nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒10‒08
eight papers chosen by
Marc Klemp
University of Copenhagen

  1. Social Interactions and Modern Economic Growth By Javier Mejia
  2. Railroads, Economic Development, and the Demographic Transition in the United States By Katz‬‏, ‪Ori
  3. Family Ties and Corruption By Litina, Anastasia; Varvarigos, Dimitrios
  4. "The rich in historical perspective: Evidence for preindustrial Europe, c. 1300-1800" By Guido Alfani
  5. Build it and they will come? Secondary railways and population density in French Algeria By Laura Maravall Buckwalter
  6. Characterizing Sustainability in Discrete Time By Geir B. Asheim; Tapan Mitra
  7. Energy intensity, growth and technical change By Akshay Shanker; David Stern
  8. Optimal Growth Policies in a Two-Sector Model with Financial Market Imperfections By Nguyen, Quoc Hung

  1. By: Javier Mejia (Division of Social Science)
    Abstract: This paper offers a theoretical framework to understand the coevolution of social interactions and long-term economic growth. It begins by considering that most traditional societies did not have educational markets. Thus, access to the required knowledge for transiting to a modern economy had to be transmitted through social interactions, in particular, through the interaction between heterogeneous groups of people–i.e. distant interactions. Once immersed in a modern economy, the productive system should have increased the demand for knowledge, promoting more distant interactions. Simultaneously, the emergence of distant interactions should have affected the connectivity of society, reducing its heterogeneity, making cheaper posterior interactions but reducing their profitability. Moreover, social interactions competed and benefited from other non-market activities, child rearing specifically. The model arrives at four basic predictions. First, modern economic growth brings a more cohesive society. Second, modern economic growth brings long-term reductions in fertility with potential short-term increases. Third, initial barriers to social interactions could explain the timing of modern economic growth arrival. Fourth, the timing of modern economic growth arrival could explain current output levels. I exploit different data sources to offer evidence in support of these predictions.
    Date: 2018–09
  2. By: Katz‬‏, ‪Ori
    Abstract: This paper estimates the impact of railroads in the United States between 1850 and 1910 on economic development, fertility, and human capital. A novel identification strategy, which relies on a dynamic instrument, allows me to control for unobservables using county fixed effects. I find that railroads shifted the distribution of occupations and industries, had a large positive effect on human capital levels, and a large negative effect on fertility rates. Further analysis suggests that the impact of railroads was larger in counties that were initially more developed. I examine possible mechanisms that drive the effects and lead to this heterogeneity.
    Keywords: Railroads, Fertility, Human Capital, Industrialization, Development, Transportation, Economic Growth, Great Divergence, Demographic Transition
    JEL: J11 N11 N71 O1 O14 O18
    Date: 2018–08–14
  3. By: Litina, Anastasia; Varvarigos, Dimitrios
    Abstract: We construct a model to examine the relation between family ties and corruption. The overall effect of strong family ties on the incentive to be corrupt can be ambiguous due to the presence of conflicting mechanisms. The model also shows that the measure of family ties can be crucial in determining its observed effect on corruption, thus offering a theoretical foundation on why the empirical outcomes entailing cross-country comparisons can differ from the outcomes of micro-level empirical investigations. This aspect of the theoretical framework is verified by our empirical analysis: Using micro-level data, we show that, in contrast to conventional wisdom and cross-country comparisons, stronger family ties reduce the approval for a broad set of activities that measure corruption.
    Keywords: Corruption, Family values
    JEL: D73 Z10
    Date: 2018–09–13
  4. By: Guido Alfani (Bocconi University)
    Abstract: "This article provides an overview of long-term changes in the relative conditions of the rich in preindustrial Europe. It covers four pre-unification Italian states (Sabaudian State, Florentine State, Kingdom of Naples and Republic of Venice) as well as other areas of Europe (Low Countries, Catalonia) during the period 1300-1800. Three different kinds of indicators are measured systematically and combined in the analysis: headcount indexes, the share of the top rich, and richness indexes. Taken together, they suggest that overall, during the entirety of the early modern period the rich tended to become both more prevalent and more distanced from the other strata of society. The only period during which the opposite process took place was the late Middle Ages, following the Black Death epidemic of the mid-fourteenth century. In the period from ca. 1300 to 1800, the prevalence of the rich doubled. In the Sabaudian State, the Florentine State and the Kingdom of Naples, for which reconstructions of regional wealth distributions exist, in about the same period the share of the top 10% grew from 45-55% to 70-80% - reaching almost exactly the same level which has recently been suggested as the European average at 1810. Consequently, the time series presented here might be used to add about five centuries of wealth inequality trends to current debates on very long-term changes in the relative position of the rich."
