nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒07‒23
thirteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Diversity and Growth By Gradstein, Mark; Justman, Moshe
  2. Human Capital Formation during the First Industrial Revolution: Evidence from the Use of Steam Engines By de Pleijt, Alexandra; Nuvolari, Alessandro; Weisdorf, Jacob
  3. Of Mice and Merchants: Trade and Growth in the Iron Age By Jan David Bakker; Stephan Maurer; Jörn-Steffen Pischke; Ferdinand Rauch
  4. Blessed are the first: The long-term effect of birth order on trust By Pierluigi Conzo; Roberto Zotti
  5. Circle of Fortune: The Long Term Impact of Western Customs Institutions in China By Gan Jin
  6. Technological changes and population growth: the role of land in England By Claire Loupias; Bertrand Wigniolle
  7. Monetary Policy in a Schumpeterian Growth Model with Two R&D Sectors By Huang, Chien-Yu; Yang, Yibai; Zheng, Zhijie
  8. The Knowledge-Diffusion Bottleneck in Economic Growth and Development By Staley, Mark
  9. Energy, knowledge, and demo-economic development in the long run: a unified growth model By Victor Court; Emmanuel Bovari
  10. Gravity and Migration before Railways: Evidence from Parisian Prostitutes and Revolutionaries By Morgan Kelly; Cormac Ó Gráda
  11. Endogenous Growth and Entropy By Tiago Neves Sequeira; Pedro Mazeda Gil; Óscar Afonso
  12. The Determinants of Economic Growth in Ghana: New Empirical Evidence By Ho, Sin-Yu; Njindan Iyke, Bernard
  13. Testing for causality between FDI and economic growth using heterogeneous panel data By Chanegriha, Melisa; Stewart, Chris; Tsoukis, Christopher

  1. By: Gradstein, Mark (Ben Gurion University); Justman, Moshe (Ben Gurion University)
    Abstract: The diversity of social interaction within economic communities affects productivity and growth, and is itself shaped by economic conditions. These reciprocal effects raise the possibility of multiple equilibria, of setting a socially polarized economy stagnating in poverty on a new path of social integration and economic growth through external intervention or an internal political initiative. This paper describes a simple analytical model that captures these reciprocal effects, and sheds light on the role of government capacity, community leadership, federation and external credit or aid, in achieving economic growth through social integration.
    Keywords: cultural diversity, economic growth, social interaction
    JEL: O11 Z10 Z18
    Date: 2018–05
  2. By: de Pleijt, Alexandra; Nuvolari, Alessandro; Weisdorf, Jacob
    Abstract: We examine the effect of technical change on human capital formation during England's Industrial Revolution. Using the number of steam engines installed by 1800 as a synthetic indicator of technological change, and occupational statistics to measure working skills (using HISCLASS), we establish a positive correlation between the use of steam engines and the share of skilled workers at the county level. We use exogenous variation in carboniferous rock strata (containing coal to fuel the engines) to show that the effect was causal. While technological change stimulated the formation of working skills, it had an overall negative effect on the formation of primary education, captured by literacy and school enrolment rates. It also led to higher gender inequality in literacy.
    Keywords: Economic Growth; education; Human Capital; Industrialisation; Steam Engines; Technological change
    JEL: J82 N33 O14 O33
    Date: 2018–06
  3. By: Jan David Bakker (University of Oxford and CEP); Stephan Maurer (University of Konstanz and CEP); Jörn-Steffen Pischke (LSE and CEP); Ferdinand Rauch (University of Oxford and CEP)
    Abstract: We study the causal connection between trade and development using one of the earliest massive trade expansions: the first systematic crossing of open seas in the Mediterranean during the time of the Phoenicians. We construct a measure of connectedness along the shores of the sea. This connectivity varies with the shape of the coast, the location of islands, and the distance to the opposing shore. We relate connectedness to local growth, which we measure using the presence of archaeological sites in an area. We find an association between better connected locations and archaeological sites during the Iron Age, at a time when sailors began to cross open water very routinely and on a big scale. We corroborate these findings at the level of the world.
