nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒08‒13
fifteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Why Has Economic Growth Slowed When Innovation Appears To Be Accelerating? By Gordon, Robert J
  2. Gravity and Migration before Railways: Evidence from Parisian Prostitutes and Revolutionaries By Kelly, Morgan; Ó Gráda, Cormac
  3. Of Mice and Merchants: Trade and Growth in the Iron Age By Jan David Bakker; Ferdinand Rauch; Stephan Maurer; Jörn-Steffen Pischke
  4. Development, Fertility and Childbearing Age: A Unified Growth Theory By Hippolyte D'Albis; Angela Greulich; Grégory Ponthière
  5. inflation-growth nexus in Botswana: Can lower inflation really spur growth in the country? By Mothuti, Gosego; Phiri, Andrew
  6. Income growth and income distribution: a long-run view of Irish experience By Callan, Tim; Bercholz, Maxime; Walsh, John R
  7. On the Economic Growth and Environmental Trade-Off: a Multi-Objective Analysis. By Marsiglio, Simone; Privileggi, Fabio
  8. Wealth inequality in the long run: A Schumpeterian growth perspective By Jakob B. Madsen; Antonio Minniti; Francesco Venturini
  9. Do both demand-following and supply-leading theories hold true in developing countries? By Chow, Sheung Chi; Vieito, João Paulo; Wong, Wing-Keung
  10. New Technological Knowledge, Rural and Urban Agriculture, and Steady State Economic Growth By Batabyal, Amitrajeet; Kourtit, Karima; Nijkamp, Peter
  11. Regional Alignment and Productivity Growth By Ludovic Dibiaggio; Benjamin Montmartin; Lionel Nesta
  12. Financing Ventures By Jeremy Greenwood; Pengfei Han; Juan M. Sanchez
  13. Income Inequality and Economic Growth: A Re-Examination of Theory and Evidence By Mehmet Balcilar; Rangan Gupta; Wei Ma; Philton Makena
  14. Solow-Swan growth model with global capital markets and congestible public goods By Aniket, Kumar
  15. Somatic Distance, Cultural Affinities, Trust And Trade By Jacques Melitz; Farid Toubal

  1. By: Gordon, Robert J
    Abstract: U. S. economic growth slowed by more than half from 3.2 percent per year during 1970-2006 to only 1.4 percent during 2006-16, and this decline was divided equally between slower growth in hours of work and slower growth in output per hour. In explaining slower growth in hours, particular emphasis is placed on the slower secular rise of life expectancy in the U.S. compared to other developed countries. Further contributions to slowing growth are made by a decline in the population share of both legal and illegal immigration and a turnaround from rising to declining labor force participation. Causes of declining productivity growth begin with the slowdown in the rate of increase of educational attainment. Why did productivity growth decline after 2006 despite an increase in the rate at which new U.S. patents were issued in 2006-16 compared to earlier decades? Part of the slowdown is attributed to the maturity of the IT revolution, which also helps to explain the trajectory of the college wage premium. Aspects of the productivity growth slowdown include the declining productivity of research workers, diminishing returns to drug innovation, and the evolutionary rather than revolutionary impact of robots and artificial intelligence.
    Keywords: Economic Growth; Immigration; Innovation; labor force participation; Mortality; productivity
    JEL: D24 E24
    Date: 2018–07
  2. By: Kelly, Morgan; Ó Gráda, Cormac
    Abstract: 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 or joining the army in the 1790s, to examine patterns of female and male migration. We supplement these with data on all women and men buried in 1833. We find that distance was a stronger deterrent to female migration than to male (consistent with more limited employment opportunities for women) that falls with the appearance of railways. Migration was highest from areas of high living standards, measured by literacy rates, with the largest impact again for women, especially those from higher social classes.
    Date: 2018–07
  3. By: Jan David Bakker; Ferdinand Rauch; Stephan Maurer; Jörn-Steffen Pischke
    Abstract: We study the causal connection between trade and development using one of the earliest massive trade expansions: the ï¬ rst 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 ï¬ nd 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 ï¬ ndings at the level of the world.
    Keywords: Urbanization, locational fundamentals, trade
    JEL: F14 N7 O47
    Date: 2018–07–06
  4. By: Hippolyte D'Albis (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, PSE - Paris School of Economics); Angela Greulich (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, INED - Institut national d'études démographiques); Grégory Ponthière (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, ERUDITE - Equipe de Recherche sur l’Utilisation des Données Individuelles en lien avec la Théorie Economique - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)
    Abstract: During the last century, fertility has exhibited, in industrialized economies, two distinct trends: the cohort total fertility rate follows a decreasing pattern, while the cohort average age at motherhood exhibits a U-shaped pattern. This paper proposes a Unified Growth Theory aimed at rationalizing those two demographic stylized facts. We develop a three-period OLG model with two periods of fertility, and show how a traditional economy, where individuals do not invest in education, and where income rises push towards advancing births, can progressively converge towards a modern economy, where individuals invest in education, and where income rises encourage postponing births. Our findings are illustrated numerically by replicating the dynamics of the quantum and the tempo of births for cohorts 1906-1975 of the Human Fertility Database.
