nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒01‒14
thirteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Equilibrium Analysis in the Behavioral Neoclassical Growth Model By Daron Acemoglu; Martin Kaae Jensen
  2. Growth with Age-Dependent Preferences By Halvor Mehlum; Ragnar Torvik; Simone Valente
  3. Japan and the Great Divergence, 730-1874 By Bassino, Jean-Pascal; Broadberry, Stephen; Fukao, Kyoji; Gupta, Bishnupriya; Takashima, Masanori
  4. Growing, Shrinking and Long Run Economic Performance: Historical Perspectives on Economic Development By Broadberry, Stephen; Wallis, John
  5. Population Growth and Economic Development in Bangladesh: Revisited Malthus By Md Niaz Murshed Chowdhury
  6. Threshold Regressions for the Resource Curse By Nicolas Clootens; Djamel Kirat
  7. On a Simple Equilibrium with Heterogeneous Quasi-Hyperbolic Discounting Agents By Jean-Pierre Drugeon; Bertrand Wigniolle
  8. CO2 intensity and GDP per capita By Hannesson, Rögnvaldur
  10. Political Determinants of Government Structure and Economic Performance in Turkey since 1950 By Ali Akarca
  11. Economic Geography, Growth Dynamics and Human Capital Accumulation in Turkey: Evidence from Regional and Micro Data By Burhan Can Karahasan; Firat Bilgel
  12. External Debt and Economic Growth in Ghana: A Co-integration and a Vector Error Correction Analysis By Matuka, Adelajda; Asafo, Shuffield Seyram
  13. Does Foreign Aid Promote Economic Growth in Sudan? Evidence from ARDL Bounds Testing Analysis By Mohammed Elhaj Mustafa Ali; Manal Mahagoub Elshakh; Ebaidalla Mahjoub Ebaidalla

  1. By: Daron Acemoglu; Martin Kaae Jensen
    Abstract: Rich behavioral biases, mistakes and limits on rational decision-making are often thought to make equilibrium analysis much more intractable. We show that this is not the case in the context of the neoclassical growth model (potentially incorporating incomplete markets and distortions). We break down the response of the economy to a change in the environment or policy into two parts: a direct response at a given vector of prices, and an equilibrium response that plays out as prices change. We refer to a change as a “local positive shock” if the direct response, when averaged across households, increases aggregate savings. Our main result shows that under weak regularity conditions, regardless of the details of behavioral preferences, mistakes and constraints on decision-making, the long-run equilibrium will involve a greater capital-labor ratio if and only if we start with a local positive shock. One implication of this result is that, from a qualitative point of view, behavioral biases matter for long-run equilibrium if and only if they change the direction of the direct response. We show that these aggregate predictions are coupled with individual-level “indeterminacy”: nothing much can be said about individual behavior.
    JEL: D50 D90 O41
    Date: 2018–12
  2. By: Halvor Mehlum; Ragnar Torvik; Simone Valente
    Abstract: We study the consequences of age-dependent preferences for economic growth and structural change in a two-sector model with overlapping generations and nondimishing returns to capital. Savings and accumulation rates depend on the relative price of services consumed by old agents and on the intergenerational distribution of income. The feedback effects originating in preferences and income distribution yield three possible long-run growth outcomes: sustained endogenous growth, decumulation traps, and bounded accumulation. In the endogenous growth scenario, the transition features rising savings and accumulation rates accompanied by distributional shifts in favor of young workers, growing employment and rising prices in the service sector. Traps are triggered by initially low capital in manufacturing and low employment in services. Bounded accumulation yielding zero long-run growth in per capita incomes is induced by preferences, not by diminishing returns to capital.
    Keywords: Endogenous growth, structural change, overlapping generations
    Date: 2018–12
  3. By: Bassino, Jean-Pascal; Broadberry, Stephen; Fukao, Kyoji; Gupta, Bishnupriya; Takashima, Masanori
    Abstract: Despite being the first Asian economy to achieve modern economic growth, Japan has received relatively little attention in the Great Divergence debate. New estimates suggest that although the level of GDP per capita remained below the level of northwest Europe throughout the period 730-1874, Japan experienced positive trend growth before 1868, in contrast to the negative trend growth experienced in China and India, leading to a Little Divergence within Asia. However, growth in Japan remained slower than in northwest Europe so that Japan continued to fall behind until after the institutional reforms of the early Meiji period. The Great Divergence thus occurred as the most dynamic part of Asia fell behind the most dynamic part of Europe.