    Keywords: Urbanization, locational fundamentals, trade
    JEL: F14 N7 O47
    Date: 2018–07–09
  4. By: Pierluigi Conzo; Roberto Zotti
    Abstract: The renewed interest by the economic literature in the effect of birth order on children’s outcomes has neglected trust as a long-term output of familial environment. Acknowledging childhood as a crucial stage of life for the formation of social preferences, we go deeper into the early-life determinants of trust, a widely recognized driver of socio-economic success. We analyze if and how differences in the order of birth predict heterogeneous self-reported trust levels in Britain. We draw hypotheses from psychology, economics and sociology, and test alternative explanations to the association between birth order and trust. Relying on an index measuring birth order independently from sibship size, we find a negative and robust effect of birth order, with laterborns trusting less than their older siblings. This effect is not accounted for by personality traits, strength of family ties, risk aversion and parental inputs. It is only partially explained by complementary human-capital outcomes, and it is robust when we use alternative dependent variables and control for endogenous fertility. Multilevel estimates suggest that trust is mostly driven by within- rather than between-family characteristics. The effect of birth order is eclipsed by education outcomes only for women, while it is counterbalanced by mother’s education for the entire sample, thereby leading to relevant policy implications.
    Keywords: Trust, Birth order, Family size, Parental investment, Personality traits, Risk aversion, Family ties, BHPS.
    JEL: A13 D10 J10 Z13
    Date: 2018
  5. By: Gan Jin (Department of International Economic Policy, University of Freiburg)
    Abstract: This paper studies the persistent impact of good institutions on economic development in China. By exploiting a British-driven institutional switch in part of China's customs stations in 1902, I find that counties that were more affected by the British customs institutions are also better developed today. Moreover, I show that the institutional switch was exogenous to the pre-colonial development, and I provide different estima- tion models to reveal a robust and causal relationship between good institutions and economic development.
    Keywords: Institutions, Economic development, Treaty ports, Chinese Maritime Customs Service (CMCS), China
    JEL: N15 O10 P51
    Date: 2018–07
  6. 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
  7. By: Huang, Chien-Yu; Yang, Yibai; Zheng, Zhijie
    Abstract: This study investigates the effects of monetary policy on economic growth and social welfare in a Schumpeterian economy with an upstream and a downstream sector in which the R&D investment of these sectors is subject to a cash-in-advance (CIA) constraint. We show that a higher nominal interest rate reallocates labor from a more cash-constrained R&D sector to a less one, which could generate an inverted-U effect on economic growth. In addition, we examine the necessary and sufficient conditions for the (sub)optimality of the Friedman rule by relating the underinvestment and overinvestment of R&D in the decentralized economy, and find that this relationship is crucially determined by the presence of CIA constraints, the relative productivity between upstream R&D and downstream R&D, and the strength of markup.
    Keywords: CIA constraint; Endogenous growth; Monetary policy; Two R&D sectors
    JEL: E41 O30 O40
    Date: 2018–06–18
  8. By: Staley, Mark
    Abstract: If learning and teaching were easy, the whole world would be developed and frontier knowledge would spread quickly. But learning is difficult and there is a finite capacity for teaching. The concept of a knowledge-diffusion ``bottleneck'' can be used to explain why there is a negative correlation between per-capita income growth rates and fertility rates, especially amongst countries that are in the early stages of industrialization. It can also explain why income distributions in rich countries have power-law tails (both upper and lower) and why income growth rates are independent of scale. A simple model of knowledge diffusion is calibrated to the observed paths of structural transformation in newly-industrializing countries. The resulting parameters are found to be consistent with the tail exponents seen in U.S. income data, suggesting a common mechanism of knowledge diffusion operating in developing countries and fully-developed countries.
    Keywords: Growth, Diffusion, Development, Bottleneck
    JEL: E00 O10
    Date: 2018–06–09
  9. By: Victor Court (CERES-ERTI - Centre d'Enseignement et de Recherche sur l'Environnement et la Societé / Environmental Research and Teaching Institute - ENS Paris - École normale supérieure - Paris, Chaire Energie & Prospérité - ENS Paris - École normale supérieure - Paris - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - Institut Louis Bachelier); Emmanuel Bovari (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Chaire Energie & Prospérité - ENS Paris - École normale supérieure - Paris - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique - Institut Louis Bachelier)
    Abstract: This article provides a knowledge-based and energy-centered unified growth model of the economic transition from limited to sustained growth. We model the transition between: (i) a pre-modern organic regime defined by limited growth in per capita output, high fertility, low levels of human capital, technological progress generated by learning-by-doing, and rare GPT arrivals; and (ii) a modern fossil regime characterized by sustained growth of per capita output, low fertility, high levels of human capital, technological progress generated by profit-motivated R\&D, and increasingly frequent GPT arrivals. The associated energy transition results from the endogenous shortage of renewable resources availability, and the arrival of new GPTs which redirect technological progress towards the exploitation of previously unprofitable exhaustible energy. Calibrations of the model are currently in progress: (i) to replicate the historical experience of England from 1560 to 2010; and (ii) to compare the different trajectories of Western Europe and Eastern Asia.
