nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒11‒05
eleven papers chosen by
Marc Klemp
University of Copenhagen

  1. Climatic Roots of Loss Aversion By Galor, Oded; Savitskiy, Viacheslav
  2. Birthplace Diversity and Economic Growth: Evidence from the US States in the Post-World War II Period By Docquier, Frédéric; Turati, Riccardo; Valette, Jérôme; Vasilakis, Chrysovalantis
  3. Precipitation and Economic Growth By Michael Berlemann; Daniela Wenzel
  4. Early childhood education and economic growth By Delalibera, Bruno Ricardo; Ferreira, Pedro Cavalcanti
  5. Income inequality and Economic Development: evidences from Brazilian Municipalities By M., Cassandro
  6. Geography of Skills and Global Inequality By Burzynski, Michal; Deuster, Christoph; Docquier, Frédéric
  7. Circle of Fortune: The Long Term Impact of Western Customs Institutions in China By Jin, Gan
  8. Unemployment and Development By Ying Feng; David Lagakos; James E. Rauch
  9. Wages, income distribution and economic growth in Scandinavia By Eric Bengtsson; Engelbert Stockhammer
  10. Doing Business and Inclusive Human Development in Sub-Saharan Africa By Asongu, Simplice; Odhiambo, Nicholas
  11. What Remains of Cross-Country Convergence? By Johnson, Paul; Papageorgiou, Chris

  1. By: Galor, Oded (Brown University); Savitskiy, Viacheslav (Brown University)
    Abstract: This research explores the origins of loss aversion and the variation in its prevalence across regions, nations and ethnic group. It advances the hypothesis and establishes empirically that the evolution of loss aversion in the course of human history can be traced to the adaptation of individuals to the asymmetric effects of climatic shocks on reproductive success during the Malthusian epoch in which subsistence consumption was a binding constraint. Exploiting regional variations in the vulnerability to climatic shocks and their exogenous changes in the course of the Columbian Exchange, the research establishes that consistent with the predictions of the theory, individuals and ethnic groups that are originated in regions marked by greater climatic volatility have higher predisposition towards loss-neutrality, while descendants of regions in which climatic conditions tended to be spatially correlated, and thus shocks were aggregate in nature, are characterized by greater intensity of loss aversion.
    Keywords: loss aversion, cultural evolution, evolution of preferences, natural selection, Malthusian epoch, growth, development
    JEL: D81 D91 Z10 O10 O40
    Date: 2018–09
  2. By: Docquier, Frédéric (Université catholique de Louvain); Turati, Riccardo (IRES, Université catholique de Louvain); Valette, Jérôme (CES, University of Paris); Vasilakis, Chrysovalantis (Bangor University)
    Abstract: This paper empirically revisits the impact of birthplace diversity on economic growth. We use panel data on US states over the 1960-2010 period. This rich data set allows us to better deal with endogeneity issues and to conduct a large set of robustness checks. Our results suggest that diversity among college-educated immigrants positively affects economic growth. We provide converging evidence pointing at the existence of skill complementarities between workers trained in different countries. These synergies result in better labor market outcomes for native workers and in higher productivity in the R&D sector. The gains from diversity are maximized when immigrants originate from economically or culturally distant countries (but not both), and when they acquired part of their secondary education abroad and their college education in the US. Overall, a 10% increase in high-skilled diversity raises GDP per capita by about 6%. On the contrary, low-skilled diversity has insignificant effects.
    Keywords: immigration culture, birthplace diversity growth
    JEL: F22 J61
    Date: 2018–09
  3. By: Michael Berlemann; Daniela Wenzel
    Abstract: As the ongoing process of global warming goes along with changes in both mean precipitation and precipitation extremes, the scientific interest in the effects of rainfall on economic prosperity has recently grown significantly. However, the few existing empirical studies of short-run growth effects of precipitation deliver inconclusive results. The medium- and long-run growth perspective is yet mostly unexplored. In this paper we deliver a systematic analysis of the short- and long-run growth effects of rainfall based on a large panel dataset covering more than 150 countries over the period of 1951 to 2013. We find strong and highly robust empirical evidence for long-lasting negative growth effects of rainfall shortages in poor and underdeveloped countries, which are not driven by the subsample of Sub Saharan African countries.
