nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒07‒09
sixteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Fast Track to Growth? The Impact of Railway Access on Regional Economic Development in 19th Century Switzerland By Konstantin Buechel, Stephan Kyburz
  2. A parsimonious model of longevity, fertility, HIV transmission and development By Gori, Luca; Manfredi, Piero; Sodini, Mauro
  3. Unreal Wages? A New Empirical Foundation for the Study of Living Standards and Economic Growth in England, 1260-1860 By Jane Humphries; Jacob Weisdorf
  4. Japan and the Great Divergence, 730-1874 By Stephen Broadberry; Jean-Pascal Bassino; Kyoji Fukao; Bishnupriya Gupta; Masanori Takashima
  5. Instrumental Variables in the Long Run By Casey, Gregory; Klemp, Marc
  6. China, Europe and the Great Divergence: A Study in Historical National Accounting, 980-1850 By Stephen Broadberry; Hanhui Guan; David Daokui Li
  7. Growing, Shrinking and Long Run Economic Performance: Historical Perspectives on Economic Development By Stephen Broadberry; John Wallis
  8. Well-being Inequality in the Long Run By Leandro Prados de la Escosura
  9. The Role of Human Capital Resources in East African Economies By Urgaia; Worku R.
  10. Interaction between Business Cycles and Economic Growth By Sohei Kaihatsu; Maiko Koga; Tomoya Sakata; Naoko Hara
  11. Dismissal Laws, Innovation, and Economic Growth By Subramanian, Krishnamurthy V.
  12. Bank profitability and economic growth By Klein, Paul-Olivier; Weill, Laurent
  13. Electricity availability: A precondition for faster economic growth? By Rohan Best; Paul J. Burke
  14. Human capital accumulation through recurrent education By Mariko Tanaka
  15. A Framework to Study the Role of Structural Transformation in Productivity Growth and Regional Convergence By Fukao, Kyoji; Paul, Saumik
  16. Are long-run output growth rates falling? By Ivan Mendieta-Munoz; Mengheng Li

  1. By: Konstantin Buechel, Stephan Kyburz
    Abstract: We study the effect of railway access on regional development in 19th century Switzerland. The identification strategy in our analysis of geo-referenced railway network information, population growth rates, sectoral work shares and body height, relies on panel data techniques and an inconsequential units IV approach. Gaining railway access increased annual population growth by 0.4 percentage points compared to unconnected municipalities, mainly via the local migration balance. Railway improvements also promoted structural shifts from the primary to the secondary/tertiary sectors, and marginally accelerated body height growth.
    Keywords: Railway Access, Regional Development, Population Growth, Structural Change, Body Height, Switzerland
    JEL: I30 N33 N73 O18
    Date: 2016–08
  2. By: Gori, Luca; Manfredi, Piero; Sodini, Mauro
    Abstract: A central policy issue in the battle against HIV in Sub-Saharan Africa (SSA) is whether and when high-prevalence countries might become fully autonomous in designing and implementing their own intervention policies aimed to control the disease. The aim of this research is twofold. First, it develops a framework for explaining economic development in a general equilibrium growth model with endogenous fertility and endogenous longevity under the threat of a deadly enduring infectious disease, as is the case of HIV/AIDS in SSA. Second, it aims to shed light on the interplay between foreign aid and endogenous domestic public policies in those SSA countries severely afflicted by HIV. In particular, it investigates the macro-economic dynamic feasibility and related effects of an intervention policy where the overall amount of resources devoted to HIV/AIDS is the sum of an exogenous component representing foreign aid and an endogenous public expenditure. Both these policies allow to bring HIV under control, but show quite different responses in terms demo-economic variables, mainly passing through the fertility response to the evolving epidemic conditions.
