nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒10‒01
five papers chosen by
Marc Klemp
University of Copenhagen

  1. Long-run spatial inequality in South Africa: early settlement patterns and separate development By Dieter von Fintel
  2. Social Norms and Fertility By Sunha Myong; JungJae Park; Junjian Yi
  3. The cultural origin of saving behavior By Costa-Font, Joan; Giuliano, Paola; Özcan, Berkay
  4. Why Do People Work So Hard? By Paul Scanlon
  5. Stagnation Traps in an Open Economy By HIRAGUCHI Ryoji

  1. By: Dieter von Fintel (Department of Economics, Stellenbosch University)
    Abstract: New economic geography theories predict that historically densely settled areas also become more industrialised. Industrial agglomeration has therefore cultivated spatial inequalities in all parts of the world. South Africa presents an interesting case study, where institutional failures interrupted the ‘usual’ agglomeration process. On the one hand, current day metropolitan regions are located in historically densely populated areas. On the other hand, apartheid-era homelands also had highly concentrated populations, but did not industrialise to the same extent as other parts of South Africa. Much earlier in history, following the mfecane, these locations attracted migrants in search of favourable agricultural conditions and physical security in the face of conflict (they were high rainfall, rugged areas). The benefit of settling in these areas, however, only remained prior to imposed restrictions on land ownership (1913 Land Act) and movement of people (during apartheid). This paper decomposes modern spatial inequality, and establishes that agglomerations and historical institutional failures explain large proportions of spatial inequality. Furthermore, the homelands wage penalty reverses once these controls are introduced into various models: had agglomeration taken its course without institutional constraints, the homelands would likely have developed into high paying local economies. While new economic geography theories hold in the urban core, the densely populated former homelands did not follow this trajectory. Spatial inequality is therefore more severe than it would have been had institutional failures not prevented the former homelands from industrialising at the same pace as other historically densely populated areas.
    Keywords: Spatial inequality, economic geography, apartheid homelands, African economic history
    JEL: N97 R11 D31
    Date: 2018
  2. By: Sunha Myong (Singapore Management University); JungJae Park (National University of Singapore); Junjian Yi (The University of Chicago)
    Abstract: We first document three stylized facts about marriage and fertility in East Asian societies: They have the highest marriage rates in the world, but the lowest total fertility; they have the lowest total fertility, but almost all married women have at least one child. By contrast, almost no single women have any children. We then explain these three facts, focusing on two social norms associated with Confucianism: the unequal gender division of childcare within a household and the stigma attached to out-of-wedlock births. We incorporate the two social norms into an economic model, and structurally estimate it using data from South Korea’s censuses and household surveys. We find that, on the one hand, the social norm of unequal gender division of childcare significantly contributes to the low fertility of South Korea, and its effect varies across education: The social norm lowers fertility for highly educated women but increases it for the less educated. Pro-natal policies can increase average fertility, but they are not effective in mitigating the role of this norm as they cannot sufficiently boost fertility for highly educated women. On the other hand, the social stigma has negligible effects on marriage and fertility. Historical simulation results show that fertility would have decreased less dramatically in the absence of the first norm, especially for younger birth cohorts. Our results suggest that the tension between the persistent gender ideology and rapid socioeconomic development is the main driving force behind the unique marriage and fertility patterns of East Asian societies, and that this tension has escalated in recent decades.
    Keywords: Confucianism, social norms, fertility, demographic transition, East Asia societies
    JEL: J11 J12 J13
    Date: 2018–09
  3. By: Costa-Font, Joan; Giuliano, Paola; Özcan, Berkay
    Abstract: Traditional economic interpretations have not been successful in explaining differences in saving rates across countries. One hypothesis is that savings respond to cultural specific social norms. The accepted view in economics so far is that culture does not have any effect on savings. We revisit this evidence using a novel dataset, which allows us to study the saving behavior of up to three generations of immigrants in the United Kingdom. Against the backdrop of existing evidence, we find that cultural preferences are an important explanation for cross-country differences in saving behavior, and their relevance persists up to three generations.
    JEL: N0
    Date: 2018–09–12
  4. By: Paul Scanlon (Trinity College Dublin)
    Abstract: Labor hours tend to fall as an economy develops, but subsequently tend to stabilize. I present a model that explains long-run trends in labor supply by the interaction of two opposing forces: a rising real wage, which lowers labor supply, and increasing product variety, which raises it. Both forces arise from the same source---innovation---and on a balanced growth path their interaction can sustain stable labor hours. Calibrating the model over the period 1959-2000, for benchmark parameters it can explain on average 80 percent of the discrepancy between hours predicted by the standard CIES one-good model and the data.
    Date: 2018
  5. By: HIRAGUCHI Ryoji
    Abstract: In this paper, we construct a continuous time endogenous growth model in which innovation is the engine of growth, and study the effect of trade restriction on the employment and the growth rate. In our model, the nominal wage rate has downward rigidity, and therefore the model may have involuntary unemployment. Monetary policy is determined by the Taylor rule. We first show that there are two balanced growth paths. In one path, the workers are fully employed and the nominal interest rate is positive. In another path, some workers are unemployed and the nominal interest rate is zero. We next show that, in the unemployment equilibrium, trade restriction by raising tariffs may lower the unemployment rate without reducing the economic growth rate. However, increasing the tariff rate excessively reduces the growth rate without improving the labor market.
    Date: 2018–09

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