    Keywords: regime shift,fertility,childbearing age,births postponement,human capital
    Date: 2018–07
  5. By: Mothuti, Gosego; Phiri, Andrew
    Abstract: Does inflation affect economic growth in Botswana over the short-run and long-run? In applying bounds procedure for modelling ARDL cointegation effects applied to empirical data collected between 1975 and 2016 we find that this hypothesis does not hold true for Botswana as inflation is found to be insignificantly related with economic growth over both the short and long-run. Our growth equation estimates point to exports (positive), government size (negative) and an Pula/Dollar exchange rate (negative) as being significantly correlated with steady-state GDP growth. Further empirical exercises show that an appreciated Pula/dollar exchange rate increases inflation whilst bearing no effect on economic growth. Conversely, a depreciated Pula/Dollar exchange simultaneously decreases inflation and economic growth for the Botswana economy. Policymakers should be this aware that attainment of lower inflation rates which occurs through a depreciated Pula/Dollar currency will only retard economic growth.
    Keywords: Inflation; Economic growth; Exchange rates; Bank of Botswana; Nonlinear autoregressive distributive lag (N-ARDL) model.
    JEL: C13 C32 C52 E31 F43
    Date: 2018–06–20
  6. By: Callan, Tim; Bercholz, Maxime; Walsh, John R
    Date: 2018–07
  7. By: Marsiglio, Simone; Privileggi, Fabio (University of Turin)
    Abstract: We develop a multicriteria approach, based on a scalarization technique, in order to analyze the trade off between economic growth and environmental outcomes in a framework in which the economy and environment relation is bidirectional. On the one hand, economic growth by stimulating production activities gives rise to emissions of pollutants which deteriorate the environment. On the other hand, the environment affects economic activities since pollution generates a production externality determining how much output the economy can produce and reducing welfare. In this setting we show that optimality dictates an initial overshooting followed by economic degrowth and rising pollution. This implies that independently of the relative importance of economic and environmental factors, it is paradoxically optimal for the economy to asymptotically reach the maximum pollution level that the environment is able to bear.
    Date: 2018–07
  8. By: Jakob B. Madsen; Antonio Minniti; Francesco Venturini
    Abstract: This paper extends Piketty’s analysis of the wealth-income ratio used as a proxy for wealth inequality, to allow for innovation. Drawing on a Schumpeterian (R&D-based) growth model that incorporates both tangible and intangible capital and using historical data for 21 OECD countries, we find the wealth-income ratio to be significantly and positively related to R&D intensity and the fixed capital investment ratio, but negatively related to income growth. Accounting for the innovation-induced counteracting growth-effect on the wealth-income ratio, we show that the net effect of R&D on wealth inequality is positive.
    Keywords: Wealth-income Ratio, Piketty's Second Law, Schumpeterian Growth.
    JEL: D30 E10 E20 O30 O40
    Date: 2018–07
  9. By: Chow, Sheung Chi; Vieito, João Paulo; Wong, Wing-Keung
    Abstract: To overcome the limitations of the traditional approach which uses linear causality to examine whether the supply-leading and demand-following theories hold. As certain countries will be found not to follow the theory by using the traditional approach, this paper first suggests using all the proxies of financial development and economic growth as well as both multivariate and bivariate linear and nonlinear causality tests to analyze the relationship between financial development and economic growth. The multivariate nonlinear test not only takes into consideration both dependent and joint effects among variables, but is also able to detect a multivariate nonlinear deterministic process that cannot be detected by using any linear causality test. We find five more countries in which the supply-leading hypothesis and/or demand-following hypothesis hold true than with the traditional approach. However, there is still one country, Pakistan, for which no linear or nonlinear causality is found between its financial development and economic growth. To overcome this limitation, this paper suggests including cointegration in the analysis. This leads us to conclude that either supply-leading or demand-following hypotheses or both hold for all countries without any exception. There will be some types of relationships between economic growth and financial development in any country such that either they move together or economic growth causes financial development or financial development causes economic growth without any exception. The finding in our paper is may be useful for governments, politicians, and other international institutions in their decision making process for the development of the countries and reducing poverty.
    Keywords: Financial development, economic growth, cointegration, linear causality, nonlinear causality, developing countries, supply-leading hypothesis, demand-following theory.
    JEL: C12 F20 O40
    Date: 2018–06–26
  10. By: Batabyal, Amitrajeet; Kourtit, Karima; Nijkamp, Peter
    Abstract: We analyze the growth effects over space arising from the adoption of new agricultural technology in a rural-urban setting. We use a dynamic model to study the impacts of technology and learning on the steady state growth rates of rural and urban regions that produce agricultural goods. New applications of agricultural technologies are tested and adopted in the rural region and they are gradually learned by the urban region. Our analysis leads to four results. First, we determine the steady state growth rate of agricultural output per worker in the rural region. Second, we define an urban to rural region agricultural technology knowledge ratio, analyze its stability properties, and then use this ratio to compute the steady state growth rate of agricultural output per worker in the urban region. Third, for specific parameter values, we study the ratio of agricultural output per worker in the urban to the rural region when both regions have converged to their balanced growth paths. Finally, we discuss the policy implications of our analysis.