    Keywords: HIV transmission,Economic development,Endogenous fertility,Endogenous longevity
    JEL: C61 C62 J1 J22 O41 O47
    Date: 2018
  3. By: Jane Humphries; Jacob Weisdorf
    Abstract: Abstract: Existing measures of historical real wages suffer from the fundamental problem that workers’ annual incomes are estimated on the basis of day wages without knowing the length of the working year. We circumvent this problem by presenting a novel wage series of male workers employed on annual contracts. We use evidence of labour market arbitrage to argue that existing real wage estimates are badly off target, because they overestimate the medieval working year but underestimate the industrial one. Our data suggests that modern economic growth began two centuries earlier than hitherto thought and was driven by an ‘Industrious Revolution’.
    Keywords: England, industrial revolution, industrious revolution, labour input, living standards, wages, Malthusian model.
    JEL: J3 J4 J5 J6 J7 J8 N33
    Date: 2016–09–20
  4. By: Stephen Broadberry; Jean-Pascal Bassino; Kyoji Fukao; Bishnupriya Gupta; Masanori Takashima
    Abstract: Abstract Japanese GDP per capita grew at an annual rate of 0.08 per cent between 730 and 1874, but the growth was episodic, with the increase in per capita income concentrated in twoperiods, 1450-1600 and after 1721, interspersed with periods of stable per capita income. There is a similarity here with the growth pattern of Britain. The first countries to achieve modern economic growth at opposite ends of Eurasia thus shared the experience of an early end to growth reversals. However, Japan started at a lower level than Britain and grew more slowly until the Meiji Restoration.
    Keywords: Japan, Great Divergence, GDP per capita, growth reversals, Britain
    JEL: N10 N30 N35 O10 O57
    Date: 2017–04–24
  5. By: Casey, Gregory; Klemp, Marc
    Abstract: We study the interpretation of instrumental variable (IV) regressions that use historical or geographical instruments for contemporary endogenous regressors. We find that conventional IV regressions generally cannot estimate the long-run causal effect of an endogenous explanatory variable when there is a time gap between the instrument and the endogenous variable. We develop a model that can overcome this problem and apply our results to important topics in the field of economic growth, including the effect of institutions on economic growth. We find effects that are smaller than those estimated in the existing literature, demonstrating the quantitative importance of our study.
    Keywords: Instrumental Variable Regression; Long-Run Economic Growth
    JEL: C10 C30 O10 O40
    Date: 2018–06
  6. By: Stephen Broadberry; Hanhui Guan; David Daokui Li
    Abstract: Abstract Chinese GDP per capita fluctuated at a high level during the Northern Song and Ming dynasties before trending downwards during the Qing dynasty. China led the world in living standards during the Northern Song dynasty, but had fallen behind Italy by 1300. At this stage, it is possible that parts of China were still on a par with the richest parts of Europe, but by 1750 the gap was too large to be bridged by regional variation within China and the Great Divergence had already begun before the Industrial Revolution.
    Keywords: GDP Per Capita; Economic Growth; Great Divergence; China; Europe
    JEL: E10 N35 O10
    Date: 2017–04–24
  7. By: Stephen Broadberry; John Wallis
    Abstract: Abstract Using annual data from the thirteenth century to the present, we show that improved long run economic performance has occurred primarily through a decline in the rate and frequency of shrinking, rather than through an increase in the rate of growing. Indeed, as economic performance has improved over time, the short run rate of growing has typically declined rather than increased. Most analysis of the process of economic development has hitherto focused on increasing the rate of growing. Here, we focus on understanding the forces making for a reduction in the rate of shrinking, drawing a distinction between proximate and ultimate factors. The main proximate factors considered are (1) structural change (2) technological change (3) demographic change and (4) the changing incidence of warfare. We conclude with a consideration of institutional change as the key ultimate factor behind the reduction in shrinking.
