nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒03‒11
twelve papers chosen by
Marc Klemp
University of Copenhagen

  1. Pandemics, places, and populations: evidence from the Black Death By Remi Jedwab; Noel D. Johnson; Mark Koyama
  2. War and the Rise of Parliaments By Leandro de Magalhaes; Francesco Giovannoni
  3. The Romer Model with Monopolistic Competition and General Technology By Federico Etro
  4. "Induced Shifting Involvements and Cycles of Growth and Distribution" By Michalis Nikiforos
  5. Without coal in the age of steam and dams in the age of electricity: an explanation for the failure of Portugal to industrialize before the Second World War By Sofia Teives Henriques; Paul Sharp
  6. Monopolistic competition for the market with heterogeneous firms and Schumpeterian growth By Federico Etro
  7. Entrepreneurship, Institutions, and Economic Growth: Does the Level of Development Matter? By Christopher J. Boudreaux
  8. Economic Growth and Poverty in Cameroon: the role of Employment By Talla Fokam, Dieu Ne Dort; Fotso Koyeu, Fourier Prevost; Ningaye, Paul
  9. Inequality of Opportunity, Inequality of Income and Economic Growth By Shekhar Aiyar; Christian H Ebeke
  10. Money and modernization in early modern England By Nuno Palma
  11. The heterogeneous relationship between income and inequality: a panel co-integration approach By Svenja Flechtner; Claudius Graebner
  12. Entrepreneurship, institutional economics, and economic growth: an ecosystem perspective By Acs, Zoltan J.; Estrin, Saul; Mickiewicz, Tomasz; Szerb, László

  1. By: Remi Jedwab; Noel D. Johnson; Mark Koyama
    Abstract: The Black Death killed 40% of Europe’s population between 1347-1352, making it one of the largest shocks in the history of mankind. Despite its historical importance, little is known about its spatial effects and the effects of pandemics more generally. Using a novel dataset that provides information on spatial variation in Plague mortality at the city level, as well as various identification strategies, we explore the short-run and long-run impacts of the Black Death on city growth. On average, cities recovered their pre-Plague populations within two centuries. In addition, aggregate convergence masked heterogeneity in urban recovery. We show that both of these facts are consistent with a Malthusian model in which population returns to high-mortality locations endowed with more rural and urban fixed factors of production. Land suitability and natural and historical trade networks played a vital role in urban recovery. Our study highlights the role played by pandemics in determining both the sizes and placements of populations.
    Keywords: pandemics, Black Death, mortality, path dependence, cities, urbanization, Malthusian theory, migration, growth, Europe
    JEL: R11 R12 O11 O47 J11 N00 N13
    Date: 2019
  2. By: Leandro de Magalhaes; Francesco Giovannoni
    Abstract: We consider the development of political institutions in Europe between 1350 and 1700 AD. In particular, we propose a model which links the i) frequency of calling of Parliament and ii) the transition (or absence of such transitions) to "Rule by Parliament" (i.e. Constitutional Monarchy) with the risks associated with particular battles and the underlying economic relationship between monarchs and the commercial elites. We test the model's predictions with a dataset we compile for England, France, Portugal and Spain that includes yearly parliamentary activity, major battles and measures of economic activity. We find support for two predictions of the model. Firstly, we provide empirical evidence that Parliaments are more likely to be called in years in which a) the country suffers a territorial defeat - our proxy for a high-risk war; and b) agriculture output is relatively low - our proxy for the resources available to the monarch that are not constrained by the commercial elites. We also discuss a case study for each of the countries in our dataset that links the model's results with the development (or lack) of transitions to Rule by Parliament.
    Keywords: Political Transitions; Wars; Glorious Revolution; Commitment; Parliament; Autocracy; Democracy.
    Date: 2019–02–20
  3. By: Federico Etro
    Abstract: I augment the Romer model of endogenous technological progress with a general CRS production function in labor and intermediate inputs. This determines markups and profits of the innovators in function of the number of inputs. Under imperfect substitutability the economy can converge to a steady state (as under a nested CES technology), replicating the properties of neoclassical growth due to a decreasing marginal profitability of innovation, or to contant growth linear in population growth as in semi-endogenous growth models.
