nep-gro New Economics Papers
on Economic Growth
Issue of 2018‒12‒24
seventeen papers chosen by
Marc Klemp
University of Copenhagen

  1. Climatic Roots of Loss Aversion By Galor, Oded; Savitskiy, Viacheslav
  2. Richer or more Numerous or both? The Role of Population and Economic Growth for Top Income Shares By Carla Krolage; Andreas Peichl; Daniel Waldenström
  3. The long run dynamics of economic growth with environmental catastrophe By Alex Coram
  4. The Half Life of Economic Injustice By Miles, David K
  5. Long-lasting social capital and its impact on economic development: the legacy of the commons By Daniel Montolio; Ana Tur-Prats
  6. Health and Economic Growth By Bloom, David E.; Kuhn, Michael
  7. Population and poverty in Ireland on the eve of the Great Famine By Fernihough, Alan; Ó Gráda, Cormac
  8. A Theory of Conservative Revivals By Iyigun, Murat; Rubin, Jared; Seror, Avner
  9. Economic Uncertainty and Fertility Cycles: The Case of the Post-WWII Baby Boom By Chabé-Ferret, Bastien; Gobbi, Paula
  10. The impact of corruption on economic growth, a bootstrapping analysis By Pedro Cosme da Costa Vieira
  11. Intergenerational mobility and the rise and fall of inequality: Lessons from Latin America By Neidhöfer, Guido
  12. Transitional Dynamics in Aggregate Models of Innovative Investment By Atkeson, Andrew; Burstein, Ariel; Chatzikonstantinou, Manolis
  13. On the Possibility of Progress By Romer, Paul M.
  14. Germs, Social Networks, and Growth By Fogli, Alessandra; Veldkamp, Laura
  15. Climate Change: The Ultimate Challenge for Economics By Nordhaus, William D.
  16. Structural Transformation, Industrial Specialization, and Endogenous Growth By Bustos, Paula; Castro Vincenzi, Juan Manuel; Monras, Joan; Ponticelli, Jacopo
  17. Does financial sector development affect the growth gains from trade opennes? By Ramírez-Rondán, N. R.; Terrones, Marco E.; Vilchez, Andrea

  1. By: Galor, Oded; Savitskiy, Viacheslav
    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 humans to the asymmetric effects of climatic shocks on reproductive success during the 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.
    JEL: D81 D91 O10 O40 Z10
    Date: 2018–11
  2. By: Carla Krolage; Andreas Peichl; Daniel Waldenström
    Abstract: When measuring income inequality over long periods of time, accounting for population and productivity growth is important. This paper presents three alternative measures of top income shares that more explicitly account for population and income growth than the standard measure. We apply these measures to long-term income data from the United States and find that the U-shaped inequality trend over the past century holds up, but with important qualifications. Using measures that allow top groups to change not only in relative income but also in group size suggest more accentuated top income share growth since 1980 than when keeping top groups fixed. For earlier historical periods, our analysis shows that choice of income deflator (CPI or GDP) matters greatly. Using distributional national accounts data does not change these results. Altogether, our study's findings suggest that one may want to use several complementary top share measures when assessing long-term income inequality trends.
    Keywords: income distribution, inequality, top incomes, growth, measurement
    JEL: D31 D63 H31 N32
    Date: 2018
  3. By: Alex Coram (University of Western Australia)
    Abstract: The purpose of this paper is to consider the dynamics of growth in a two state variable and two control variable model where the environment is taken as a constraint. This captures some elements of environmental problems not covered in the cost approach. It also captures the idea that the environment may be an absolute barrier or have a catastrophe boundary. It show that, even though the environment is not a cost, it may be optimal to cut growth before the barrier is reached. It also shows that the technology of production has a strong non-linear affect on maximum attainable output.
    JEL: O4 Q54 Q58
    Date: 2018
  4. By: Miles, David K
    Abstract: How much of today's income (GDP) is a result of unjust economic transactions? How much is a legacy of past acquisition of wealth (capital) which was itself unjust? To answer that question requires two things: first, a principle to determine what is, and what is not, a just acquisition of wealth or a just source of income; second, a means of using that principle to estimate what fraction of wealth and income is unjust. I use a principle put forward by Robert Nozick to provide the first of these things and then use some calculations based on standard neoclassical models of economic growth to illustrate its implications for the scale of unfairness today.
