nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒08‒20
sixteen papers chosen by
Marc Klemp
University of Copenhagen

  1. "Flowers of Evil? Industrialization and Long Run Development" By Raphael Franck; Oded Galor
  2. The Geography of Linguistic Diversity and the Provision of Public Goods By Klaus Desmet; Joseph Gomes; Ignacio Ortuño-Ortín
  3. A Brief History of Human Time. Exploring a database of " notable people " By Olivier Gergaud; Morgane Laouenan; Etienne Wasmer
  4. Development, fertility and childbearing age: A unified growth theory By Hippolyte D'Albis; Angela Greulich; Grégory Ponthière
  5. Was Higher Education a Major Channel through which the US Became an Economic Superpower in the 20th Century? By Cook, Adam; Ehrlich, Isaac
  6. Economic Growth, Productivity and Convergence of the Middle East and North African Countries By Mushtaq Malik, Mushtaq Ahmad Malik; Tariq Masood, Dr. Tariq Masood
  7. Human Capital, Knowledge Creation, Knowledge Diffusion, Institutions and Economic Incentives: South Korea versus Africa By Asongu, Simplice; Tchamyou, Vanessa
  8. Gifts of the Immigrants, Woes of the Natives: Lessons from the Age of Mass Migration By Marco Tabellini
  9. Economic Integration and Democracy: An Empirical Investigation By Giacomo Magistretti; Marco Tabellini
  10. A New Index of Human Capital to Predict Economic Growth By Henry Laverde; Juan C. Correa; Klaus Jaffe
  12. Of Mice and Merchants: Trade and Growth in the Iron Age By Bakker, Jan; Maurer, Stephan E; Pischke, Jörn-Steffen; Rauch, Ferdinand
  13. A theory of structural change that can fit the data By Simon Alder; Andreas Mueller; Timo Boppart
  14. The Role of Carbon Dioxide in Increasing Food Production and the Productivity of Agriculture for the US and Worldwide By Debertin, David
  15. Investment and Saving along the Development Path By Manuel Garcia-Santana; Josep Pijoan-Mas; Lucciano Villacorta
  16. The Economics of Missionary Expansion: Evidence from Africa and Implications for Development By Remi Jedwab; Felix Meier zu Selhausen; Alexander Moradi

  1. By: Raphael Franck; Oded Galor
    Abstract: This research explores the effect of industrialization on the process of development. In contrast to conventional wisdom that views industrial development as a catalyst for economic growth, the study establishes that while the adoption of industrial technology was conducive to economic development in the short-run, it has detrimental effects on the standard of living in the long-run. Exploiting exogenous geographic and climatic sources of variation in the diffusion and adoption of steam engines across French departments during the early phases of industrialization, the research establishes that intensive industrialization in the middle of the 19th century increased income per capita in the subsequent decades but diminished it by the turn of the 21st century. The analysis further suggests that the adverse effect of earlier industrialization on long-run prosperity can be attributed to the negative impact of the adoption of unskilled-intensive technologies in the early stages of industrialization on the long-run level of human capital and thus on the incentive to adopt skill-intensive technologies in the contemporary era. Preferences and educational choices of second generation migrants within France indicate that industrialization has triggered a dual techno-cultural lock-in characterized by a reinforcing interaction between technological inertia, reflected by the persistence predominance of low-skilled-intensive industries, and cultural inertia, in the form of a lower predisposition towards investment in human capital. These findings suggest that the characteristics that permitted the onset of industrialization, rather than the adoption of industrial technology per se, have been the source of prosperity among the currently developed economies that experienced an early industrialization. Thus, developing economies may benefit from the allocation of resources towards human capital formation and skilled intensive sectors rather than toward the promotion of traditional unskilled-intensive industrial sectors.
    Date: 2018
  2. By: Klaus Desmet; Joseph Gomes; Ignacio Ortuño-Ortín
    Abstract: This paper analyzes the importance of local interaction between individuals of different linguistic groups for the provision of public goods at the national level. The micro-founded conceptual framework we develop predicts that a country's public goods (i) decrease in its overall linguistic fractionalization, and (ii) either increase or decrease in its local learning multiplier, a measure of how local interaction affects antagonism towards other groups in the society at large. After constructing a 5 km by 5 km dataset on language use for 223 countries, we empirically explore these theoretical predictions. While overall fractionalization worsens public goods outcomes, we find a positive causal effect of local learning. Conditional on a country's overall diversity, public goods outcomes are maximized when there are a few large-sized groups and the diversity of each location mirrors that of the country as a whole. Our large-scale study, spanning the entire globe, confirms experimental micro-evidence in favor of contact theory.
