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on Economic Growth |
| By: | FURUKAWA Yuichi; Tat-kei LAI; SATO Kenji |
| Abstract: | People's desire for novelty is often perceived to encourage innovation. However, our cross-country evidence suggests that the relationship can be negative. To explain this empirical finding, we develop a new R&D-based growth model which incorporates people's novelty-seeking traits. In our model, people's novelty-seeking traits are captured by their extra preference towards new goods; besides, innovation is achieved through new and existing product development as two separate processes of innovation, both requiring costly and time-consuming investment activities. We find that if the level of inherent novelty seeking is higher than some threshold level, then the economy is caught in an underdevelopment trap with less innovation; otherwise, it provides innovation perpetually and achieves long-run growth. Our model shows that the effects of higher levels of inherent novelty seeking on innovation and economic growth can be negative. Our result suggests an essential role of the public's preference for novelty in designing a more favorable economic institution and policy that support innovation and growth. |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:18073&r=gro |
| By: | Murat Iyigun (University of Colorado, Boulder); Jared Rubin (Chapman University); Avner Seror (Chapman Univeristy) |
| Abstract: | Why do some societies fail to adopt more efficient political and economic institutions in response to changing economic conditions? And why do such conditions sometimes generate conservative ideological backlashes and, at other times, progressive social and political movements? We propose an explanation that highlights the interplay—or lack thereof—between productivity, cultural beliefs and institutions. In our model, production shocks that benefit one sector of the economy may induce forward-looking elites to provide public goods associated with a different, more traditional sector that benefits their interests. This investment results in more agents generating cultural beliefs complementary to the provision of the traditional good, which in turn increases the political power of the traditional elite. Hence, productivity shocks in a more advanced sector of the economy can increase investment, political power, and cultural capital associated with the more traditional sector of the economy, in the process generating a revival of beliefs associated with an outdated economic environment. |
| Keywords: | Institutions, Conservatism, Cultural Beliefs, Cultural Transmission, Institutional Change, Technological Change |
| JEL: | D02 N40 N70 O33 O38 O43 Z10 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:18-14&r=gro |
| By: | Daniel Montolio (Department of Economics, University of Barcelona and Barcelona Institute of Economics.); Ana Tur-Prats (Department of Economics, University of California, Merced.) |
| Abstract: | This paper analyzes the historical determinants and long-term persistence of social capital, as well as its effect on economic development, by looking at the legacy of the commons in a Spanish region. In medieval times, common goods were granted to townships and were managed collectively by local citizens. This enabled the establishment of institutions for collective action and self-government. Common goods persisted until the second half of the nineteenth century. We argue that the experience of cooperation among villagers, repeated over the centuries, increased the social capital in each local community. In 1845, a law forced small villages to merge with others, a fact which generated exogenous variation in the number of mergers (i.e., cooperative networks) that each modern municipality was required to have. We exploit this change in an IV and RD setting and find that current municipalities formed by a greater number of old townships have a denser network of associations. We also find that higher social capital is associated with more economic development. |
| Keywords: | collective action, self-government, long-term persistence, common goods |
| JEL: | N90 P48 Z10 H49 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:xrp:wpaper:xreap2018-8&r=gro |
| By: | Bonick, Matthew; Farfán-Vallespín, Antonio |
| Abstract: | We show that differences in present levels of racism within a sample of former European colonies can be traced back 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 persistent internal norms, beliefs and values, resilient to changes in institutional and economic circumstances. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cenwps:062018&r=gro |
| By: | Hélène Latzer (Université Paris1 Panthéon-Sorbonne - Centre d'Economie de la Sorbonne and Université Saint-Louis (CEREC) - Belgique); Kiminori Matsuyama (Northwestern University - USA); Mathieu Parenti (Université Libre de Bruxelles (ECARES) and CEPR (United Kingdom)) |
| 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 |
| JEL: | O11 O31 O33 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:18032&r=gro |
| By: | Atulan Guha (Indian Institute of Management Kashipur) |