    Keywords: Unified Growth Theory,Useful Knowledge,Energy Transition,Demography
    Date: 2018–01–31
  10. By: Morgan Kelly (University College Dublin, CAGE and CEPR); Cormac Ó Gráda (University College Dublin and CAGE)
    Abstract: Although urban growth historically depended on large inflows of migrants, little is known of the process of migration in the era before railways. Here we use detailed data for Paris on women arrested for prostitution in the 1760s, or registered as prostitutes in the 1830s and 1850s; and of men holding identity cards in the 1790s, to examine patterns of female and male migration. We supplement these with data on all women and men buried in 1833. Migration was highest from areas of high living standards, measured by literacy rates. Distance was a strong deterrent to female migration (reflecting limited employment opportunities) that falls with railways, whereas its considerably lower impact on men barely changes through the nineteenth century.
    Keywords: Migration, gravity, prostitution.
    Date: 2018–06
  11. By: Tiago Neves Sequeira (Univ. Beira Interior and CEFAGE-UBI); Pedro Mazeda Gil (University of Porto, Faculty of Economics, and CEF.UP); Óscar Afonso (University of Porto, Faculty of Economics, CEF.UP, and CEFAGE-UBI)
    Abstract: This paper offers novel insights regarding the role of complexity in both the transitional and the long-run dynamics of the economy. We devise an endogenous growth model using the concept of entropy as a state-dependent complexity effect. This allows us to gradually diminish scale effects as the economy develops along the transitional dynamics, which conciliates evidence on the existence of scale effects in history with evidence of no or reduced scale effects in today’s economies. We show that empirical evidence supports entropy as a “first principle” operator of the complexity effect. The model features endogenous growth, with null or small (positive or negative) scale effects, or stagnation, in the long run. These different long-run possibilities have also policy implications. Then, we show that the model can replicate well the take-off after the industrial revolution and the productivity slowdown in the second half of the XXth century. Future scenarios based on in-sample calibration are discussed, and may help to explain (part of) the growth crises affecting the current generation.
    Keywords: endogenous economic growth, complexity effects, entropy
    JEL: O10 O30 O40 E22
  12. By: Ho, Sin-Yu; Njindan Iyke, Bernard
    Abstract: This paper deals with an investigation into the determinants of economic growth in Ghana over the period 1975 to 2014. In particular, we investigated the impact of physical capital, human capital, labour, government expenditure, inflation, foreign aid, foreign direct investment, financial development, globalisation and debt servicing on economic performance within an augmented Solow growth model. It was found that, in the long run, both human capital and foreign aid have a positive influence on output, while labour, financial development and debt servicing have a negative impact on output. It was also found that, in the short run, government expenditure and foreign aid have a positive influence on economic growth, while labour, inflation and financial development have a negative impact on economic growth. These findings hold important policy implications for the country.
    Keywords: Determinants; economic growth; Ghana; ARDL bounds testing.
    JEL: C22 O47 O55
    Date: 2018
  13. By: Chanegriha, Melisa (Middlesex University); Stewart, Chris (Kingston University London); Tsoukis, Christopher (Keele University)
    Abstract: In this paper we investigate the causal relationship between the ratio of FDI to GDP (FDIG)and economic growth (GDPG). We use innovative econometric methods which are based on the heterogeneous panel test of the Granger non-causality hypothesis based on the works of Hurlin (2004a), Fisher (1932, 1948) and Hanck (2013) using data from 136 developed and developing countries over the 1970-2006 period. According to the Hurlin and Fisher panel tests FDIG unambiguously Granger-causes GDPG for at least one country. However, theresults from these tests are ambiguous regarding whether GDPG Granger-causes FDIG for at least one country. Using Hanck’s (2013) panel test we are able to determine whether and for which countries there is Granger-causality. This test suggests that at most there are three countries (Estonia, Guyana and Poland) where FDIG Granger-causes GDPG and no countries where GDPG Granger-causes FDIG.
    Keywords: Granger-causality Tests; Panel Data; FDI; Economic Growth;
    JEL: C33 F21 F43 N10
    Date: 2018–05–23

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