    Keywords: economic growth, precipitation
    JEL: O44 Q54 Q56
    Date: 2018
  4. By: Delalibera, Bruno Ricardo; Ferreira, Pedro Cavalcanti
    Abstract: We study the effects of early childhood skill formation on productivity and schooling. We add early childhood human capital to a standard continuous time life cycle economy and assume complementarity between educational stages. Agents are homogenous and choose the intensity of preschool education, how long to stay in formal school, labor effort and consumption. The model is calibrated to the U.S. from 1961 to 2008 and matches the data very well We study the effects of early childhood skill formation on productivity and schooling. We add early childhood human capital to a standard continuous time life cycle economy and assume complementarity between educational stages. Agents are homogenous and choose the intensity of preschool education, how long to stay in formal school, labor effort and consumption. The model is calibrated to the U.S. from 1961 to 2008 and matches the data very well and closely reproduces the paths of schooling, hours worked, relative prices and GDP. We find that early childhood education can explain a large part of the observed increase of years of schooling in the U.S. since 1961, and it was as important as formal education for the increase of labor productivity in the period. Furthermore, we show that small reallocations of public expenditures from formal education to early childhood education would have sizable impacts on income per capita and productivity.
    Date: 2018–10–18
  5. By: M., Cassandro
    Abstract: This note aimed to investigate, within Brazilian municipalities, the relationship between income inequality and economic development. We used data from 5,566 Brazilian municipalities, and parametric and nonparametric tools were used. The results obtained show that there is no inverted-U relationship between these two variables. Our best model (the nonparametric model) suggest an U-shape relationship between income inequality and economic development. This finding differs from previous studies presented in the literature. This results indicates that even in the more developed municipalities, the gap between rich and poor is increasing.
    Keywords: Kuznets Curve; GAM; income inequality; economic development
    JEL: C50 O20
    Date: 2018–10
  6. By: Burzynski, Michal (LISER); Deuster, Christoph (IRES, Université catholique de Louvain); Docquier, Frédéric (Université catholique de Louvain)
    Abstract: This paper analyzes the factors underlying the evolution of the worldwide distribution of skills and their implications for global inequality. We develop and parameterize a two-sector, two-class, world economy model that endogenizes education and mobility decisions, population growth, and income disparities across and within countries. First, our static experiments reveal that the geography of skills matters for global inequality. Low access to education and sectoral misallocation of skills substantially impact income in poor countries. Second, we produce unified projections of population and income for the 21st century. Assuming the continuation of recent education and migration policies, we predict stable disparities in the world distribution of skills, slow-growing urbanization in developing countries and a rebound in income inequality. These prospects are sensitive to future education costs and to internal mobility frictions, which suggests that policies targeting access to all levels of education and sustainable urban development are vital to reduce demographic pressures and global inequality in the long term.
    Keywords: human capital, migration, urbanization, growth, inequality
    JEL: E24 J24 O15
    Date: 2018–09
  7. By: Jin, Gan
    Abstract: This paper studies the persistent impact of good institutions on economic development in China. By exploiting a British-driven institutional switch in part of China's customs stations in 1902, I find that counties that were more affected by the British customs institutions are also better developed today. Moreover, I show that the institutional switch was exogenous to the pre-colonial development, and I provide different estimation models to reveal a robust and causal relationship between good institutions and economic development.
