nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒08‒27
twelve papers chosen by
Marc Klemp
University of Copenhagen

  1. Two Blades of Grass: The Impact of the Green Revolution By Douglas Gollin; Casper Worm Hansen; Asger Wingender
  2. Spatial Competition, Innovation and Institutions: The Industrial Revolution and the Great Divergence By Klaus Desmet; Avner Greif; Stephen Parente
  3. Kuznets meets Lucas: Structural Change and Human Capital By Cruz, Edgar
  4. Capital Accumulation and the Rate of Profit in a Two-Class Economy with Optimization Behavior By Sasaki, Hiroaki
  5. Barriers to Reallocation and Economic Growth: the Effects of Firing Costs By Toshihiko Mukoyama; Sophie Osotimehin
  6. Should the Government Subsidize Innovation or Automation? By Chu, Angus C.; Cozzi, Guido; Furukawa, Yuichi; Liao, Chih-Hsing
  7. Mass Refugee Inflow and Long-Run Prosperity: Lessons from the Greek Population Resettlement By Murard, Elie; Sakalli, Seyhun Orcan
  8. Beyond the Arrow effect: a Schumpeterian theory of multi-quality firms * By Hélène Latzer
  9. Cointegration of Economic growth and External balance in Colombia: 1963-2016 By Barón Ortegón, Brayan Alexander
  10. The Short-Run and Long-Run Effects of Resources on Economic Outcomes: Evidence From the United States 1936-2015 By Karen Clay; Margarita Portnykh
  11. Family Planning and Development: Aggregate Effects of Contraceptive Use By Tiago Cavalcanti; Cezar Santos; Georgi Kocharkov
  12. Climate Shocks, Cyclones, and Economic Growth: Bridging the Micro-Macro Gap By Laura Bakkensen; Lint Barrage

  1. By: Douglas Gollin; Casper Worm Hansen; Asger Wingender
    Abstract: We examine the economic impact of high-yielding crop varieties (HYVs) in developing countries 1960-2000. We use time variation in the development and diffusion of HYVs of 10 major crops, spatial variation in agro-climatically suitability for growing them, and a differences-in-differences strategy to identify the causal effects of adoption. In a sample of 84 counties, we estimate that a 10 percentage points increase in HYV adoption increases GDP per capita by about 15 percent. This effect is fully accounted for by the direct effect on crop yields, factor adjustment, and structural transformation. We also find that HYV adoption reduced both fertility and mortality.
    JEL: N50 O11 O13 O50 Q16
    Date: 2018–06
  2. By: Klaus Desmet; Avner Greif; Stephen Parente
    Abstract: A market-size-only theory of industrialization cannot explain why England developed nearly two centuries before China. One shortcoming of such a theory is its exclusive focus on producers. We show that once we incorporate the incentives of factor suppliers' organizations such as craft guilds, industrialization no longer depends on market size, but on spatial competition between the guilds' jurisdictions. We substantiate our theory (i) by providing historical and empirical evidence on the relation between spatial competition, craft guilds and innovation, and (ii) by showing the calibrated model correctly predicts the timings of the Industrial Revolution and the Great Divergence.
    JEL: N10 O11 O14 O31 O43
    Date: 2018–06
  3. By: Cruz, Edgar
    Abstract: This paper develops a multi-sector growth model with human capital accumulation. In this model, human capital induces structural change through two channels: changes in relative prices and changes in the investment rate of physical and human capital. We show that the specifications of the model give rise to a generalized balanced growth path. Furthermore, we show that the model is consistent with (i) the decline in agriculture, (ii) the hump-shaped of manufacturing, (iii) the rise of the services sector and (iv) the path of human capital accumulation in the U.S economy during the twenty century. Given our findings, we outline that imbalances between physical and human capital contribute to explain cross-country differences in the pace of structural change.
