nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒12‒03
six papers chosen by
Marc Klemp
University of Copenhagen

  1. Top Lights: Bright cities and their contribution to economic development By Bluhm, Richard; Krause, Melanie
  2. A dynamic model of recycling with endogenous technological breakthrough By Gilles Lafforgue; Luc Rouge
  3. Migration and Growth in China: A Sceptical Assessment of the Evidence By Longfeng Ye; Peter E. Robertson
  4. The corruption-income inequality trap: A study of Asian countries By Dwiputri, Inayati Nuraini; Arsyad, Lincolin; Pradiptyo, Rimawan
  5. Why 1990 international Geary-Khamis dollars cannot be a foundation for reliable long run comparisons of GDP By Brunt, Liam; Fidalgo, Antonio
  6. Revisiting debt-led and export-led growth models: a sectoral balances approach By Jan Behringer; Till van Treeck

  1. By: Bluhm, Richard (Institute of Macroeconomics, Leibniz University Hannover, and UNU-MERIT); Krause, Melanie (Hamburg University, Department of Economics)
    Abstract: Tracking the development of cities in emerging economies is difficult with conventional data. We show that satellite images of nighttime lights are a reliable proxy for economic activity at the city level, provided they are first corrected for topcoding. The commonly-used data fail to capture the true brightness of many cities. We present a stylized model of urban luminosity and empirical evidence which both suggest that these 'top lights' can be characterized by a Pareto distribution. We then propose a simple correction procedure which recovers the full distribution of city lights. Our results show that the brightest cities account for nearly a third of global economic activity. Applying this approach to cities in Sub-Saharan Africa, we find that primate cities are outgrowing secondary cities but are changing from within. Poorer neighborhoods are developing, but sub-centers are forming so that Africa's largest cities are also becoming increasingly fragmented.
    Keywords: Development, urban growth, night lights, top-coding, inequality
    JEL: O10 O18 R11 R12
    Date: 2018–11–05
  2. By: Gilles Lafforgue (Toulouse Business School); Luc Rouge (Toulouse Business School)
    Abstract: We present a general equilibrium growth model in which the use of a non renewable resource yields waste. Recycling waste produces materials of poor quality. These materials can be reused for production only once a dedicated R&D activity has made their quality reach a certain minimum threshold. The economy then switches to a fully recycling regime. We refer to this switch as the technological breakthrough. We analyze the optimal trajectories of the economy and interpret the Ramsey-Keynes and Hotelling conditions in this specific context. We characterize the determinants of the date of the breakthrough, which is endogenous, as well as the discontinuity in the variables' paths that is induced by this breakthrough. We show, in particular, that the availability of a recycling technology leads to an over-exploitation of the resource and possibly to lower levels of consumption before the breakthrough. We also find that the breakthrough can have a negative impact on utility over a finite period.
    Keywords: Recycling, Non-renewable resource, Technical change, Growth,
    JEL: C61 O44 Q32 Q53
    Date: 2018–10
  3. By: Longfeng Ye (Xi'an Jiaotong-Liverpool University); Peter E. Robertson (Business School, University of Western Australia)
    Abstract: Numerous studies report the growth effects from labor reallocation in China to be in the order of 1 to 2 percentage points per year, which would appear to be a significant fraction of China's per capita income growth. We show that the total factor productivity gains are an order of magnitude smaller, at only 0.25 percentage points per year. There are two reasons for this difference. First, the majority of studies have used a decomposition method that effectively assumes linear production functions. This results in values that are much larger than the more appropriate Denison-Kuznets method. Second we also allow for sectoral differences in human capital. We conclude that the gains from labor reallocation may have been a far less important source of China's growth than is conventionally thought.
    Keywords: Economic Growth; Productivity; Dual Economy; Structural Change; China
    JEL: O4 O41 O1
    Date: 2017
  4. By: Dwiputri, Inayati Nuraini; Arsyad, Lincolin; Pradiptyo, Rimawan
    Abstract: The existence of ambiguity in the study of the impact of corruption on economic growth, namely the grease the wheel hypothesis and sand the wheel hypothesis, trigger this research to look at the impact of corruption through another perspective, i.e. income inequality. This study identifies the mutual influence between corruption and income inequality in Asian countries, because in general, Asian countries have high levels of corruption and poor governance. This research attempts to contribute literature on the theoretical modeling of the effect of corruption on income inequality, using the Ramsey Growth model's development. Using the Ordinary Least Square (OLS), Tobit, and Two Stage Least Square (2SLS) methods, this study also proves that a reciprocal influence exists between corruption and income inequality in Asia, otherwise known as the corruption-inequality trap. The results show that the higher the level of corruption is, this can aggravate income inequality, and the higher the income inequality level is, this can affect the level of corruption in Asian countries. Other variables that have a robust effect on income inequality in Asia are per capita income, the gross enrollment rate in primary education, population growth, foreign direct investment, and governance.
    Keywords: economic growth,income inequality,corruption,grease the wheel hypothesis,sand the wheel hypothesis
    JEL: D63 D73 O11
    Date: 2018
  5. By: Brunt, Liam (Dept. of Economics, Norwegian School of Economics and Business Administration); Fidalgo, Antonio (Fresenius University of Applied Sciences)
    Abstract: Using a large, new dataset of agricultural prices and quantities for many countries and regions, we create five new international Geary-Khamis pounds – for 1870, 1845, 1775, 1705, and a superior chained series. We show that estimated levels and changes in output per worker look very different – more extreme – using 1705 international pounds and 1990 international dollars, compared to all other series; growth rates appear substantially higher using 1990 international dollars. In short, out-of-sample baskets and/or prices create extremely unreliable output estimates. We also show that individual country price indices (rather than international indices) can generate substantially different estimated growth rates.
    Keywords: Geary-Khamis prices; economic growth; international comparisons; price indices
    JEL: C43 C82 N10 N50
    Date: 2018–11–28
  6. By: Jan Behringer; Till van Treeck
    Abstract: In this paper, we revisit the macroeconomic foundations and political economy of national growth models. We challenge the Kaleckian framework underpinning the emergent growth model literature in comparative political economy, which focuses primarily on the functional income distribution (wages versus profits), while ignoring personal income distribution (inequality across private households). Using the examples of the "export-led" and "debt-led" growth models of Germany and the United States, we show how institutional differences can help explain why different countries developed different patterns of income distribution and how income distribution and institutions interacted to generate financial imbalances in different sectors of the economy (i.e., the private household sector, the private corporate sector, and the government sector).
    Keywords: Growth models, financial balances, functional income distribution, personal income distribution, institutions
    JEL: D3 J5 P5
    Date: 2018

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