    Keywords: Distributive justice; Human Capital; income distribution; Solow growth model
    JEL: O15 P14 P26 P48
    Date: 2018–11
  5. By: Daniel Montolio (Universitat de Barcelona & Institut d'Economia de Barcelona (IEB)); Ana Tur-Prats (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
  6. By: Bloom, David E. (Harvard University); Kuhn, Michael (Vienna Institute of Demography)
    Abstract: The positive cross-country correlation between health and economic growth is well-established, but the underlying mechanisms are complex and difficult to discern. Three issues are of central concern. First, assessing and disentangling causality between health and economic growth is empirically challenging. Second, the relation between health and economic growth changes over the process of economic development. Third, different dimensions of health (mortality vs. morbidity, children's and women's health, and health at older ages) may have different economic effects.
    Keywords: longevity, health, productivity, poverty traps, economic development, economic well-being, living standards, neoclassical and R&D-based growth
    JEL: I10 J13 J24
    Date: 2018–11
  7. By: Fernihough, Alan; Ó Gráda, Cormac
    Abstract: The link between demographic pressure and economic conditions in pre-Famine Ireland has long interested economists. This paper re-visits the topic, harnessing the highly disaggregated parish-level data from the 1841 Census of Ireland. Using population per value adjusted acre as a measure of population pressure, our results indicate that on the eve of the Great Famine of 1846{50, population pressure was positively associated with both illiteracy rates and the prevalence of poor quality housing. But while our analysis shows that population pressure was one of the primary factors underpinning pre-Famine poverty, it also highlights the importance of geography and human agency. A counterfactual computation indicates that had Ireland's population stayed at its 1800 level, this would have led to only modest improvements in literacy and housing.
    Keywords: Famine,Malthus,Population,Ireland
    JEL: N33 B30 J11
    Date: 2018
  8. By: Iyigun, Murat (University of Colorado, Boulder); Rubin, Jared (Chapman University); Seror, Avner (Chapman University)
    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: 2018–11
  9. By: Chabé-Ferret, Bastien; Gobbi, Paula
    Abstract: Using the US Census waves 1940-1990 and Current Population Surveys 1990-2010, we look at how economic uncertainty affected fertility cycles over the course of the XXth century. We use cross-state and cross-cohort variation in the volatility of income growth to identify the causal link running from uncertainty to completed fertility. We find that economic uncertainty has a large and robust negative effect on fertility. This finding contributes to the unraveling of the determinants of the post-WWII baby boom. Specifically, the difference in economic uncertainty endured by women born in 1910 compared to that faced by women born in 1935 accounts for between 45% and 61% of the one child variation across these cohorts. We hypothesize that a greater economic uncertainty increases the risk of large consumption swings, which individuals mitigate by marrying later, postponing fertility, and ultimately decreasing their completed fertility.
    Keywords: baby boom; baby bust; economic uncertainty; Fertility
    JEL: E32 J11 J13 N30
    Date: 2018–12
  10. By: Pedro Cosme da Costa Vieira (Faculdade de Economia do Porto)
    Abstract: In this paper we evaluate the impact of corruption in economic growth and if in less developed countries the hypothesis "greasing the wheels” is valid. Using an unbalanced panel data with 2907 observations from 174 countries and 23 years between 1995 and 2017 (data from Transparency International and World Bank), we estimate using bootstrapping that the impact of corruption on growth is negative (an estimate of 0.025pp per CPI point) and that the hypothesis "greasing the wheels” is not supported in the data. Our results are in accordance with the literature but are more robust because our database has much more observations.
    Keywords: Corruption, Economic Growth, Panel data, Bootstrapping
    JEL: C15 C23 O47 D73
    Date: 2018–12
  11. By: Neidhöfer, Guido
    Abstract: Countries with high income inequality also show a strong association between parents' and children's economic well-being; i.e. low intergenerational mobility. This study is the first to test this relationship in a between-country and within-country setup; using harmonized micro data from 18 Latin American countries, spanning multiple cohorts. It is shown that experiencing higher income inequality in childhood is associated with lower intergenerational mobility measured in adulthood. Following the same methodology, the influence of economic growth and public education is evaluated: both are positively, significantly, and substantially associated with intergenerational mobility.