| Abstract: | The GDP growth structure of India is dominated by the growth in service sector. Kaldor has argued that the sector that has the strongest capital accumulation and technical progress and input-output linkages with the rest of the economy should play the role of growth driver. Since, Indian sectoral growth structure is dominated by service sector it is expected that it should have the strongest backward and forward linkages with the rest of the economy and should have strongest capital accumulation and highest productivity growth. This paper argues through empirical evidences that service sector in India does not fulfil these criteria and hence, Kaldor?s theory is inadequate to explain sectoral structure of the Indian growth. |
| Keywords: | Growth, Services, India, productivity |
| JEL: | O14 O53 O40 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iacpro:8209711&r=gro |
| By: | Krueger, Dirk; Ludwig, Alexander (Munich Center for the Economics of Aging (MEA)) |
| Abstract: | [English] We characterize the optimal linear tax on capital in an Overlapping Generations model with two period lived households facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general equilibrium feedback of private precautionary saving. For logarithmic utility our full analytical solution of the Ramsey problem shows that the optimal aggregate saving rate is independent of income risk. The optimal time-invariant tax on capital is increasing in income risk. Its sign depends on the extent of risk and on the Pareto weight of future generations. If the Ramsey tax rate that maximizes steady state utility is positive, then implementing this tax rate permanently generates a Pareto-improving transition even if the initial equilibrium is dynamically efficient. We generalize our results to Epstein-Zin-Weil utility and show that the optimal steady state saving rate is increasing in income risk if and only if the intertemporal elasticity of substitution is smaller than 1. [German] Sollten Kapitaleinkommen besteuert werden? Diese Frage hat in der Theorie der optimalen Besteuerung und in ihrer quantitativen Anwendung schon eine lange Reihe ökonomischer Literatur beschäftigt. Frühere Antworten zu dieser Frage, unter Verwendung relativ stilisierter ökonomischer Rahmenbedingungen, waren negativ. Das bedeutet, die Literatur kam zu dem Schluss, dass optimale Kapitaleinkommenssteuern null seien. Dies steht im Gegensatz zu den hohen Steuern auf Kapitaleinkommen, die in allen Industriestaaten zu beobachten sind. Eine aktuellere, größtenteils quantitative Literatur fand hingegen heraus, dass optimale Kapitaleinkommenssteuern positiv sein sollten. Gründe für diese Feststellung sind, dass zum einen Kapitaleinkommenssteuern ein effektiver Ersatz für fehlende altersabhängige Einkommenssteuern sein können, zum anderen dass sie ein effektives umverteilendes Steuerinstrument sind (von einkommensstarken zu einkommensschwachen Haushalten), und zum dritten, dass die Besteuerung von Kapitaleinkommen eine Absicherung gegen Einkommens- oder Renditeschocks aus der ex-ante Perspektive darstellen. Unser theoretisches Paper gibt neue analytische Einsichten für Gründe für optimale Steuern auf Kapitaleinkommen, die Aufschluss darüber geben, welche Mechanismen die Resultate in der überwiegend quantitativen Literatur treiben. Wir legen den Fokus auf einen Effekt, der bisher in der Literatur keine explizite Aufmerksamkeit erfahren hat, der jedoch implizit in zahlreichen quantitativen Studien über optimale Kapitaleinkommenssteuern präsent ist. In Gegenwart von Einkommensrisiken und unvollständiger Absicherung gegen diese, sichern sich Haushalte gegen niedrige Einkommensrealisierung durch privates Sparen ab. Wir zeigen, dass ein solches vorsorgendes Sparverhalten negative Effizienzwirkungen in der aggregierten Volkswirtschaft haben kann, insbesondere für die Renditen aus Kapitalanlagen. Der Staat internalisiert dieses negative Feedback. Wenn diese negativen Feedback-Effekte stark genug sind, dann sollten optimale Kapitaleinkommenssteuern positiv sein. Um diese Einsichten in all ihrer theoretischen Klarheit abzuleiten, halten wir das ökonomische Umfeld, das wir betrachten, sehr stilisiert. Während wir dadurch sehr klare und trennscharfe Charakterisierungen der treibenden Kräfte der optimalen Kapitaleinkommenssteuern liefern können, ist es trotzdem wichtig zu betonen, dass unser theoretischer Beitrag nicht beabsichtigt, ein realistisches ökonomisches Modell für eine quantitative Exploration zu stellen. Folglich ist der Hauptzweck unserer Analyse, hilfreiche Einsichten für eine verbesserte Interpretation der Erkenntnisse in der existierenden quantitativen Literatur über optimale Kapitaleinkommenssteuern zu bieten. |
| JEL: | H21 H31 E21 |
| Date: | 2018–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:mea:meawpa:201802&r=gro |
| By: | Zouhair Aït Benhamou; Lesly Cassin |
| Abstract: | This paper puts forward a modified OLG framework for high migration countries such as Caribbean islands, to link economic growth and demographic features. Our theoretical model captures the potential effects of migration on the households' choices in terms of savings, fertility and education, and thus on the accumulation of human and physical capital. Through a numerical analysis we study specifically five countries. We find that households in Jamaica, Haiti and Dominican Republic invest more in education for future generations and increase their fertility rate. Thus due to migration, their economic growth is driven by accumulation of efficient units of labor. For Barbados or Trinidad and Tobago, the benefits from education are dwarfed respectively by a low migration premium or a low level of remittances. Their economic growth is therefore driven by a high accumulation of physical capital. Second, we introduce frictions on the capital market in order to account for the imperfections in the interest rate adjustments to the marginal productivity of capital. For the studied islands, physical capital accumulation on the one hand and economic growth on the other hand show trade-offs between short-run and long-run if the frictions are reduced. |
