nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒11‒12
thirteen papers chosen by
Marc Klemp
University of Copenhagen

  1. In the shadow of coal: How large-scale industries contributed to present-day regional differences in personality and well-being By Obschonka, Martin; Stuetzer, Michael; Rentfrow, Peter J.; Shaw-Taylor, Leigh; Satchell, Max; Silbereisen, Rainer K.; Potter, Jeff; Gosling, Samuel D.
  2. Somatic Distance; Trust and Trade By Jacques Melitz; Farid Toubal
  3. The Reversal of Fortune, Extractive Institution and the Historical Roots of Racism By Bonick, Matthew; Farfan-Vallespin, Antonio
  4. Investigating The Relation Between Technology and Economic Growth with AK Model: An application Swamy?s Random Coefficient Model (RCM) By Aynur Pala
  5. The Market Size Effect in Endogenous Growth Reconsidered By Hélène Latzer; Kiminori Matsuyama; Mathieu Parenti
  6. Diasporas, Diversity, and Economic Activity: Evidence from 18th-century Berlin By Hornung, Erik
  7. The Institutional Foundations of Religious Politics: Evidence from Indonesia By Samuel Bazzi; Gabriel Koehler-Derrick; Benjamin Marx
  8. Institutions, Human Capital and Entrepreneurial Orientation (EO): Implications for Growth Strategy By Mthanti, Thanti; Ojah, Kalu
  9. Conditional Divergence in the Post-1989 Globalisation Period By Kevin S. Nell
  10. Regional alignement and productivity growth By Ludovic Dibiaggio; Benjamin Montmartin; Lionel Nesta
  11. The long-run and short-run effects of foreign direct investment, foreign aid and remittances on economic growth in African countries By Njangang, Henri; Nembot Ndeffo, Luc; Noubissi Domguia, Edmond; Fosto Koyeu, Prevost
  12. Productivity Spillovers in the Global Market By Nazmus Sadat Khan; Jun Nagayasu
  13. Asymmetric Cointegration and Causality between Natural Gas Consumption and Economic Growth in Nigeria By Danladi Galadima, Mukhtar; Wambai Aminu, Abubakar

  1. By: Obschonka, Martin; Stuetzer, Michael; Rentfrow, Peter J.; Shaw-Taylor, Leigh; Satchell, Max; Silbereisen, Rainer K.; Potter, Jeff; Gosling, Samuel D.
    Abstract: Recent research has identified regional variation of personality traits within countries but we know little about the underlying drivers of this variation. We propose that the Industrial Revolution, as a key era in the history of industrialized nations, has led to a persistent clustering of well-being outcomes and personality traits associated with psychological adversity via processes of selective migration and socialization. Analyzing data from England and Wales, we examine relationships between the historical employment share in large-scale coal-based industries (coal mining and steam-powered manufacturing industries that used this coal as fuel for their steam engines) and today’s regional variation in personality and well-being. Even after controlling for possible historical confounds (historical energy supply, education, wealth, geology, climate, population density), we find that the historical local dominance of large-scale coal-based industries predicts today’s markers of psychological adversity (lower Conscientiousness [and order facet scores], higher Neuroticism [and anxiety and depression facet scores], lower activity [an Extraversion facet], and lower life satisfaction and life expectancy). An instrumental variable analysis, using the historical location of coalfields, supports the causal assumption behind these effects (with the exception of life satisfaction). Further analyses focusing on mechanisms hint at the roles of selective migration and persisting economic hardship. Finally, a robustness check in the U.S. replicates the effect of the historical concentration of large-scale industries on today’s levels of psychological adversity. Taken together, the results show how today’s regional patterns of personality and well-being may have their roots in major societal changes underway decades or centuries earlier.