    Keywords: Economic Growth, Learning, Rural Region, Technology, Urban Region
    JEL: O18 Q16 R11
    Date: 2018–01–20
  11. By: Ludovic Dibiaggio (SKEMA Business School; Université Côte d’Azur; GREDEG CNRS); Benjamin Montmartin (SKEMA Business School; Université Côte d’Azur; OFCE Sciences.Po; GREDEG CNRS); Lionel Nesta (Université Côte d’Azur; GREDEG CNRS; OFCE Sciences.Po)
    Abstract: Recent studies highlight an increasing within-country divergence in regional performance. This paper develops the concept of regional alignment to suggest that synergistic relations among the scientific expertise, technological specialization and industry composition of regions affect regional productivity growth. In this paper, we test an extended conditional beta-convergence model using data on 94 French departments (NUTS3) for the period 2001-2011. Our results indicate that a conditional beta-convergence is associated with a sigma-divergence process in the total factor productivity (TFP) growth of French regions. This process is strongly affected by the level of regional alignment. Indeed, we find evidence that regional alignment both directly and indirectly influences regional productivity growth. The indirect effect of regional alignment materializes through its leverage on R&D investment, which is one of the most important drivers of productivity growth. Moreover, using a heterogeneous coefficients model, we show that the positive effect of regional alignment on TFP growth increases with the industrial and technological diversity of regions, which suggests that regional alignment increases the value of Jacobs externalities more than Marshall-Arrow-Romer (MAR) externalities.
    Keywords: Regional Alignment, beta-convergence, productivity growth, multi-regional model
    JEL: R11
    Date: 2018–07
  12. By: Jeremy Greenwood; Pengfei Han; Juan M. Sanchez
    Abstract: The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of financing, venture capitalists evaluate the viability of startups. If viable, venture capitalists provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital; viz., statistics by funding round concerning the success rates, failure rates, investment rates, equity shares, and IPO values. Raising capital gains taxation reduces growth and welfare.
    JEL: E13 E22 G24 L26 O16 O31 O40
    Date: 2018–07
  13. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus, Turkey; Department of Economics, University of Pretoria, Pretoria, South Africa; Montpellier Business School, Montpellier, France.); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Wei Ma (International Business School Suzhou, Xi'an Jiaotong-Liverpool University, Suzhou, China); Philton Makena (Department of Economics, University of Pretoria, Pretoria, South Africa)
    Abstract: We re-examine the theoretical and empirical relationship between income inequality and economic growth in an endogenous growth model with a at tax on income, distributive conflicts among agents and median voter dynamics. We show that when government spends tax revenue on the provision of public goods in the form of both production and consumption services, the theoretical relationship between inequality and economic growth is neither strictly positive nor strictly negative but that it is ambiguous. An empirical evaluation of the theoretical findings is done by applying a semi-parametric model on a sample of 55 low-income, lower-middle-income, upper-middle-income and high-income countries for the period 1980 to 2010. Results show that the relationship between income inequality and growth takes the form of an inverted-U shape in that income inequality initially has a positive impact on growth up to an average Gini coefficient threshold of 35.92 beyond which it negatively impacts on growth.
    Date: 2018–07
  14. By: Aniket, Kumar
    Abstract: The traditional Solow-Swan growth framework has only one kind privately owned capital. Output saved in a period is transformed into privately owned capital through the saving channel. We add a fiscal channel that taxes output and transforms it into public goods subject to congestion. We show that under the standard conditions the steady state of the economy is determined by the interaction of these two channels and prosperity for a country is only attained if both channels work properly.
    Keywords: Economic Growth, Public Goods, Infrastructure, Congestion
    JEL: H1 H41 O11 O16 O41 O43
    Date: 2018–06–13
  15. By: Jacques Melitz (CREST; ENSAE; CEPII); Farid Toubal (CREST; ENS de Paris-Saclay; CEPII)
    Abstract: Somatic distance, or differences in physical appearance, proves to be extremely important in the gravity model of bilateral trade in conformity with results in other areas of economics and outside of it in the social sciences. This is also true quite independently of survey evidence about bilateral trust. These findings are obtained in a sample of the 15 members of the European Economic Association in 1996. Robustness tests also show that somatic distance has a more reliable influence on bilateral trade than the other cultural variables. The article finally discusses the interpretation and the breadth of application of these results.
    Keywords: Somatic distance, Cultural interactions, Trust, Language, Bilateral Trade
    JEL: F10 F40 Z10
    Date: 2018–04–01

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