| Keywords: | Migration, Capital Markets, Overlapping Generations Model, Caribbean, Small Island Developing States |
| JEL: | F24 J24 J11 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2018-41&r=gro |
| By: | Xiao Jiang (Denison University); Chau Nguyen (Oxford University) |
| Abstract: | The debate between balanced and unbalanced growth doctrines has generated much heat since the publication of Rosenstein-Rodan’s seminal work in 1943 but vanished in early 1980s. This paper intends to empirically revisit the forgotten debate by first compiling a harmonized international dataset that contains sectorial value-added data for up to 175 countries over 45 years. This dataset enables us to construct the index of sectorial imbalance for each country, which further allows us to update the key empirical tests for the balanced and unbalance growth hypotheses that appeared in the literature. Moreover, we also conduct cross-country growth regression analysis to systematically examine the effects of sectorial balance (or imbalance) on growth. Overall, we have found empirical support for the balanced growth hypothesis. |
| Keywords: | Growth, sectorial balance, development, cross-country regression |
| JEL: | O40 O25 C12 B29 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:1817&r=gro |
| By: | Martín Cicowiez (CEDLAS-FCE-UNLP); Agustín Filippo (IADB); Sebastián Katz |
| Abstract: | In this paper, we first assess the historical evolution of total factor productivity in Haiti and then consider alternative scenarios related to accelerating growth. Specifically, we focus on issues of intertemporal coordination between population growth, TFP (Total Factor Productivity), capital accumulation, foreign debt, output, and consumption. To that end, we developed a model of the Ramsey-Cass-Koopmans type. This class of models are the workhorse of most contemporary work in modeling the long and very long term growth of countries (Barro and Sala-i-Martin 2004 and Acemoglu 2009). In doing so, we make two contributions to the empirical economic analysis of developing countries such as Haiti: (a) we estimate Haiti’s capital stock and perform a growth accounting exercises using data that goes back to the 1950s; and (b) we built a 2016 macro consistent dataset and use it to calibrate a long-run growth model for a small open economy such as Haiti. |
| JEL: | F43 O41 O20 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:dls:wpaper:0238&r=gro |
| By: | Dirk Krueger (Department of Economics, University of Pennsylvania); Alexander Ludwig (Department of Economics, Goethe-Universität Frankfurt) |
| Abstract: | We characterize the optimal linear tax on capital in an Overlapping Generations model with two period lived households facing uninsurable idiosyncratic labor income risk. The Ramsey government internalizes the general equilibrium feedback of private precautionary saving. For logarithmic utility our full analytical solution of the Ramsey problem shows that the optimal aggregate saving rate is independent of income risk. The optimal time-invariant tax on capital is increasing in income risk. Its sign depends on the extent of risk and on the Pareto weight of future generations. If the Ramsey tax rate that maximizes steady state utility is positive, then implementing this tax rate permanently generates a Pareto-improving transition even if the initial equilibrium is dynamically efficient. We generalize our results to Epstein-Zin-Weil utility and show that the optimal steady state saving rate is increasing in income risk if and only if the intertemporal elasticity of substitution is smaller than 1. |
| Keywords: | Idiosyncratic Risk, Taxation of Capital, Overlapping Generations, Precautionary Saving, Pecuniary Externality |
| JEL: | H21 H31 E21 |
| Date: | 2018–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:18-004&r=gro |
| By: | António Santos; João Amador |
| Abstract: | This paper examines the contribution of employment, capital accumulation and total factor productivity (TFP) to economic growth in African countries over the period 1986-2014. The methodology consists in the estimation of a translog dynamic stochastic production frontier for a set of 49 African economies, thus allowing for the breakdown of TFP along efficiency developments and technological progress. Although the heterogeneity amongst African countries poses a challenge to the estimation of a common production frontier, this is the best approach to perform cross-country comparisons. The results of our growth accounting exercise are more accurate for the contribution of input accumulation and TFP to GDP growth than for the separation between contributions of technological progress and efficiency. We conclude that economic growth patterns differ across African countries but they have been almost totally associated to input accumulation, notably in what concerns capital. The experience of Egypt, Nigeria and South Africa - the three largest African economies - confirms this pattern. |
| JEL: | C11 O47 O55 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201820&r=gro |