    JEL: H4 O18 O57 R1 Z10 Z13
    Date: 2018–06
  3. By: Olivier Gergaud (KEDGE Business School [Talence] - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche); Morgane Laouenan (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Etienne Wasmer (ECON - Département d'économie - Sciences Po)
    Abstract: This paper describes a database of 1,243,776 notable people and 7,184,575 locations (Geolinks) associated with them throughout human history (3000BCE-2015AD). We first describe in details the various approaches and procedures adopted to extract the relevant information from their Wikipedia biographies and then analyze the database. Ten main facts emerge. 1. There has been an exponential growth over time of the database, with more than 60% of notable people still living in 2015, with the exception of a relative decline of the cohort born in the XVIIth century and a local minimum between 1645 and 1655. 2. The average lifespan has increased by 20 years, from 60 to 80 years, between the cohort born in 1400AD and the one born in 1900AD. 3. The share of women in the database follows a U-shape pattern, with a minimum in the XVIIth century and a maximum at 25% for the most recent cohorts. 4. The fraction of notable people in governance occupations has decreased while the fraction in occupations such as arts, literature/media and sports has increased over the centuries; sports caught up to arts and literature for cohorts born in 1870 but remained at the same level until the 1950s cohorts; and eventually sports came to dominate the database after 1950. 5. The top 10 visible people born before 1890 are all non-American and have 10 different nationalities. Six out of the top 10 born after 1890 are instead U.S. born citizens. Since 1800, the share of people from Europe and the U.S. in the database declines, the number of people from Asia and the Southern Hemisphere grows to reach 20% of the database in 2000. Coïncidentally, in 1637, the exact barycenter of the base was in the small village of Colombey-les-Deux-Eglises (Champagne Region in France), where Charles de Gaulle lived and passed away. Since the 1970s, the barycenter oscillates between Morocco, Algeria and Tunisia. 6. The average distance between places of birth and death follows a U-shape pattern: the median distance was 316km before 500AD, 100km between 500 and 1500AD, and has risen continuously since then. The greatest mobility occurs between the age of 15 and 25. 7. Individuals with the highest levels of visibility tend to be more distant from their birth place, with a median distance of 785km for the top percentile as compared to 389km for the top decile and 176km overall. 8. In all occupations, there has been a rise in international mobility since 1960. The fraction of locations in a country different from the place of birth went from 15% in 1955 to 35% after 2000. 9. There is no positive association between the size of cities and the visibility of people measured at the end of their life. If anything, the correlation is negative. 10. Last and not least, we find a positive correlation between the contemporaneous number of entrepreneurs and the urban growth of the city in which they are located the following decades; more strikingly, the same is also true with the contemporaneous number or share of artists, positively affecting next decades city growth; instead, we find a zero or negative correlation between the contemporaneous share of "militaries, politicians and religious people" and urban growth in the following decades.
    Keywords: Big Data,notable people
    Date: 2017–01–19
  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); Angela Greulich (INED - Institut national d'études démographiques, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, 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); Grégory Ponthière (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, 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: During the last two centuries, 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 higher education, and where income rises push towards advancing births, can progressively converge towards a modern economy, where individuals invest in higher 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 Swedish cohorts born between 1876 and 1966.