    Date: 2017–04–24
  8. By: Leandro Prados de la Escosura (Universidad Carlos III, Groningen, and CEPR)
    Abstract: This paper provides a long-run view of well-being inequality at world scale based on a new historical dataset. Trends in social dimensions alter the view on inequality derived from per capita GDP. While in terms of income, inequality increased until the third quarter of the twentieth century; in terms of well-being, inequality fell steadily since World War I. The spread of mass primary education and the health transitions were its main drivers. The gap between the West and the Rest explains only partially the evolution of well-being inequality, as the dispersion within the developing regions has increasingly determined its evolution.
    Keywords: Well-being, Inequality, Life Expectancy, Health Transition, Education, per capita GDP
    JEL: I00 N30 O15 O50
    Date: 2018–05
  9. By: Urgaia; Worku R.
    Abstract: This study deals with the role of human capital resources in economic growth. In economic growth, human capital is an important stock component that can affect the gross national income GNI more than gross domestic product GDP since GNI comprises the GDP itself and other income resources obtained from abroad. The empirical results of transmission mechanism channels in vector autoregressive model indicate that the observed human capital has long-run effects on the national income in a panel of nine East African countries from the year 1980 to 2015.The short-term transmission mechanism channels show that there is an important contribution of human capital resources HCR to the development of physical capital stock through GNI. The GNI has also a positive impact on the accumulation of physical capital stock via HCR. In addition, we also apply the time scaling decomposition of a panel wavelet analysis in Granger causality tests. The tests show that HCR and the GNI have a bi-directional causal relationship in the short-run, medium-and long-run. The recent trend shows that East Africa has the lowest level of human capital development which raises the issues of employment challenges faced by women more than men although it has achieved a rapid growth in expanding education. We, therefore, suggest that more due attention should be given to human capital resources than any other in attempt to achieve sustainable development in the process of successful economic progress.
    Keywords: Dynamic Panel VAR,Transmission Channel,HCR,GNI and Granger Wavelet Analyses
    JEL: J00 J24
    Date: 2018
  10. By: Sohei Kaihatsu (Bank of Japan); Maiko Koga (Bank of Japan); Tomoya Sakata (Bank of Japan); Naoko Hara (Bank of Japan)
    Abstract: In the aftermath of the recent global financial crisis, advanced economies have faced sluggish recoveries or long-lasting economic slowdowns. This experience has challenged the conventional dichotomy of business cycles and economic growth, which has long been central to macroeconomic analysis. Against this backdrop, we review the literature looking at the relationship between business cycles and economic growth. This study consists of three parts. First, we provide basic ideas about the relationship of business cycles and economic growth, and a simple empirical analysis on economic growth rates in advanced economies. Second, we survey studies which look at the effects of business cycles on economic growth. Specifically, we focus on hysteresis effects caused by labor market structure, firm activity and fiscal policy. Third, we review the literature looking at the effects of economic growth on business cycles, through mechanisms such as technological progress and population ageing.
    Keywords: Business cycles; economic growth; hysteresis
    JEL: E32 O40
    Date: 2018–06–20
  11. By: Subramanian, Krishnamurthy V. (Asian Development Bank Institute)
    Abstract: We show theoretically and empirically that dismissal laws—laws that impose hurdles on firing of employees—spur innovation and thereby economic growth. Theoretically, dismissal laws make it costly for firms to arbitrarily discharge employees. This enables firms to commit to not punish short-run failures of employees. Because innovation is inherently risky and employment contracts are incomplete, dismissal laws enable such commitment. Specifically, absent such laws, firms cannot contractually commit so ex ante. The commitment provided by dismissal laws encourages employees to exert greater effort in risky, but path-breaking, projects thereby fostering firm-level innovation. We provide empirical evidence supporting this thesis using the discontinuity provided by the passage of the federal Worker Adjustment and Retraining Notification Act. Using the fact that this Act only applied to firms with 100 or more employees, I undertake difference-in-difference and regression discontinuity tests to provide this evidence. Building on endogenous growth theory, which posits that economic growth stems from innovation, I also show that dismissal laws correlate positively with economic growth. However, other forms of labor laws correlate negatively with economic growth and swamp the positive effect of dismissal laws.
