nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒03‒25
four papers chosen by
Marc Klemp
University of Copenhagen

  1. Which Tail Matters? Inequality and Growth in Brazil By Stephan Litschig; Maria Lombardi
  2. Democracy and the Labor Share of Income: A Cross-Country Analysis By Guerriero, Marta
  3. Technological catch-up to the national and regional frontier: Firm-level evidence for India By Shubin Yang; Sandra Lancheros; Chris Milner
  4. Sectoral and Skill Contributions to Labor Productivity in Asia By Helble, Matthias; Long, Trinh; Le, Trang

  1. By: Stephan Litschig (National Graduate Institute for Policy Studies, Tokyo, Japan); Maria Lombardi (Universidad Torcuato Di Tella)
    Abstract: We estimate the effect of initial income inequality on subsequent income per capita growth using sub-national data from Brazil over the period 1970-2000. Holding initial income per capita and standard confounders constant, we find that sub-national units with a higher share of income going to the middle quintile at the expense of the bottom quintile grow more rapidly, while places with a higher share of income going to the top quintile at the expense of the middle quintile get no growth boost at all. We document that both physical and human capital accumulation in places with higher inequality in the lower tail of the initial income distribution outpace capital accumulation in more equal places, while inequality in the upper tail of the distribution is uncorrelated with subsequent physical or human capital growth. These results are consistent with theories on credit constraints and setup costs for human and physical capital investments.
    Date: 2019–03
  2. By: Guerriero, Marta (Asian Development Bank Institute)
    Abstract: Summary statistics on the labor share of income show that between-country variation is much greater than within-country variation: functional income distribution is determined by factors which change substantially across countries but are persistent over time. We attempt to shed some light on the long-run and political economy determinants of the labor income share. We revisit and extend previous empirical research on democratic political institutions and the labor share using a dataset of 112 countries over 1970–2015. Our empirical analysis shows that democracy allows workers to appropriate a higher share of national income. The evidence is robust to different indices of democracy and different periods of time, and after performing instrumental variable estimation. These results are particularly relevant today, in light of the recent global decline in the labor income share and current crisis of democracy.
    Keywords: labor share; factor income distribution; democracy; political economy; institutions
    JEL: E25 O15 P16
    Date: 2019–01–25
  3. By: Shubin Yang; Sandra Lancheros; Chris Milner
    Abstract: This paper studies productivity convergence to the regional and national frontiers among manufacturing firms in India, using panel data over the period 1999 to 2010. We find evidence of convergence by lagging firms to both their national and regional frontiers, with faster convergence to the national frontier than to their regional frontier. We examine the effects of export behaviour on this process of convergence, and the results demonstrate that exporting promotes productivity growth but slows down the convergence process since export firms tend to be nearer to frontiers. We also investigate the effect of outward FDI (OFDI) on firms’ productivity growth and convergence. Likewise, the results show that OFDI facilitates firms’ productivity growth but decelerates the speed of convergence.
    Keywords: Productivity convergence, technology frontiers, globalisation
    Date: 2019
  4. By: Helble, Matthias (Asian Development Bank Institute); Long, Trinh (Asian Development Bank Institute); Le, Trang (Asian Development Bank Institute)
    Abstract: Using a decomposition approach on data collected by the Asian Productivity Organization (APO) as well as World Input-Output data, we show that in most Asian economies the services sector makes the largest contribution to labor productivity. Furthermore, we find evidence of a major reallocation of labor from agriculture directly to services, bypassing the manufacturing sector. This finding challenges the traditional view that countries in their economic development need to have their workforce employed first in manufacturing before switching to services. Lastly, the paper studies how different skill levels contribute to labor productivity growth. We find that high-skilled workers have contributed most to overall labor productivity growth in developing Asia. In services, high-skilled workers have mainly driven labor productivity, indicating that upskilling and training are instrumental in services-led development.
    Keywords: labor productivity; manufacturing; services; skills
    JEL: J21 O11
    Date: 2019–03–07

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