    Keywords: Endogenous growth, technological progress, monopolistic competition, variable markups, Solow model
    JEL: E2 L1 O3 O4
    Date: 2019
  4. By: Michalis Nikiforos
    Abstract: The paper builds on the concept of (shifting) involvements, originally proposed by Albert Hirschman (2002 [1982]). However, unlike Hirschman, the concept is framed in class terms. A model is presented where income distribution is determined by the involvement of the two classes, capitalists and workers. Higher involvement by capitalists and lower involvement by workers tends to increase the profit share and vice versa. In turn, shifts in involvements are induced by the potential effect of a change in distribution on economic activity and past levels of distribution. On the other hand, as the profit share increases, the economy tends to become more wage led. The dynamics of the resulting model are interesting. The more the two classes prioritize the increase of their income share over economic activity, the more possible it is that the economy is unstable. Under the stable configuration, the most likely outcome is Polanyian predator-prey cycles, which can explain some interesting historical episodes during the 20th century. Finally, the paper discusses the possibility of conflict and cooperation within each of the distribution-led regimes.
    Keywords: Shifting Involvements; Hirschman; Wage Led; Profit Led; Predator-Prey
    JEL: E11 E12 E21 E22 E32
    Date: 2019–02
  5. By: Sofia Teives Henriques (Lund University); Paul Sharp (University of Southern Denmark, CAGE, CEPR)
    Abstract: We provide a natural resource explanation for the divergence of the Portuguese economy relative to other European countries before the Second World War, based on a considerable body of contemporary sources. First, we demonstrate that a lack of domestic resources meant that Portugal experienced limited and unbalanced growth during the age of steam. Imports of coal were prohibitively expensive for inland areas, which failed to industrialize. Coastal areas developed through steam, but were constrained by limited demand from the interior. Second, we show that after the First World War, when other coal-poor countries turned to hydro-power, Portugal relied on coal-based thermal-power, creating a vicious circle of high energy prices and labor-intensive industrialization. We argue that this was the result of (i) water resources which were relatively expensive to exploit; and (ii) path-dependency, whereby the failure to develop earlier meant that there was a lack of capital and demand from industry.
    Keywords: Industrial Revolution, natural resources, coal, electrification, energy prices
    JEL: N1 N5 N7 O13 Q4
    Date: 2019–03
  6. By: Federico Etro
    Abstract: I study monopolistic competition in patent races where firms are heterogeneous in R&D costs. Only the most efficient firms invest, and they invest more when the value of innovation is higher, while the endogenous set of active firms depends on the profitability of innovation. In particular, selection effect (increasing R&D productivity) emerge after a reduction of the entry cost or after an increase (a reduction) of the value of innovation if the elasticity of the probability of innovation is increasing (decreasing) in investment. In Schumpeterian models selection effects foster endogenous growth.
    Keywords: Patent races, heterogeneous firms, monopolistic competition, Schumpeterian growth.
    JEL: L1 O3 O4
    Date: 2019
  7. By: Christopher J. Boudreaux
    Abstract: Entrepreneurship is often touted for its ability to generate economic growth. Through the creative-destructive process, entrepreneurs are often able to innovate and outperform incumbent organizations, all of which is supposed to lead to higher employment and economic growth. Although some empirical evidence supports this logic, it has also been the subject of recent criticisms. Specifically, entrepreneurship does not lead to growth in developing countries; it only does in more developed countries with higher income levels. Using Global Entrepreneurship Monitor data for a panel of 83 countries from 2002 to 2014, we examine the contribution of entrepreneurship towards economic growth. Our evidence validates earlier studies findings but also exposes previously undiscovered findings. That is, we find that entrepreneurship encourages economic growth but not in developing countries. In addition, our evidence finds that the institutional environment of the country, as measured by GEM Entrepreneurial Framework Conditions, only contributes to economic growth in more developed countries but not in developing countries. These findings have important policy implications. Namely, our evidence contradicts policy proposals that suggest entrepreneurship and the adoption of pro-market institutions that support it to encourage economic growth in developing countries. Our evidence suggests these policy proposals will be unlikely to generate the economic growth desired.