    Keywords: regime shift,human capital,fertility,childbearing age,births postponement
    Date: 2017–02
  5. By: Cook, Adam (State University of New York); Ehrlich, Isaac (University at Buffalo, SUNY)
    Abstract: This paper offers a thesis for why the US overtook the UK and other European countries in the 20th century in both aggregate and per capita GDP as a case study of recent models of endogenous growth, where "human capital" is the engine of growth. By human capital we mean an intangible asset, best thought of as a stock of embodied and disembodied knowledge comprising education, information, entrepreneurship, and productive and innovative skills, which is formed through investments in schooling, job training, and health as well as through research and development projects and informal knowledge transfers (cf. Ehrlich and Murphy 2007). The conjecture is that the ascendancy of the US as an economic superpower in the 20th century owes considerably to its faster human capital formation relative to that of the UK and "old Europe." This paper assesses whether the thesis has legs to stand on through both stylized facts and a supplementary quasi-experimental empirical analysis. The stylized facts indicate that the US led other major developed countries in schooling attainments per adult population member, beginning in the latter part of the 19th century and lasting throughout the 20th century, especially at the secondary and tertiary levels. The quasi-experimental analysis constitutes the first attempt to test the hypothesis that the US's ascendancy to a major economic power stems largely from the impact of the first Morrill Act of 1862, which launched the public higher education movement in the US through the establishment of land grant colleges and universities across the nation during the latter part of the 19th century. The higher education movement appears to have spearheaded a higher long-term rate of growth in per capita income in the US relative to the UK and other major European countries.
    Keywords: human capital, endogenous growth, Morrill Act, higher education, treatment effects, US
    JEL: H1 I2 N1 N3 O0 O4 C21
    Date: 2018–06
  6. By: Mushtaq Malik, Mushtaq Ahmad Malik; Tariq Masood, Dr. Tariq Masood
    Abstract: The present study tried to understand spatial and temporal variation in economic growth and productivity of the Middle East and North African Region for the period 1971-2014. Further, we also tested the hypothesis of regional convergence in the neo-classical framework. The study is based on the Penn World Table data of a sample of the Middle East and North African countries. Our findings suggest that oil-dependent economies have shown large variations in growth which can be linked with the fluctuations of oil price. Due to rapid population and labour force growth (both nationals and immigrants) in most of the oil-based economies, growth rates of per capita GDP and per worker GDP are quite meagre. Total factor productivity does not play a significant role and growth in the region is due to the capital accumulation. Both beta and sigma measures of convergence suggest that there is convergence in per worker GDP (labour productivity) and per capita GDP.
    Keywords: economic growth; growth accounting; productivity convergence; MENA
    JEL: O47
    Date: 2018–03–01
  7. By: Asongu, Simplice; Tchamyou, Vanessa
    Abstract: This article compares African countries to South Korea in terms of knowledge economy (KE). Emphasis is laid on human capital, knowledge creation, knowledge diffusion, institutions and economic incentives. The analytical approach consists of providing knowledge economy catch-up strategies that can be understood within the context of country-specific gaps between the frontier country in KE and laggard African countries. The empirical evidence is based on sigma convergence with data for the period 1996-2010. Overall, a KE diagnosis is provided by assessing KE gaps (between South Korea and specific-African countries) and suggesting compelling catch-up strategies with which to reduce identified gaps. Contemporary and non-contemporary policies from South Korea and more contemporary policies based on challenges of globalisation are discussed. The policy relevance of this inquiry aligns with the scholarly perspective that catch-up between South Korea and more advanced economies was accelerated by the former adapting to and assimilating relatively obsolete technological know-how from more developed nations.
    Keywords: Knowledge economy; Benchmarks; Policy syndromes; Catch-up; Africa
    JEL: O10 O30 O38 O55 O57
    Date: 2018–01
  8. By: Marco Tabellini (Harvard Business School, Business, Government and the International Economy Unit)
    Abstract: In this paper, I show that political opposition to immigration can arise even when immigrants bring significant economic prosperity to receiving areas. I exploit exogenous variation in European immigration to US cities between 1910 and 1930 induced by World War I and the Immigration Acts of the 1920s, and instrument immigrants' location decision relying on pre-existing settlement patterns. Immigration increased natives' employment and occupational standing, and fostered industrial production and capital utilization. However, despite these economic benefits, it triggered hostile political reactions, such as the election of more conservative legislators, higher support for anti-immigration legislation, and lower public goods provision. Stitching the economic and the political results together, I provide evidence that natives' backlash was, at least in part, due to cultural differences between immigrants and natives, suggesting that diversity might be economically beneficial but politically hard to manage.