    Keywords: Human capital; Structural change; Economic growth
    JEL: O41 O47
    Date: 2018–07–28
  4. By: Sasaki, Hiroaki
    Abstract: By building a growth model with two classes, workers and capitalists, this study investigates the existence and the stability of the long-run equilibrium along the lines of Pasinetti (1962) and Samuelson and Modigliani (1966). Unlike preceding studies in which the propensity to save of each class is exogenously given, this study assumes that workers solve a two-period overlapping generations model while capitalists solve an infinite-horizon dynamic optimization model. Depending on the combinations of both classes' time preference rate, the parameter of the production function, and the population growth rate, we obtain two kinds of long-run equilibria, the Pasinetti equilibrium and dual equilibrium \`a la Samuelson-Modigliani. We show that under realistic values of the parameters, the economy is likely to converge to the Pasinetti equilibrium.
    Keywords: workers and capitalists; intertemporal optimization; Pasinetti equilibrium; dual equilibrium
    JEL: E13 E21 E25
    Date: 2018–08–07
  5. By: Toshihiko Mukoyama (Department of Economics, Georgetown University); Sophie Osotimehin (Department of Economics, University of Virginia)
    Abstract: We study how factors that hinder the reallocation of inputs across firms influence aggregate productivity growth. We extend Hopenhayn and Rogerson's (1993) general equilibrium firm dynamics model to allow for endogenous innovation. We calibrate the model using US data, and then evaluate the effects of firing taxes on reallocation, innovation, and aggregate productivity growth. In our baseline specification, we find that firing taxes reduce overall innovation and productivity growth. We also show that firing taxes can have opposite effects on the entrants' innovation and the incumbents' innovation, and thus the overall outcome depends on the relative strengths of these forces.
    Keywords: Innovation, R&D, Reallocation, Firing costs
    JEL: E24 J24 J62 O31 O47
    Date: 2018–08–13
  6. By: Chu, Angus C.; Cozzi, Guido; Furukawa, Yuichi; Liao, Chih-Hsing
    Abstract: This study introduces automation into a Schumpeterian model to explore the different effects of R&D and automation subsidies. R&D subsidy increases innovation and decreases the share of automated industries with an overall inverted-U effect on economic growth. Automation subsidy decreases innovation and increases the share of automated industries also with an inverted-U effect on growth. Calibrating the model to US data, we find that the current level of R&D (automation) subsidy is above (below) the growth-maximizing level. Simulating transition dynamics, we find that changing R&D (automation) subsidy to its growth-maximizing level causes a welfare gain of 3.8% increase in consumption.
    Keywords: automation, innovation, economic growth
    JEL: O3 O4
    Date: 2018–08
  7. By: Murard, Elie (IZA); Sakalli, Seyhun Orcan (Université de Lausanne)
    Abstract: This paper investigates the long-term consequences of mass refugee inflow on economic development by examining the effect of the first large-scale population resettlement in modern history. After the Greco-Turkish war of 1919–1922, 1.2 million Greek Orthodox were forcibly resettled from Turkey to Greece, increasing the Greek population by more than 20% within a few months. We build a novel geocoded dataset locating settlements of refugees across the universe of more than four thousand Greek municipalities that existed in Greece in 1920. Exploiting the spatial variation in the resettlement location, we find that localities with a greater share of refugees in 1923 have today higher earnings, higher levels of household wealth, greater educational attainment, as well as larger financial and manufacturing sectors. These results hold when comparing spatially contiguous municipalities with identical geographical features and are not driven by pre-settlement differences in initial level of development across localities. The long-run beneficial effects appear to arise from agglomeration economies generated by the large increase in the workforce, occupational specialization, as well as by new industrial know-hows brought by refugees, which fostered early industrialization and economic growth.