    Date: 2019–03
  8. By: Talla Fokam, Dieu Ne Dort; Fotso Koyeu, Fourier Prevost; Ningaye, Paul
    Abstract: This study investigates empirically the effect of employment in the transmission of economic growth to poverty change in Cameroon. Using data covering the period 1991 to 2017. We estimate two models: the employment intensity of growth model of Kapsos; and the Loayza and Raddatz model, which assesses the impact of sectoral employment intensity of economic growth to the change in poverty. Analyses highlight two main results. First, economic growth positively affects employment and negatively affects poverty rates. Second, the transmission of economic growth through employment is not effective in reducing poverty in Cameroon. These results show that in recent decades, economic growth has propelled the creation of employment in Cameroon. However, these employments, which are mostly precarious, generated by the informal sector, have not significantly reduced poverty.
    Keywords: economic growth, poverty, employment
    JEL: I32 J21 O47
    Date: 2019–02–27
  9. By: Shekhar Aiyar; Christian H Ebeke
    Abstract: We posit that the relationship between income inequality and economic growth is mediated by the level of equality of opportunity, which we identify with intergenerational mobility. In economies characterized by intergenerational rigidities, an increase in income inequality has persistent effects—for example by hindering human capital accumulation— thereby retarding future growth disproportionately. We use several recently developed internationally comparable measures of intergenerational mobility to confirm that the negative impact of income inequality on growth is higher the lower is intergenerational mobility. Our results suggest that omitting intergenerational mobility leads to misspecification, shedding light on why the empirical literature on income inequality and growth has been so inconclusive.
    Date: 2019–02–15
  10. By: Nuno Palma (University of Manchester and CEPR)
    Abstract: Classic accounts of the English industrial revolution present a long period of stagnation followed by a fast take-off. However, recent findings of slow but steady per capita economic growth suggest that this is a historically inaccurate portrait of early modern England. This growth pattern was in part driven by specialization and structural change accompanied by an increase in market participation at both the intensive and extensive levels. These, I argue, were supported by the gradual increase in money supply made possible by the importation of precious metals from America. They allowed for a substantial increase in the monetization and liquidity levels of the economy, hence decreasing transaction costs, increasing market thickness, changing the relative incentive for participating in the market, and allowing agglomeration economies to arise. By making trade with Asia possible, precious metals also induced demand for new desirable goods, which in turn encouraged market participation. Finally, the increased monetization and market participation made tax collection easier. This helped the government to build up fiscal capacity and as a consequence to provide for public goods. The structural change and increased market participation that ensued paved the way to modernization.
    Keywords: Origins and persistence of modern economic growth; the industrious, industrial and financial revolutions; early modern monetary injections; the great divergence; the little divergence; state-formation; provision of public goods
    JEL: E10 E40 E50 N13 N33 O40
    Date: 2019–02
  11. By: Svenja Flechtner (University of Siegen, Germany); Claudius Graebner (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria)
    Abstract: We study the relationship between per-capita income and income inequality with a heterogeneous panel co-integration approach. We extend previous studies in two dimensions: first, we compile a more extensive data set for 61 countries over 26-51 years and consider measures for both pre-tax and post-tax income inequality; second, we take into account country heterogeneity rather than relying on average panel estimates alone. We find a negative group-mean based relationship using pre-tax income inequality, but no such relationship for post-tax income inequality. Moreover, we find estimates on the country level to be heterogeneous in both cases.
    Keywords: Development, Inequality, Growth, Panel co-integration
    Date: 2019–02
  12. By: Acs, Zoltan J.; Estrin, Saul; Mickiewicz, Tomasz; Szerb, László
    Abstract: We analyze conceptually and in an empirical counterpart the relationship between economic growth, factor inputs, institutions, and entrepreneurship. In particular, we investigate whether entrepreneurship and institutions, in combination in an ecosystem, can be viewed as a “missing link” in an aggregate production function analysis of cross-country differences in economic growth. To do this, we build on the concept of National Systems of Entrepreneurship (NSE) as resource allocation systems that combine institutions and human agency into an interdependent system of complementarities. We explore the empirical relevance of these ideas using data from a representative global survey and institutional sources for 46 countries over the period 2002–2011. We find support for the role of the entrepreneurial ecosystem in economic growth
    Keywords: economic growth; entrepreneurship; ecosystem; efficiency; technology; Solow residual; GEM; GEI
    JEL: D02 O38 P11
    Date: 2018–08–01

This nep-gro issue is ©2019 by Marc Klemp. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.