    Keywords: Endogeneous growth model
    Date: 2017–11
  5. By: Claire Loupias (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne); Bertrand Wigniolle (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper emphasizes the role of land and technological progress in economic and population growth. The model is calibrated using historical data on England concerning both economic growth rate and the factor shares (land, capital, and labor) in total income, as well as mortality tables. It is able to reproduce the dynamics of population since 1760. Moreover, it is possible to disentangle the relative effect of technical changes and mortality fall on the evolution of population. We conduct a counterfactual analysis eliminating successively the increase in life expectancy and the technological bias. With no increase in life expectancy, population would have been respectively 10% and 30% lower in 1910 and in the long run. The figures would have been respectively 40% and 60% lower, with no bias in the technical progress. Finally, population would have been 45% smaller in 1910 and 70% smaller in the long run, neutralizing both the effect of life expectancy and technological bias. So the major part of population increase is due to the technological bias evolution between land and capital.
    Keywords: endogenous fertility,land
    Date: 2018–05
  6. By: Murad Kasim
    Abstract: In this paper, I endeavour to construct a new model, by extending the classic exogenous economic growth model by including a measurement which tries to explain and quantify the size of technological innovation ( A ) endogenously. I do not agree technology is a "constant" exogenous variable, because it is humans who create all technological innovations, and it depends on how much human and physical capital is allocated for its research. I inspect several possible approaches to do this, and then I test my model both against sample and real world evidence data. I call this method "dynamic" because it tries to model the details in resource allocations between research, labor and capital, by affecting each other interactively. In the end, I point out which is the new residual and the parts of the economic growth model which can be further improved.
    Date: 2018–05
  7. By: Khobai, Hlalefang
    Abstract: Knowledge of the direction of causality between electricity generation from renewables and economic growth is essential if energy policies which will support economic growth of the country are to be devised. This study explores the causal relationship between electricity generated from the renewables and economic growth in South Africa using carbon dioxide emissions, employment and capital as the additional variables. The study uses the Johansen co-integration model to detect the long run relationship between the variables and the Vector Error Correction Model (VECM) to determine the direction of causality. The findings from Johansen co-integration evidenced a long run relationship between electricity generated from renewables, economic growth, carbon dioxide emissions, employment and capital. The VECM revealed unidirectional causality running from electricity generated from renewables to economic growth. The findings indicate that electricity generation from renewables enhance economic growth. Therefore, the government should make appropriate efforts to select energy policies that do not negatively affect economic growth.
    Keywords: Electricity generation, carbon dioxide emissions, economic growth
    JEL: C32 D04 Q01 Q42 Q47
    Date: 2018–05–03
  8. By: Chakra Pani Acharya (National Planning Commission Secretariat, Kathmandu, Nepal); Roberto Leon-Gonzalez (National Graduate Institute for Policy Studies, Tokyo, Japan)
    Abstract: We examine the impact of remittances on economic growth using panel data (1975-2014) for 18 countries in Asia and Sub-Saharan Africa (SSA) that are similar in size and development level. We allow for heterogeneous production functions across countries and calculate the average marginal effects of remittances using the panel dynamic ordinary least squares estimator. The estimation results show that remittances increase growth significantly, especially through investments in human capital. In addition we find that: (i) remittances have a modest impact on growth when controlling for physical and human capital channels through which remittances potentially affect output growth; (ii) when we do not control for human capital the effect is larger regardless of the sub-samples considered - the elasticity of output with respect to remittances is 7.3 percent in the full sample, and 18.6 percent among Asian countries ; (iii) remittances have a significant positive long-run effect on human capital formation regardless of the sub-samples considered but the effect on physical capital accumulation is significant only among middle income and Asian countries. The findings suggest that channeling the remittances towards investments in physical capital and adoption of new knowledge, skills and technology is crucial for high economic growth in low income countries.
    Date: 2018–05
  9. By: Sunde, Tafirenyika
    Abstract: This study examines the relationship between education expenditure and economic growth in Mauritius. The study employed the ARDL bounds testing methodology for the period 1976 to 2016. The study found that education expenditure Granger causes economic growth in Mauritius in the short run. In addition, the study also found that economic growth does not Granger cause education expenditure in Mauritius in the short run. However, in the long-run, the study found that there are long-run relationships between education expenditure and economic growth in both equations; and this means that an increase in either of the variables will eventually lead to an increase in the other variable. The study, therefore, found support for the hypothesis that investment in education raises economic growth. This means that Mauritius has the potential to benefit from further investments in education in the future.
    Keywords: Education expenditure; economic growth; Granger causality; ARDL; Mauritius
    JEL: C5 E6
    Date: 2017
  10. By: Antolin-Diaz, Juan; Drechsel, Thomas; Petrella, Ivan
    Abstract: Using a dynamic factor model that allows for changes in both the long-run 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 United States and other advanced economies. When applied to real-time data, the proposed model is capable of detecting shifts in long-run growth in a timely and reliable manner.
    JEL: J1 N0
    Date: 2017–05
  11. By: Noh, Nadia Mohd; Masih, Mansur
    Abstract: Energy plays a crucial role in the economic development of most economies. The causality nexus between energy consumption and economic growth is important in enacting energy consumption policy and environmental policy. This paper tries to investigate the relationship between energy consumption and economic growth for Thailand over the period from 1976 to 2014 applying NARDL approach. The main finding from the NARDL evidence cointegration among economic growth, energy consumption, capital formation and trade openness and found asymmetry is significant for both the long run and short run for economic growth, which implies that taking nonlinearity and asymmetry into account is important when studying the relationship between economic growth and energy consumption. This paper also found that most of the independent variables are found to be significant in the long run compared to the short run. In addition, this paper also discerned Granger-causal chain between the variables through the application of VECM, VDC and IRF analyses.
    Keywords: Energy consumption, Economic growth, NARDL, VECM, VDC, Thailand
    JEL: C58 Q43
    Date: 2017–12–31
  12. By: Fanti, Lucrezia
    Abstract: This paper introduces the classical idea about the so-called directed and induced technical change (ITC) within a Keynesian demand-side and evolutionary endogenous growth model in order to analyze the interplay among technical change, long-run economic growth and functional income distribution. An ITC process is analyzed within an Agent-Based Stock-Flow Consistent (AB-SFC) model, wherein credit-constrained heterogeneous firms choose both the intensity and the direction of the innovation towards a labor- or capital-saving choice of technique. In the long-run, the model reproduces the so-called Kaldor stylized facts (i.e. with a purely labor-saving technical change), however during the transitional phase the model shows a labor-saving/capital-using innovation pattern, as the aggregate output-capital ratio decreases until it stabilizes in the long-run, as well as declining labor share for long time periods and we can ascribe these evidences mainly to the directed technical change process. In order to stress the effective role of the innovation bias on the model dynamics, we compare the baseline scenario with a counterfactual scenario wherein a neutral technical progress is at work.
    Keywords: Agent-Based Macroeconomics; Stock-Flow Consistent Models; Induced Technical Change; Directed Innovation; Choice of Techniques; Labor Share; Growth and Distribution.
    JEL: E24 E25 O33 O41
    Date: 2018–03–10

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