    Keywords: labor laws; R&D; technological change; law and finance; entrepreneurship; growth
    JEL: F30 G31 J08 J50 K31
    Date: 2018–05–25
  12. By: Klein, Paul-Olivier; Weill, Laurent
    Abstract: This paper analyses the effect of bank profitability on economic growth. While policymakers have shown major concerns for low levels of bank profitability, there are no empirical studies on the growth effects of bank profitability. To fill this gap, we investigate the impact of bank profitability on economic growth using a sample of 133 countries during the period 1999–2013 with several empirical approaches. Our first major conclusion is that a high current level of bank profitability contributes positively to economic growth. Our second conclusion is that the past level of bank profitability exerts a negative influence on economic growth leading to the absence of significance for the overall bank profitability. Hence, the positive impact of bank profitability on economic growth is short-lived. These findings are robust to a battery of robustness checks, including those using alternative measures for profitability and growth.
    JEL: G21 O16 O40
    Date: 2018–07–02
  13. By: Rohan Best; Paul J. Burke
    Abstract: We investigate if greater electricity availability helps countries ascend to faster economic growth trajectories. This is an important question for many developing countries that are currently prioritizing infrastructure investments. Using cross-sectional and panel regressions with national-level decadal data, we find some evidence that electricity availability has a significant effect on subsequent economic growth. However, much of the effect disappears once suitable controls are included. We examine various dimensions of electricity availability, including electricity consumption quantity, generation capacity, residential access rate, and quality of electricity supply. It appears that electricity availability is best viewed as something that can be scaled up as economies grow rather than something that imposes binding constraints on subsequent economic growth.
    Keywords: electricity availability, electricity consumption, economic growth, development economics
    JEL: O47 Q43 Q48
    Date: 2018–06
  14. By: Mariko Tanaka
    Abstract: Sustaining economic growth under rapid aging is one of the most important policy issues in Japan. Because of the difficulty of increasing labor force in an aging society, it is desirable to promote human capital accumulation for improvement of labor quality in the long run. However, since human capital accumulated in the young may become obsolete for elder workers, we cannot achieve sufficient level of human capital to sustain economic growth only through education for the young. Thus, we need recurrent education for the elderly or retired female workers in an aging society as in Japan. Hence, this paper investigates whether we can achieve socially optimal level of human capital when the decision to participate in recurrent education is left to the private sector.
    Date: 2018–03
  15. By: Fukao, Kyoji (Asian Development Bank Institute); Paul, Saumik (Asian Development Bank Institute)
    Abstract: We show that σ-convergence in regional productivity growth can be approximated by σ-convergence in sectoral productivity growth and σ-convergence in structural transformation-led productivity growth. Applying this framework to Japanese prefecture-level data from 1874 to 2008, we find support for substantial convergence effects of structural transformation in the post-WWII years.
    Keywords: structural transformation; labor productivity; regional convergence; Japan
    JEL: O10 O40
    Date: 2018–04–23
  16. By: Ivan Mendieta-Munoz; Mengheng Li
    Abstract: This paper studies the evolution of long-run output and labour productivity growth rates in the G-7 countries during the post-war period. We estimate the growth rates consistent with a constant unemployment rate using time-varying parameter models that incorporate both stochastic volatility and a Heckman-type two-step estimation procedure that deals with the possible endogeneity problem in the econometric models. The results show a significant decline in long-run growth rates that is not associated with the detrimental effects of the Great Recession, and that the rate of growth of labour productivity appears to be behind the slowdown in long-run GDP growth.
    Keywords: Long-run output growth rates, unobserved components, Kalman filter, time- varying parameter models, stochastic volatility, Heckman two-step bias correction. JEL Classification: O41, O47, C15, C32
    Date: 2018

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