    Keywords: refugees, immigration, historical persistence, economic development
    JEL: O10 O43 N34 N44
    Date: 2018–06
  8. By: Hélène Latzer (CEREC - Université Saint-Louis - Bruxelles, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper introduces multi-quality firms within a Schumpeterian framework. Featuring non-homothetic preferences and income disparities in an otherwise standard quality-ladder model, we show that the resulting differences in the willingness to pay for quality among consumers generate both positive investments in R&D by industry leaders and positive market shares for more than one quality, hence allowing for the emergence of multi-product firms within a vertical innovation framework. This positive investment in R&D by incumbents is obtained with complete equal treatment in the R&D field between the incumbent patentholder and the challengers: in our framework , the incentive for a leader to invest in R&D stems from the possibility for an incumbent having innovated twice in a row to efficiently discriminate between rich and poor consumers displaying differences in their willingness to pay for quality. We hence exemplify a so far overlooked demand-driven rationale for innovation by incumbents. Such a framework also makes it possible to analyze the impact of inequality both on long-term growth and on the allocation of R&D activities between challengers and incumbents. We find that an increase in the income gap positively impacts an econ-omy's growth rate, partly shifting R&D activities from challengers to incumbents. On the other hand, a greater income concentration is detrimental for growth, diminishing both the incumbents' and the challengers' R&D activities.
    Keywords: Growth,Innovation,Income inequality
    Date: 2016–10
  9. By: Barón Ortegón, Brayan Alexander
    Abstract: In this paper is analyzed the relation between GDP growth and External balance in Colombia for the study period (1963-2016) by using a VECM. Supposing everything else unchanged, we conclude that Colombian external balance granger caused GDP growth and there was indeed a long run relation between both variables. This outcome helps to explain the Colombian GDP growth dynamics over the last fifty years and the impact of trade policy on economic growth.
    Keywords: Economic growth; External balance; Trade balance; Colombia; VEC model.
    JEL: F00 F14 F17 F43 F47
    Date: 2018–04–07
  10. By: Karen Clay; Margarita Portnykh
    Abstract: This paper draws on a new state-level panel dataset and a model of domestic Dutch disease to examine the short-run and long-run effects of oil & natural gas, coal, and agricultural land endowments on state economies during 1936-2015. Using a flexible shift-share estimation approach, where the shift is national resource employment and the share is state resource endowment, we find that different resources had different short-run effects in different time periods, across increases and decreases in resource employment, and across different outcomes. Using long differences, we find that long-run population growth was an important margin of adjustment over 1936-2015. States with larger coal and agricultural endowments per square mile experienced significantly slower population growth than states with smaller endowments per square mile. Resource endowments had no effect on long-run growth in per capita income.
    JEL: J2 N12 O4 Q24 Q43
    Date: 2018–06
  11. By: Tiago Cavalcanti (University of Cambridge); Cezar Santos (Fundacao Getulio Vargas); Georgi Kocharkov (Universidad Carlos III de Madrid)
    Abstract: What is the role of family planning interventions on fertility, savings, human capital investment, and development? To examine this, endogenous unwanted fertility is embedded in an otherwise standard quantity-quality overlapping generations model of fertility and growth. The model features costly fertility control and families can (partially) insure against a fertility risk by using costly modern contraceptives. In the event of unexpected pregnancies, households can also opt to abort some pregnancies, at a cost. Given the number of children born, parents decide how much education to provide and how much to save out of their income. We fit the model to Kenyan data, implement several family planning policies and decompose their aggregate effects. Our results suggest that given a small budget (up to 0.5 percent of GDP), legalizing and subsidizing the price of abortion is a more cost-effective policy for improving long-run living standards and reducing inequality than policies that either subsidize the price of modern contraceptives or subsidize basic education.
    Date: 2018
  12. By: Laura Bakkensen; Lint Barrage
    Abstract: Empirical analyses of the impacts of climatic shocks on growth, while critical for policy, have found seemingly disparate results and are seldom incorporated into macroeconomic climate-economy models. This paper seeks to bridge this micro-macro gap through the case of tropical cyclones. We first present a stochastic endogenous growth model that can reconcile previous empirical findings. We then empirically estimate the impacts of cyclones on the structural determinants of growth (total factor productivity, depreciation, fatalities), instead of growth itself, facilitating direct inclusion into the seminal DICE climate-economy model. Cyclone damages are estimated to increase the social cost of carbon by 10-15%.
    JEL: O44 O47 Q54
    Date: 2018–08

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