    Keywords: Industrial Revolution, regional well-being, adversity, Big Five personality traits, historical factors
    JEL: I31 N93
    Date: 2018
  2. By: Jacques Melitz (CREST; ENSAE; CEPII); Farid Toubal (CREST; ENS de Paris-Saclay; CEPII)
    Abstract: Somatic distance; or differences in physical appearance; proves to be extremely important in the gravity model of bilateral trade in conformity with results in other areas of economics and outside in the social sciences. This is also true independently of survey evidence about bilateral trust. These findings are obtained in a sample of the 15 members of the European Economic Association in 1996. Robustness tests also show that somatic distance; as well as co-ancestry; has a more reliable influence on bilateral trade than the other cultural variables. The article finally discusses the interpretation and breadth of application of these results.
    Keywords: Somatic distance, Cultural interactions, Co-ancestry, Trust, Language, Bilateral Trade.
    JEL: F10 F40 Z10
    Date: 2018–08–01
  3. By: Bonick, Matthew; Farfan-Vallespin, Antonio
    Abstract: We show differences in levels of racism within a sample of former European colonies can be traced to historical institutions. Our identification strategy relies on the reversal of fortune, a historical shock capturing the exogenous establishment of different institutions during the onset of European colonization. Using both OLS and multilevel analysis, we find, extractive historical institutions to be a strong predictor of higher levels of racism independent of present and other explanatory factors at the individual and country levels. We argue and provide evidence this relationship is causal and operates through internal norms, beliefs and values.
    JEL: J15 N30 N40 Z10
    Date: 2018
  4. By: Aynur Pala (Okan University)
    Abstract: This study aims to investigate effect of technology on economic growth in thirthty-OECD countries using random coefficient model (RCM) with AK model. We applied cross-sectional dependence test, panel unit-root test and co-integration test. As a result of estimated RCM model, in Denmark, Finland, Germany, Ireland and Poland, researcher and Business enterprise expenditure on R&D (BERD) as a percentage of GDP have positive and statistically significant effect on economic growth. In Estonia, Iceland and Latvia, researcher variable has positive and statistically significant effect on economic growth. In Turkey, BERD as a percentage of GDP variable has positively impacted on economic growth.
    Keywords: technology, economic growth, random coefficient model
    JEL: A19 C59 C50
    Date: 2018–07
  5. By: Hélène Latzer (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEREC - Université Saint-Louis - Bruxelles); Kiminori Matsuyama (Northwestern University [Evanston]); Mathieu Parenti (ULB - Université Libre de Bruxelles [Bruxelles])
    Abstract: This paper aims at disentangling two effects of the labor supply size on long-run growth that are traditionally undistinguishable under preference homotheticity: a scale effect, and a market size effect. To reach this goal, we present two horizontal-innovation models of endogenous growth with non-homothetic preferences. We demonstrate in particular that in such set-ups, keeping the economy's total effective labor supply constant, a "richer" country (i.e., with higher labor productivity and a smaller labor force) grows faster than a "poorer" country (i.e., with lower labor productivity and a larger labor force), leading the two countries to diverge.
