nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒10‒29
five papers chosen by
Marc Klemp
University of Copenhagen

  1. How production networks amplify economic growth By James McNerney; Charles Savoie; Francesco Caravelli; J. Doyne Farmer
  2. Roads and Urban Growth By Ferdinand Rauch
  3. Diversity and Conflict By Cemal Eren Arbatli; Quamrul H. Ashraf; Oded Galor; Marc Klemp
  4. Resource Dependence and the Causes of Local Economic Growth: An Empirical Investigation By Rian Hilmawan; Jeremy Clark
  5. Social Capital and Innovation - Can Social Trust Explain the Technological Innovation of the High-performing East Asian Economies? By Seo-Young Cho

  1. By: James McNerney; Charles Savoie; Francesco Caravelli; J. Doyne Farmer
    Abstract: Technological improvement is the most important cause of long-term economic growth, but the factors that drive it are still not fully understood. In standard growth models technology is treated in the aggregate, and a main goal has been to understand how growth depends on factors such as knowledge production. But an economy can also be viewed as a network, in which producers purchase goods, convert them to new goods, and sell them to households or other producers. Here we develop a simple theory that shows how the network properties of an economy can amplify the effects of technological improvements as they propagate along chains of production. A key property of an industry is its output multiplier, which can be understood as the average number of production steps required to make a good. The model predicts that the output multiplier of an industry predicts future changes in prices, and that the average output multiplier of a country predicts future economic growth. We test these predictions using data from the World Input Output Database and find results in good agreement with the model. The results show how purely structural properties of an economy, that have nothing to do with innovation or human creativity, can exert an important influence on long-term growth.
    Date: 2018–10
  2. By: Ferdinand Rauch
    Abstract: P. Brandily, F. Rauch Roads are essential to facilitate interactions in cities. A sub-optimal road layout in cities and towns may inhibit interactions and constrain urban population growth. Using data from over 1800 cities and towns from Sub-Saharan Africa, and an instrument based on the history of foundation ages of cities in Africa, we study the relationship between the road layout of a city and its population growth. We show that cities characterised by low road density in the city centre experience less population growth in recent decades.
    Keywords: Road layout, Urban planning, Urbanization, Sub-Saharan Africa
    JEL: O18 R4
    Date: 2018–10–11
  3. By: Cemal Eren Arbatli (Faculty of Economic Sciences, National Research University Higher School of Economics, Moscow); Quamrul H. Ashraf (Department of Economics, Williams College, Williamstown); Oded Galor (Department of Economics, Brown University, Providence); Marc Klemp (Department of Economics, University of Copenhagen)
    Abstract: This research advances the hypothesis and establishes empirically that interpersonal population diversity has contributed significantly to the emergence, prevalence, recurrence, and severity of intrasocietal confl icts. Exploiting an exogenous source of variations in population diversity across nations and ethnic groups, it demonstrates that population diversity, as determined predominantly during the exodus of humans from Africa tens of thousands of years ago, has contributed significantly to the risk and intensity of historical and contemporary internal confl icts, accounting for the confounding effects of geographical, institutional, and cultural characteristics, as well as for the level of economic development. These findings arguably reflect the adverse effect of population diversity on interpersonal trust, its contribution to divergence in preferences for public goods and redistributive policies, and its impact on the degree of fractionalization and polarization across ethnic, linguistic, and religious groups.
    Keywords: Social conflict, population diversity, ethnic fractionalization, ethnic polarization, interpersonal trust, political preferences
    JEL: D74 N30 N40 O11 O43 Z13
    Date: 2018–03–01
  4. By: Rian Hilmawan; Jeremy Clark (University of Canterbury)
    Abstract: Previous research has found that in Indonesia, a resource giant in South East Asia, resource dependence is positively associated with economic growth, contrary to a 'resource curse' hypothesis. We test four potential causal mechanisms for this positive effect: spill overs to manufacturing, higher education provision, improvements in institutional quality, and investment in public capital. We follow 390 districts within Indonesia from 2006 to 2015, using four alternative measures of resource dependence, and instrumenting for their potential endogeneity. We first confirm a positive overall effect of resource dependence on real per capita Gross Regional Domestic Product. We then test the extent to which resource dependence positively affects manufacturing, education, public investment, and district institutional quality. We finally test the extent to which these factors contribute to growth. We find that resource dependence aids growth in part by raising measures of district institutional quality. Resource dependence also raises net high school enrolment rates, though we do not find that this in turn raises growth. Conversely, while higher capital spending by districts raises growth, we find no evidence that this share is affected by resource dependence. In auxiliary analysis, we find little support for the hypothesis that resource dependence benefits growth more (or only) for districts that begin with higher institutional quality.
    Keywords: Resource dependence, causal channels, economic growth, institutional quality
    JEL: Q32 Q33 Q38 O13 O43 O47
    Date: 2018–10–01
  5. By: Seo-Young Cho (University of Marburg)
    Abstract: The economic success and innovative outcomes of the high performing East Asian countries, albeit often characterized as low-trust societies, suggests reexamination of the presumed positive relationship between social trust and innovation. Multi-level analyses conducted in this paper reveal that the role of social capital in innovation is different in East Asia. Shared social norms such as growth primacy and reciprocity and values of accepting competition and performance-based incentives are the most essential driving-force of innovation in the East Asian countries, whereas social trust does not play a positive role there. The importance of the shared social norms and collective goals can be explained by the prominent role of the state in the East Asian development.
    Keywords: social capital; social trust; social norms; social values; competition; innovation; entrepreneurship; high-performing East Asian economies
    JEL: J24 L26 N15 N75 O31 O43
    Date: 2018

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