    Keywords: Immigration; Political Backlash; Age of Mass Migration; Cultural Diversity
    JEL: J15 J24 N32
    Date: 2018–07
  9. By: Giacomo Magistretti (Northwestern University); Marco Tabellini (Harvard Business School, Business, Government and the International Economy Unit)
    Abstract: We study whether economic integration fosters the process of democratization and the channels through which this might happen. Our analysis is based on a large panel dataset of countries between 1950 and 2014. We instrument actual trade with predicted trade constructed by estimating a time-varying gravity equation similar to Feyrer (2009). We find that economic integration has a positive effect on democracy, driven by trade with democratic partners and stronger for countries with lower initial levels of economic and institutional development. These results are consistent with a learning/cultural exchange process whereby economic integration promotes the spread of democracy from more to less democratic countries. We corroborate this interpretation by providing evidence against alternative mechanisms, such as income effects, human capital accumulation, and trade-induced changes in inequality.
    Keywords: democracy, institutional development, economic integration, international trade.
    JEL: F14 F15 P16
    Date: 2018–07
  10. By: Henry Laverde; Juan C. Correa; Klaus Jaffe
    Abstract: The accumulation of knowledge required to produce economic value is a process that often relates to nations economic growth. Such a relationship, however, is misleading when the proxy of such accumulation is the average years of education. In this paper, we show that the predictive power of this proxy started to dwindle in 1990 when nations schooling began to homogenized. We propose a metric of human capital that is less sensitive than average years of education and remains as a significant predictor of economic growth when tested with both cross-section data and panel data. We argue that future research on economic growth will discard educational variables based on quantity as predictor given the thresholds that these variables are reaching.
    Date: 2018–07
  11. By: Walter Paternesi Meloni; Matteo Deleidi
    Abstract: Mature European countries have recently experienced a slackening in output growth and stagnating labour productivity, which may result both from poor ‘within sector’ growth and/or ‘structural change’. In this regard, the contribution of the paper is twofold. First, we assess the weight of ‘structural change’ versus ‘within sector’ growth in affecting overall productivity dynamics by means of a shift-share analysis. Second, we investigate the impact of demand factors on ‘within sector’ productivity growth by estimating the Kaldor-Verdoorn long-run coefficients in response to the dynamics of autonomous demand (1980-2015). We find that: (i) productivity growth is mainly driven by the ‘within sector effect’, with a relatively smaller role played by structural change; (ii) autonomous demand growth is relevant in determining productivity dynamics, especially in manufacturing. A major policy implication is that coordinated expansionary policies would matter for productivity growth in the EU, and at the same time contribute to sustain employment.
    Keywords: Structural Change; Tertiarisation; Shift-Share Analysis; Labour Productivity; Kaldor-Verdoorn Law.
    JEL: E24 L16 O47
    Date: 2018–07
  12. By: Bakker, Jan; Maurer, Stephan E; Pischke, Jörn-Steffen; Rauch, Ferdinand
    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.
    Date: 2018–07
  13. By: Simon Alder (University of North Carolina at Chapel H); Andreas Mueller (University of Essex); Timo Boppart (IIES, Stockholm University)
    Abstract: We propose a dynamic theory that is consistent with the long-run structural change of consumption expenditure shares in agriculture, manufacturing and services over more than a century. We first document three robust features in the long-run data for the United States, the United Kingdom, Canada and Australia: (i) a monotonic decrease in agriculture; (ii) a hump shape in manufacturing; and (iii) an accelerated rise of services. Using historical panel data on sectoral prices and nominal expenditures from 1900 to 2014, we then test what demand side theory can quantitatively explain the observed structural change. We find that the standard non-homothetic preference specifications used in the literature - the generalized Stone-Geary and the Price Independent Generalized Linearity (PIGL) specification - struggle to do so. Within our intertemporal framework, we then consider the entire class of preferences that allows for the aggregation of individual Euler equations - the class of intertemporally aggregable (IA) preferences. This general class nests the standard specifications and allows for the identification of preference parameters from aggregate data. Moreover, its expenditure system is flexible enough to capture the non-monotonic relationship between sectoral expenditure shares. Despite the flexibility, the IA preference specification is parsimonious and can be used in a multi-sector general equilibrium model with steady growth and heterogeneity in individual consumption expenditures. In the empirical analysis we show that the standard specifications are rejected against the more flexible parameterizations of IA preferences and we document the importance of flexible income effects.