    Keywords: Economic inequality; wealth concentration; richness; top wealthy; middle ages; early modern period; Italy; Low Countries; Catalonia; Black Death; property structures
    JEL: N30 N33 N93 D31
    Date: 2017–04
  5. By: Laura Maravall Buckwalter (Universidad Carlos III de Madrid)
    Abstract: "By the end of the 19th century, the Algerian railway network played a crucial role as an instrument for settlement expansion and colonial control. A growing amount of research shows that railway expansion at this time allowed previously marginalized regions to participate in international trade and thereby boosting growth. Yet few studies point out that it also increased marginalization and reinforced dual economies in areas that did not experience access to the infrastructure or that did not have the required economies to profit from and engage in international markets. This paper looks into the effect of gaining railroad access on the indigenous and settler population density in French Algeria during this period. By taking advantage of unique territorial population data at a sub-municipal level and digitized historical colonization maps in the Constantine region, it measures the effect of gaining railway access in relatively isolated areas – areas in which the infrastructure arrived later – using a differences- in-differences methodology. Results show that the indigenous population responded positively to railroad infrastructure only in those regions where settlers were already located while the settler density did not respond to the infrastructure. To provide an explanation, it then analyzes freight and passenger transport at a more detailed level. In line with literature on Algerian railways, the results suggest that the potential gains were restricted by tariffs, which mirrored Constantine’s difficulty to engage in scale economies due to geographical restrictions, such as the limited fertile land and the vulnerability of agricultural production to climate."
    JEL: N00
    Date: 2018–04
  6. By: Geir B. Asheim; Tapan Mitra
    Abstract: We examine the investment rule that must be satisfied by an efficient and egalitarian path in a discrete-time version of the Dasgupta-Heal-Solow model of capital accumulation and resource depletion. In the discrete-time model, competitive valuation of net investments in terms of early and late pricing differs. We redefine Hartwick's rule to require zero value of net investments at a valuation rule intermediate between these two. Using this definition, we show that along an efficient and egalitarian path, Hartwick's rule is followed in all time periods. We thereby establish the converse of Hartwick's result in discrete time, and we do so under weaker assumptions than those in the existing literature on how output varies as a function of capital and resource use. Our redefinition of Hartwick's rule follows naturally if discrete time is viewed as providing information at discrete points in time of an underlying continuous-time process.
    Keywords: intergenerational equity, sustainable development
    JEL: D63 O41 Q01
    Date: 2018
  7. By: Akshay Shanker; David Stern
    Abstract: World and U.S. energy intensities have declined over the past century, falling at an average rate of approximately 1.2–1.5 percent a year. The decline has persisted through periods of stagnating or even falling energy prices, suggesting the decline is driven in large part by autonomous factors, independent of price changes. In this paper, we use directed technical change theory to understand the autonomous decline in energy intensity and investigate whether the decline will continue. We show in an economy with no state-dependence, where existing knowledge does not make R&D more profitable, energy intensity continues to decline, albeit at a slower rate than output growth, due to energy-augmenting innovation. However, in an economy with extreme state-dependence, energy intensity eventually stops declining because labor-augmenting innovation crowds out energy-augmenting innovation. Our empirical analysis of energy intensity in 100 countries between 1970 and 2010 suggests a scenario without extreme state dependence where energy intensity continues to decline; in either case, energy intensity never declines faster than output grows, and so energy use always increases, as long as the extraction cost of energy stays constant.
    Keywords: Energy, Directed Technological Change, Economic Growth
    JEL: O33 O41 Q43
    Date: 2018–09
  8. By: Nguyen, Quoc Hung
    Abstract: This paper studies the pro-growth policies in an endogenous growth model where heterogeneous entrepreneurs face collateral constraints, skilled workers accumulate human capital, and the government intervenes to promote human and physical capital formation. It shows that the model has a balanced-growth path whose rate depends on government policy and financial development level. The theoretical analysis also shows that when the distribution of idiosyncratic productivity is heavy-tailed, the government must subsidize productive entrepreneurs to achieve optimal pro-growth policies.
    Keywords: Heterogeneity; Financial Deepening; Growth Policies
    JEL: E10 E22 E44 O16
    Date: 2018–09–08

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