    Keywords: Inequality,Intergenerational Mobility,Equality of Opportunity,Human Capital,Growth,Development,Public Education,Great Gatsby Curve,Latin America
    JEL: D63 I24 J62 O15
    Date: 2018
  12. By: Atkeson, Andrew (Federal Reserve Bank of Minneapolis); Burstein, Ariel (UCLA); Chatzikonstantinou, Manolis (UCLA)
    Abstract: What quantitative lessons can we learn from models of endogenous technical change through innovative investments by firms for the impact of changes in the economic environment on the dynamics of aggregate productivity in the short, medium, and long run? We present a unifying model that nests a number of canonical models in the literature and characterize their positive implications for the transitional dynamics of aggregate productivity and their welfare implications in terms of two sufficient statistics. We review the current state of measurement of these two sufficient statistics and discuss the range of positive and normative quantitative implications of our model for a wide array of counterfactual experiments, including the link between a decline in the entry rate of new firms and a slowdown in the growth of aggregate productivity given that measurement. We conclude with a summary of the lessons learned from our analysis to help direct future research aimed at building models of endogenous productivity growth useful for quantitative analysis.
    Keywords: Endogenous growth; Innovative investment; Transitional dynamics
    JEL: O3 O4
    Date: 2018–11–30
  13. By: Romer, Paul M. (New York University)
    Abstract: Paul M. Romer delivered his Prize Lecture on 8 December 2018 at the Aula Magna, Stockholm University.
    Keywords: long-term growth;
    JEL: O00
    Date: 2018–12–08
  14. By: Fogli, Alessandra (Federal Reserve Bank of Minneapolis); Veldkamp, Laura (Columbia Graduate School of Business)
    Abstract: Does the pattern of social connections between individuals matter for macroeconomic outcomes? If so, where do these differences come from and how large are their effects? Using network analysis tools, we explore how different social network structures affect technology diffusion and thereby a country's rate of growth. The correlation between high-diffusion networks and income is strongly positive. But when we use a model to isolate the effect of a change in social networks, the effect can be positive, negative, or zero. The reason is that networks diffuse ideas and disease. Low-diffusion networks have evolved in countries where disease is prevalent because limited connectivity protects residents from epidemics. But a low-diffusion network in a low-disease environment needlessly compromises the diffusion of good ideas. In general, social networks have evolved to fit their economic and epidemiological environment. Trying to change networks in one country to mimic those in a higher-income country may well be counterproductive.
    Keywords: Growth; Development; Technology diffusion; Economic networks; Social networks; Pathogens; Disease
    JEL: E02 I1 O1 O33
    Date: 2018–11–19
  15. By: Nordhaus, William D. (Yale University)
    Abstract: William D. Nordhaus delivered his Prize Lecture on 8 December 2018 at the Aula Magna, Stockholm University.
    Keywords: long-term growth; climate change
    JEL: O00
    Date: 2018–12–08
  16. By: Bustos, Paula; Castro Vincenzi, Juan Manuel; Monras, Joan; Ponticelli, Jacopo
    Abstract: The introduction of new technologies in agriculture can foster structural transformation by freeing workers who find occupation in other sectors. The traditional view is that this increase in labor supply in manufacturing can lead to industrial development. However, when workers moving to manufacturing are mostly unskilled, this process reinforces a country's comparative advantage in low-skill intensive industries. To the extent that these industries undertake less R&D, this change in industrial composition can lead to lower long-run growth. We provide empirical evidence of this mechanism using a large and exogenous increase in agricultural productivity due to the legalization of genetically engineered soy in Brazil. Our results indicate that improvements in agricultural productivity, while positive in the short-run, can generate specialization in less-innovative industries and have negative effects on productivity in the long-run.
    Keywords: Agricultural Productivity; Brazil; Genetically Engineered Soy; labor mobility; Skill-Biased Technical Change
    Date: 2018–12
  17. By: Ramírez-Rondán, N. R.; Terrones, Marco E.; Vilchez, Andrea
    Abstract: A sizeable literature suggests that financial sector development could be an important enabler of the growth benefits of trade openness. We provide a comprehensive analysis of how financial development can affect the relationship between trade openness and growth using a dynamic panel threshold model and an extensive dataset for a large sample of countries for the 1970-2015 period. We find that there is a financial development threshold in which trade openness has a positive and significant effect on economic growth. We also find that when splitting the sample into industrialized and non-industrialized countries, the financial development threshold that enables the growth benefits of trade is higher in the former group of countries than in the latter. This finding is consistent with the fact that the export composition of industrialized countries is tilted towards more capital-intensive finance-constrained goods.
    Keywords: Trade openness, economic growth, threshold model, panel data.
    JEL: C33 E51 F43 O41
    Date: 2018–11

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