nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒04‒08
fourteen papers chosen by
Marc Klemp
University of Copenhagen

  1. How the 1906 San Francisco Earthquake Shaped Economic Activity in the American West By Ager, Philipp; Eriksson, Katherine; Hansen, Casper Worm; Lønstrup, Lars
  2. Coal Smoke, City Growth, and the Cost of the Industrial Revolution By W. Walker Hanlon
  3. The Demographic Transition in a Unified Growth Modelof the English Economy By Foreman-Peck, James; Zhou, Peng
  4. Demand Drives Growth all the Way By Taylor, Lance; Foley, Duncan K.; Rezai, Armon
  5. An Analysis of the Importance of Both Destruction and Creation to Economic Growth (Updated) By Gregory Huffman
  6. Natural Resources, Economic Growth and Geography By González-Val, Rafael; Pueyo, Fernando
  7. Love of Novelty: A Source of Innovation-Based Growth... or Underdevelopment Traps? By Furukawa, Yuichi; Lai, Tat-kei; Sato, Kenji
  8. An Integrated Panel Data Approach to Modelling Economic Growth By Guohua Feng; Jiti Gao; Bin Peng
  9. Nonlinearity Between the Shadow Economy and Level of Development By Dong Frank Wu; Friedrich Schneider
  10. Observing Economic Growth in Unrecognized States with Nighttime Light By Masayuki Kudamatsu
  11. Capital Accumulation, GreeParadox, and Stranded Assets: An Endogenous Growth Perspective By Jin, Wei; Zhang, ZhongXiang
  12. Energy consumption and economic growth: Evidence from Vietnam By Ha Minh Nguyen; Ngoc Hoang Bui; Duc Hong Vo; Michael McAleer
  13. Southeast Asia in the global economy: a selective analytical survey By Hal Hill
  14. The Growth-Finance Nexus in Brazil: Evidence from a New Dataset, 1890-2003 By Nauro Campos; Menelaos Karanasos; Panagiotis Koutroumpis

  1. By: Ager, Philipp; Eriksson, Katherine; Hansen, Casper Worm; Lønstrup, Lars
    Abstract: This paper examines the long-run effects of the 1906 San Francisco Earthquake on the spatial distribution of economic activity in the American West. Using variation in the potential damage intensity of the earthquake, we show that more severely affected cities experienced lower population increases relative to less affected cities until the late 20th century. This long-lasting effect is largely a result of individuals' high geographical mobility at that time. Less affected areas became more attractive migration destinations in the immediate aftermath of the earthquake, which permanently changed the spatial distribution of economic activity in the American West.
    Keywords: American West; Economic Geography; Location of Economic Activity; migration; Natural Disasters
    JEL: N9 O15 O40 R11 R12
    Date: 2019–03
  2. By: W. Walker Hanlon
    Date: 2018
  3. By: Foreman-Peck, James (Cardiff Business School); Zhou, Peng (Cardiff Business School)
    Abstract: A dynamic stochastic unified growth model is estimated from English economy data for almost a millennium. At the core of the (seven) overlapping generations, rational expectations structure is household choice about target number and quality of children. The trends of births, deaths, population and, the real wage, are closely matched by the estimated model. In the 19th century English fertility transition, the model shows how the generalized child price relative to the child quality price rose. The rising opportunity cost of education was as decisive for the transition as the parental shift to child quality.
    Keywords: Economic Development, Demography, Unified Growth, Overlapping Generations, English Economy
    JEL: O11 J11 N13
    Date: 2019–03
  4. By: Taylor, Lance; Foley, Duncan K.; Rezai, Armon
    Abstract: A demand-driven alternative to the conventional Solow-Swan growth model is analyzed. Its medium run is built around Marx-Goodwin cycles of demand and distribution. Long-run income and wealth distributions follow rules of accumulation stated by Pasinetti in combination with a technical progress function for labor productivity growth incorporating a Kaldor effect and induced innovation. An explicit steady state solution is presented along with analysis of dynamics. When wage income of capitalist households is introduced, the Samuelson-Modigliani steady state "dual" to Pasinetti's cannot be stable. Numerical simulation loosely based on US data suggests that the long-run growth rate is around two percent per year and that the capitalist share of wealth may rise from about forty to seventy percent due to positive medium-term feedback of higher wealth inequality into its own growth.
    Date: 2018–03
  5. By: Gregory Huffman (Vanderbilt University)
    Abstract: A growth model is studied in which the destruction (or exit) and creative (or research) decisions are decoupled. This approach emphasizes that different agents make these interrelated decisions. The growth rate equals the product of a measure of the destruction and creation rates. The determinants of income mobility, income inequality, the lifespan of a firm, and the growth rate are studied. The equilibrium can either yield too high or low a level of innovation, but the destruction rate may also be too high or low. A non-linear tax/subsidy scheme, which alters the innovation and exit decisions, can improve welfare.