    Keywords: GDP per capita, Britain, Great Divergence, Japan
    JEL: N10 N30 N35 O10 O57
    Date: 2018–12
  4. By: Broadberry, Stephen; Wallis, John
    Abstract: Using annual data from the thirteenth century to the present, we show that improved long run economic performance has occurred primarily through a decline in the rate and frequency of shrinking, rather than through an increase in the rate of growing. Indeed, as economic performance has improved over time, the short run rate of growing has typically declined rather than increased. Most analysis of the process of economic development has hitherto focused on increasing the rate of growing. Here, we focus on understanding the forces making for a reduction in the rate of shrinking, drawing a distinction between proximate and ultimate factors. The main proximate factors considered are (1) structural change (2) technological change and (3) demographic change. We conclude with a consideration of institutional change as the key ultimate factor behind the reduction in shrinking.
    Date: 2018–12
  5. By: Md Niaz Murshed Chowdhury
    Abstract: Bangladesh is the 2nd largest growing country in the world in 2016 with 7.1% GDP growth. This study undertakes an econometric analysis to examine the relationship between population growth and economic development. This result indicates population growth adversely related to per capita GDP growth, which means rapid population growth is a real problem for the development of Bangladesh.
    Date: 2018–12
  6. By: Nicolas Clootens (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - Université de Tours - CNRS - Centre National de la Recherche Scientifique); Djamel Kirat (LEO - Laboratoire d'économie d'Orleans - UO - Université d'Orléans - Université de Tours - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper analyzes the behavior of cross-country growth rates with respect to resource abundance and dependence. We reject the linear model that is commonly-used in growth regressions in favor of a multiple-regime alternative. Using a formal sample-splitting method, we find that countries exhibit different behaviors with respect to natural resources depending on their initial level of development. In high-income countries, natural resources play only a minor role in explaining the differences in national growth rates. On the contrary, in low-income countries abundance seems to be a blessing but dependence restricts growth.
    Keywords: non-renewable resources,growth,resource curse,threshold regressions
    Date: 2018–11
  7. By: Jean-Pierre Drugeon (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Bertrand Wigniolle (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article considers the long-run equilibrium distribution of an economy populated by heterogenous and present biased quasi-hyperbolic discounting agents. In a first configuration with logarithmic utility functions and Cobb-Douglas production technologies, this article establishes the existence and the uniqueness of the equilibrium: only one agent, determined by the highest value of a coefficient building from both the degree of present bias and the rate of discount, will have a positive long-run consumption and a positive long-run wealth. A second configuration with constant elasticities of substitution utilities and linear production technologies is then considered. This article similarly establishes the existence and the uniqueness of the equilibrium. There is generically a unique agent with the highest growth rate for his consumption and his wealth. This agent is determined by both preferences and technology parameters and may change following a technological shock.
    Keywords: Heterogeneities,quasi-hyperbolic discounting,linear decision rules
    Date: 2018–12
  8. By: Hannesson, Rögnvaldur (Dept. of Economics, Norwegian School of Economics)
    Abstract: The relationship between CO2 intensity and GDP per capita is studied. Most rich countries show falling CO2 intensity over time and a negative correlation with GDP per capita. Many poor and medium rich countries show the opposite, a positive time trend and a positive correlation with GDP per capita. For the majority of countries with a negative correlation between CO2 intensity and GDP per capita a non-linear function fits the data better than a linear one, implying that CO2 intensity falls at a diminishing rate as countries get richer. Hence, economic growth will not by itself go very far in reconciling economic growth and reductions in CO2 emissions. There are indications that poor and medium rich countries experience a boost in CO2 intensity as they embark on industrialization. This will also make it harder to reconcile economic growth and cuts in CO2 emissions.
    Keywords: Carbon dioxide; economic growth; CO2 intensity
    JEL: O44 Q43 Q54
    Date: 2018–12–12
  9. By: Shintaro Asaoka (Institute of Economic Research, Kyoto University)
    Abstract: This study examines the existence of bubbles in an economy with a low growth rate. By using an overlapping-generations model with Matsuyama's (1999) production sector, it is shown a bubble exists in an economy with a low growth rate. If consumers can borrow assets when they are young, then there is a unique cycle with a bubble moving back and forth between two phases. In one phase, the output growth rate is low and innovation occurs. In the other phase, the output growth rate is high and there is no innovation. Therefore, a bubble also exists in an economy with a high growth rate. On the contrary, cycles cannot emerge if consumers save assets when they are young.