    Keywords: Divergence,Horizontal Innovation,Knowledge Spillover,Endogenous Growth,Balanced Growth Path,Variable price elasticity,Endogenous Markup,Nonhomotheticity,Direct Explicit Additivity,Indirect Explicit Additivity
    Date: 2018–10
  6. By: Hornung, Erik (University of Cologne, Center for Macroeconomic Research)
    Abstract: Diversity may either increase economic activity by utilizing complementarities in production or lead to costly conflict over resources. Using citydistrict panel data from 18th-century Berlin, a major center of refuge for persecuted minorities in early modern Europe, we analyze the relationship between changes in diversity and economic activity. Prussian rulers specifically invited groups of skilled immigrants, such as Jews, Huguenots, and Bohemians, to settle in Berlin’s newly-developed city quarters. We find that the resulting ethnic diversity fosters textile production in a much broader range of products than individual ethnicities, arguably reflecting complementarities between groups.Keywords: Ethnic Diversity, Minorities, Huguenots, Jews, Productivity JEL Classification: N33, J61, Z12, O33
    Date: 2018
  7. By: Samuel Bazzi; Gabriel Koehler-Derrick; Benjamin Marx
    Abstract: Why do religious politics thrive in some societies but not others? This paper explores the institutional foundations of this process in Indonesia, the world’s largest Muslim democracy. We show that a major Islamic institution, the waqf, fostered the entrenchment of political Islam at a critical historical juncture. In the early 1960s, rural elites transferred large amounts of land into waqf—a type of inalienable charitable trust—to avoid expropriation by the government as part of a major land reform effort. Although the land reform was later undone, the waqf properties remained. We show that greater intensity of the planned reform led to more prevalent waqf land and Islamic institutions endowed as such, including religious schools, which are strongholds of the Islamist movement. We identify lasting effects of the reform on electoral support for Islamist parties, preferences for religious candidates, and the adoption of Islamic legal regulations (sharia). Overall, the land reform contributed to the resilience and eventual rise of political Islam by helping to spread religious institutions, thereby solidifying the alliance between local elites and Islamist groups. These findings shed new light on how religious institutions may shape politics in modern democracies.
    JEL: D72 D74 P16 P26 Z12
    Date: 2018–10
  8. By: Mthanti, Thanti; Ojah, Kalu
    Abstract: Motivated by the long established postulation by Adam Smith and Joseph Schumpeter that human capital and institutions enable Schumpeterian entrepreneurship which, in turn, facilitates economic growth, we sought to establish a more robust empirical support for this relationship. Adopting EO (i.e., innovativeness, proactiveness and risk-taking; Mthanti and Ojah, 2017, Research Policy, 46:4, 724-739) as the measure of Schumpeterian entrepreneurship at the macro-level, and using a sample of 93 countries, over 1980-2008, we employ system-GMM to investigate institutions and human capital as possible determinants of Schumpeterian entrepreneurship (EO). We find that the human capital—EO nexus is robust across economic development levels. However, there is a cross-country variation in the institutions—EO nexus. In line with theoretical predictions, institutions indeed drive EO in middle-to-high income countries. However, in low income countries, building institutions in order to foster EO yields perverse outcomes, which, for us and especially based on deeper analysis, suggest that improving the quality of institutions may not be a necessary precondition for EO/growth policy in low income countries. Furthermore, we find that EO is a highly persistent series, with self-reinforcing network effects; i.e., lofty EO behaviour encourages more lofty EO behaviour. Overall, therefore, we argue that where Schumpeterian entrepreneurship is hampered by low private returns or poor institutional environment, a sensible growth strategy would be to: (1) invest in human capital and (2) subsidize EO directly to exploit its network effects.
    Keywords: Institutions, Human capital, Entrepreneurship, Economic growth, Growth model
    JEL: O1 O3 O4 O5
    Date: 2017–01
  9. By: Kevin S. Nell (College of Business and Economics, School of Economics, University of Johannesburg; cef.up, FEP, University of Porto)
    Abstract: This paper shows that conditional convergence in per capita income, as a robust empirical regularity across countries, may have dissipated in the post-1989 globalisation era. There is evidence of conditional divergence over the period 1990-2016, with growth-reducing structural change emanating from greater trade openness and a slower rate of technology catch-up in developing countries identified as potential explanations. The results further show that conditional divergence can only be ceased subject to some initial, efficiency-adjusted level of educational attainment. One implication of conditional divergence is that the growth accelerations observed in many developing economies since the late-1990s may not be sustainable.
    Keywords: Banking, conditional convergence; conditional divergence; education; structural change; technology catch-up.