    Date: 2018
  14. By: Debertin, David
    Abstract: Climate scientists have long warned that global warming, even if by only a few degrees, would play global havoc, with devastating negative impacts on the entire planet. In the climate science world, there are no positive impacts of a temperature increase, only negatives. Climate scientists frequently blame global warming almost entirely on the steady increase in the use of fossil fuels by human beings as the world becomes ever more and more industrialized. Climate scientists generally believe that drastic and costly steps must immediately be taken to curb the burning of fossil fuels in an effort to reduce the pace of global warming, even if these drastic measures have only a minimal impact on atmospheric carbon dioxide levels, if at all.This paper takes an entirely different view grounded in both plant science and agricultural production economics. This has been largely if not entirely ignored by the climate scientists. The scientific basis is grounded both in agricultural production economics and the basics of plant physiology. The conclusion I reach states that to the extent the planet is warming, while there may be some measurable and reasonable costs, the same warming undeniably generates large benefits to agriculture. These benefits accrue to farmers and consumers. Farmers operating in the Northern Plains states have been and continue to be major beneficiaries. These benefits include not only the direct impacts of the carbon dioxide on plant growth, but also benefits such as increased rainfall associated with greater cloud cover, longer growing seasons allowing a larger diversity of high-value species to be grown, more lush pasture growth for livestock and warmer winters that allow more fall-planted and high-yielding plant such as winter wheats to thrive.
    Keywords: Agricultural and Food Policy, Environmental Economics and Policy, Food Consumption/Nutrition/Food Safety, Production Economics, Productivity Analysis, Resource /Energy Economics and Policy
    Date: 2017–03–22
  15. By: Manuel Garcia-Santana (Universitat Pompeu Fabra); Josep Pijoan-Mas (CEMFI); Lucciano Villacorta (Central Bank of Chile)
    Abstract: In this paper we document that the investment and saving rates follow a large and long-lived hump-shaped profile along the development path. This pattern is present both in the large panel of countries of the Penn World Tables (PWT) between 1950 and 2010 and also in the historical data recently assembled by Jorda, Schularick, and Taylor (2017). The hump of investment with development is a challenge for the standard neo-classical model of growth. We propose two simple mechanisms that can jointly explain the observed paths of investment. First, we allow for richer transitional dynamics by assuming that households value their consumption in reference to a slow-moving endogeneous standard of living of the society where they live in, and show that a calibrated model with this feature alone can reproduce the large and long-lasting hump-shaped profiles of investment with development. Second, we look at the data of each country as coming from the transitional dynamics of economies whose technology does not grow at a constant rate. In particular, we extend the model to have separate consumption and investment goods sectors and feed it with the observed paths of investment-specific technical change, total factor productivity, and investment depreciation for each country. We exploit the Euler equation of consumption with a large panel of countries to estimate the preference parameters of the model as it is standard in the micro consumption literature. The estimated model allows us to understand which forces drive the investment rates observed in the data for every country and period.
    Date: 2018
  16. By: Remi Jedwab; Felix Meier zu Selhausen; Alexander Moradi
    Abstract: One of the most powerful cultural transformations in modern history has been the dramatic expansion of Christianity outside Europe. Recent, yet extensive, literature uses Christian missions established during colonial times as a source of exogenous variation to study thelong-term effects of religion, human capital and culture in Africa, the Americas and Asia. We argue that the endogeneity of missionary expansion may be underestimated, thus questioning the link between missions and economic development. Using annual panel data on missions from 1751 to 1932 in Ghana as well as cross-sectional data on missions for 43 sub-Saharan African countries in 1900 and 1924, we show that: (i) locational decisions were driven by economic factors, as missionaries went to healthier, safer, and more accessible and developed areas, privileging the best locations first; (ii) these factors may spuriously explain why locations with past missions are more developed today, especially as most studies rely on historical mission atlases that tend to only report the best mission locations. Our study identifies factors behind the spatial diffusion of religion. It also highlights the risks of omission and endogenous measurement error biases when using historical data and events for identification.
    Keywords: Path Dependence; Economic Development; Economics of Religion; Human Capital; Compression of History; Measurement Error; Christianity; Colonization; Africa
    JEL: F54 L31 N37 O15 O17 Z12
    Date: 2018

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