    Keywords: bubbles, endogenous growth model
    JEL: D91 E32 O41
    Date: 2018–01
  10. By: Ali Akarca (University of Illinois)
    Abstract: During the last two-thirds of a century, Turkey was ruled by a wide variety of governments: single-party governments, coalitions partnered by two or more parties and by ideologically compatible and incompatible parties, minority and military governments. While single party governments all lasted at least two terms, the rest rarely lasted even one term. The timing of these governments and the order in which they followed each other were not by chance but according to a pattern induced by coups. Typically single party governments were ended by coups. Ideologically incompatible and then compatible coalition governments followed, usually after a brief military administration. Then once again single party governments returned. As economic growth typically exhibits an inverted-U type of pattern over the life of a government, and declines as the number of ruling parties and the ideological distance between them increase, the coups lowered the growth rate of the country and generated political business cycles that are distinct from those induced by elections. In the paper, these assertions are explained in detail, and supported using theory, history, descriptive statistics, and regression analysis. It is also shown that improving democratic institutions of the country would enhance the stability and growth of the economy greatly.
    Date: 2018–10–23
  11. By: Burhan Can Karahasan (Piri Reis University); Firat Bilgel
    Abstract: This study explores the endogenous relationship among market access, wages and human capital accumulation in Turkey. Our first set of analyses tests the impact of market access on human capital development using regional data at the NUTS III level. Results, robust to the inclusion of spatial spillovers, regional structural differences in production, possible endogeneity issues and the unobserved regional heterogeneities, validate that regions with better access to markets are the ones that accumulate more human capital in Turkey. Our second set of analyses aims to explore the background of human capital accumulation by using individual level data, which allows us to combine market accessibility, returns to education (wages) and human capital development. Remarkably, once we include wages and treat it as endogenous, we find evidence that the impact of market access on human capital development diminishes. Overall, the findings of this study validate that background of the NEG model does not work in line with the expectations. Rather the influence of geographical proximity on wages and individual’s decision on human capital investment are not identical.
    Date: 2018–10–10
  12. By: Matuka, Adelajda; Asafo, Shuffield Seyram
    Abstract: This paper employed a co-integration analysis and an error correction methodology to examine the impact of external debt on economic growth in Ghana using annual time series from 1970-2017. Estimates show that our normalized long-run co-integrating growth equation coefficients do not differ from our short-run vector error correction coefficients for our variables of interest. Findings are that external debt inflows stimulate growth in Ghana both in the long-run and short-run. Secondly, our study also confirmed the crowding out effect, debt overhang effect and the non-linear effect of external debt on economic growth in Ghana. From the perspective of policy, we advocate for a judicious allocation of the debt resources such that the cost of servicing the debt will not skew resources away from investment which in a medium to long-term will be inimical to growth.
    Keywords: External debt, Economic growth, Economic Development, Johansen Co-integration, Time series Models, Ghana
    JEL: C13 C82 H6 O47
    Date: 2018–12–10
  13. By: Mohammed Elhaj Mustafa Ali (University of Kassala); Manal Mahagoub Elshakh; Ebaidalla Mahjoub Ebaidalla
    Abstract: This study examines the relationship between foreign aid and economic growth in Sudan using autoregressive distrusted lag (ARDL) bounds tests. Relying on time series data spanned over the period 1980 to 2015, the findings reveal that there is a long run relationship between variables under consideration. Specifically, the findings show that foreign aid in the form of official development assistance (ODA) has a positive and significant long run impact on economic growth in Sudan. However, the interaction between aid and corruption in public institutions imposes a negative and significant long run impact on economic growth. Interestingly, the findings indicate that aid deters economic growth in the short run. This outcome may stand as indication that aid spurs economic growth via its contributions to human capital and improving infrastructural facilities both of which become rewarding in the long run. The paper concludes with the importance of utilizing aid in enhancing human capital capacities in order to boost economic growth.
    Date: 2018–11–13

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