    JEL: O11 O15 O33 O47
    Date: 2018–10
  10. By: Ludovic Dibiaggio (Histoire et Critique des Arts - Centre d'étude et de recherche d'archéologie méditerranéenne et atlantique. UHB); Benjamin Montmartin (Observatoire français des conjonctures économiques); Lionel Nesta (Observatoire français des conjonctures économiques)
    Abstract: We propose the concept of regional alignment to suggest that synergistic relations among the scientific expertise, technological specialization and industry composition of regions affect regional productivity growth. In this paper, we test an extended conditional β-convergence model using data on 94 French departments (NUTS3) for the period 2001-2011. Our results indicate that a conditional β-convergence is associated with a σ-divergence process in the total factor productivity (TFP) growth of French regions. This process is strongly affected by the level of regional alignment. Indeed, we find evidence that regional alignment both directly and indirectly influences regional productivity growth. The indirect effect of regional alignment materializes through its leverage on R&D investment, which is one of the most important drivers of productivity growth. Moreover, using a heterogeneous coefficients model, we show that the positive effect of regional alignment on TFP growth increases with the industrial diversity of regions, which suggests that regional alignment increases the value of Jacobs externalities more than Marshall-ArrowRomer (MAR) externalities. KEY
    Keywords: Regional alignement; β-convergence; Productivity growth; Multi-regional model
    JEL: O30 O40 R11
    Date: 2018–09
  11. By: Njangang, Henri; Nembot Ndeffo, Luc; Noubissi Domguia, Edmond; Fosto Koyeu, Prevost
    Abstract: This paper investigates the long-run and short-run effects of foreign direct investment (FDI), foreign aid and migrant remittances on economic growth in 36 African countries over the period 1980–2016. Empirical evidence is based on Pooled Mean Group (PMG) approach. The following findings are established. First, while there is a positive and significant long-run relationship between foreign direct investment and economic growth in Africa as a whole, the effect of remittances and foreign aid is insignificant. Second, in the short-run there is no evidence of any significant impact of FDI, remittances and foreign aid on economic growth. Third, results are still robust in the short-run when the panel is divided in three subsamples. However, in the long-run the effects of FDI, remittances and foreign aid on economic growth depend on the income level.
    Keywords: FDI; Remittances; Foreign Aid; economic growth; PMG
    JEL: F23 F24 F35 F43 O55
    Date: 2018–10–28
  12. By: Nazmus Sadat Khan; Jun Nagayasu
    Abstract: This paper analyzes the effect of productivity shocks originating from other countries on economic growth in the home country. Traditionally, productivity shocks have been considered as driving forces of economic growth in their home countries. However, productivity improvements occur both at home and overseas. In liberalized global markets, economic growth is, in theory, also attributable to productivity shocks from other countries. Using data from 18 countries, we show that numerous countries benefit from productivity spillovers. Nevertheless, their impacts on the economy differ according to the origin of the economic shocks. On the one hand, US shocks are rather pervasive and affect many economies and regions, regardless of their development stage. On the other hand, shocks from other country groups exert less influence over foreign economies.
    Date: 2018–10
  13. By: Danladi Galadima, Mukhtar; Wambai Aminu, Abubakar
    Abstract: This paper investigates asymmetric cointegration, asymmetric adjustment, and causality between natural gas consumption and economic growth in Nigeria using the momentum threshold autoregressive (M-TAR) model and the Granger-causality test in a momentum threshold error correction model (M-TECM). The results revealed evidence of asymmetric cointegration, asymmetric adjustment which suggests that the negative discrepancies from the equilibrium error adjust more rapidly than the positive discrepancies and that there is bidirectional causality between the two variables. The implication of the results is that a shock that decreases the impact of natural gas consumption on economic growth adjusts more rapidly than a shock that increases it and that a consistent natural gas supply increases growth and similarly a rise in growth leads to rise in natural gas consumption. Therefore, policymakers in Nigeria need to confine more attention to the shocks stemming from the decrease in natural gas consumption and the country should adopt energy exploration policies.
    Keywords: Keywords: Asymmetric Cointegration, Asymmetric Adjustment, Causality, Natural Gas Consumption, Economic Growth
    JEL: Q43
    Date: 2017–11–30

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