    Keywords: Institutions,Economic development,Treaty ports,Chinese Maritime Customs Service (CMCS),China
    JEL: N15 O10 P51 N15 O10 P51
    Date: 2018
  8. By: Ying Feng; David Lagakos; James E. Rauch
    Abstract: This paper draws on household survey data from countries of all income levels to measure how average unemployment rates vary with income per capita. We document that unemployment is increasing with GDP per capita. Furthermore, we show that this fact is accounted for almost entirely by low-educated workers, whose unemployment rates are strongly increasing in GDP per capita, rather than by high-educated workers, whose unemployment rates are not correlated with income. To interpret these facts, we build a model with workers of heterogeneous ability and two sectors: a traditional sector, in which self-employed workers produce output without reward for ability; and a modern sector, in which firms hire in frictional labor markets, and output increases with ability. Countries differ exogenously in the productivity level of the modern sector. The model predicts that as productivity rises, the traditional sector shrinks, as progressively less-able workers enter the modern sector, leading to a rise in overall unemployment and in the ratio of low-educated to high-educated unemployment rates. Quantitatively, the model accounts for around one third of the cross-country patterns we document.
    JEL: E24 E26 O11 O41
    Date: 2018–10
  9. By: Eric Bengtsson; Engelbert Stockhammer (King’s College London)
    Abstract: Wage restraint plays an important role in the conventional economic history explanation of the post-war golden growth experience of industrialized economies. Conversely, wage increases harming investment and increasing unemployment have been proffered as explanations for some of the high unemployment during the interwar period. This article argues that the conventional account implicitly only considers effects of wage growth on investment and not the advantageous effects on consumption. Thus, the evaluation of the effects on GDP growth is lop-sided. We employ a Post-Keynesian model to estimate effects of growth in the wage share of national income on consumption, investment, exports and imports separately, and weigh the effects together to estimate total effects on GDP growth, in Scandinavia (Denmark, Norway and Sweden) 1900–2010. Furthermore, we estimate the positive effects of wage pressure on productivity, showing it to be significant and positive in all three countries. We show that the postwar wage push had small positive effects on GDP growth in Denmark and Sweden, and a small negative effect in Norway. Thus, wage restraint is not a valid explanation for the postwar growth miracle. We propose a more comprehensive macroeconomic framework for understanding the implications of labour-capital distribution.
    Keywords: functional income distribution, inequality, consumption, investment, Scandinavia, Bhaduri-Marglin model, economic history
    JEL: E12 N10 N14
    Date: 2018–10
  10. By: Asongu, Simplice; Odhiambo, Nicholas
    Abstract: Purpose- This study examines how doing business affects inclusive human development in 48 sub-Saharan Africa for the period 2000-2012. Design/methodology/approach- The measurement of inclusive human development encompasses both absolute pro-poor and relative pro-poor concepts of inclusive development. Three doing business variables are used, namely: the number of start-up procedures required to register a business; time required to start a business; and time to prepare and pay taxes. The empirical evidence is based on Fixed Effects and Generalised Method of Moments regressions. Findings- The findings show that increasing constraints to the doing of business have a negative effect on inclusive human development. Originality/value- The study is timely and very relevant to the post-2015 Sustainable Development agenda for two fundamental reasons: (i) Exclusive development is a critical policy syndrome in Africa because about 50% of countries in the continent did not attain the MDG extreme poverty target despite enjoying more than two decades of growth resurgence. (ii) Growth in Africa is primarily driven by large extractive industries and with the population of the continent expected to double in about 30 years, scholarship on entrepreneurship for inclusive development is very welcome. This is essentially because studies have shown that the increase in unemployment (resulting from the underlying demographic change) would be accommodated by the private sector, not the public sector.
    Keywords: Doing Business; Inclusive Development; Entrepreneurship; Africa
    JEL: I30 M20 O10 O30 O55
    Date: 2018–01
  11. By: Johnson, Paul; Papageorgiou, Chris
    Abstract: We examine the record of cross-country growth over the past 50 years and ask if developing countries have made progress on closing income gap between their per capita incomes and those in the advanced economies. We conclude that, as a group, they have not and then survey the literature on absolute convergence with particular emphasis on that from the last decade or so. That literature supports our conclusion of a lack of progress in closing the income gap between countries. We close with a brief examination of the recent literature on cross-individual distribution of income which finds that, despite the lack of progress on cross-country convergence, global inequality has tended to fall since 2000.
    Keywords: Economic growth, convergence, catching up, global inequality
    JEL: E01 E13 F41 O11 O47
    Date: 2018–08

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