    Keywords: Economic Growth, Creative Destruction, Innovation, Firm Exit, Tax Policy, Inequality
    JEL: E00 E62 H23 O10 O30 O40
    Date: 2019–03–25
  6. By: González-Val, Rafael; Pueyo, Fernando
    Abstract: In this paper we discuss the relationship between economic growth and natural resources at a global level, taking into account geography. With this aim, our model integrates elements of the theories of endogenous growth, natural resources and new economic geography. We find that an increase in the world growth rate can lead to a higher depletion of the natural resources following an increase in the world demand due to expansion in population. However, the consideration of geography and growth mechanisms make the relationship between growth and natural resources more complex, and can even lead to the opposite conclusion when the forces behind growth are different from world demand. Indeed, either a reduction in transport costs or an increase in R&D productivity appears to be able to generate a faster growth compatible with a lower depletion of natural resources.
    Keywords: Research Methods/ Statistical Methods
    Date: 2018–08–31
  7. By: Furukawa, Yuichi; Lai, Tat-kei; Sato, Kenji
    Abstract: This study develops a new innovation-based growth model to explore the role of people's love of novelty in innovation and innovation-based growth. The model considers (a) an infinitely lived representative consumer who has the standard love-of-variety preferences for differentiated products and extra love-of-novelty preferences for new products and (b) technological progress driven by two costly and time-consuming innovation activities, new product development and existing product development. We demonstrate that if the consumer's love-of-novelty preference is moderate, new and existing product development alternately occur on an equilibrium path, whereby the economy achieves innovation and long-run growth, through cycles. However, if the love of novelty is too strong or too weak, the economy is caught in an underdevelopment trap with less innovation and no long-run growth. Our results suggest that the love of novelty is a source of innovation-based growth, but can become a cause of underdevelopment traps if too strong.
    Keywords: Love/fear of novelty; innovation; innovation-based economic growth
    JEL: E32 O40 Z10
    Date: 2019
  8. By: Guohua Feng; Jiti Gao; Bin Peng
    Abstract: Empirical growth analysis has three major problems -- variable selection, parameter heterogeneity and cross-sectional dependence -- which are addressed independently from each other in most studies. The purpose of this study is to propose an integrated framework that extends the conventional linear growth regression model to allow for parameter heterogeneity and cross-sectional error dependence, while simultaneously performing variable selection. We also derive the asymptotic properties of the estimator under both low and high dimensions, and furtherinvestigate the finite sample performance of the estimator through Monte Carlo simulations. We apply the framework to a dataset of 89 countries over the period from 1960 to 2014. Our results reveal some cross-country patterns not found in previous studies (e.g., "middle income trap hypothesis", "natural resources curse hypothesis", "religion works via belief, not practice", etc.).
    Keywords: Growth regressions, variable selection, parameter heterogeneity, cross-sectional dependence
    JEL: C23 O47
    Date: 2019
  9. By: Dong Frank Wu; Friedrich Schneider
    Abstract: This paper is the first attempt to directly explore the long-run nonlinear relationship between the shadow economy and level of development. Using a dataset of 158 countries over the period from 1996 to 2015, our results reveal a robust U-shaped relationship between the shadow economy size and GDP per capita. Our results imply that the shadow economy tends to increase when economic development surpasses a given threshold or at least does not disappear. Our findings suggest that special attention should be given to the country’s level of development when designing policies to tackle issues related to the shadow economy.
    Keywords: Shadow economy;National income;Social safety nets;Labor market flexibility;Economic growth;institutional factor;non-institutional;regression;long-run;country group
    Date: 2019–03–01
  10. By: Masayuki Kudamatsu (Associate Professor, Osaka School of International Public Policy, Osaka University)
    Abstract: This paper uses the satellite images of nighttime light to estimate economic growth rates in four unrecognized states of the former Soviet Union: Nagorno-Karabakh in Azerbaijan, Abkhazia and South Ossetia in Georgia, and Transnistria in Moldova. We then compare these estimates against those similarly obtained for the parent states to gauge the impact of non-recognition as sovereign states on economic activities. The estimated economic growth rates do not differ much between the breakaway territories and their parent states, suggesting that the economic impact of non-recognition as states may be fairly limited.
    Keywords: Unrecognized states, the former Soviet Union, satellite data, civil conflicts, economic growth
    JEL: D74 O43 P48
    Date: 2019–03
  11. By: Jin, Wei; Zhang, ZhongXiang
    Abstract: The existing studies on Green Paradox and stranded assets focus on dirty exhaustible assets (fossil fuel reserves) and show that environmental regulations, by changing the costs of dirty inputs relative to clean ones, lead to replacements of the former by the latter and stranding of dirty assets due to perfect substitution. It, in turn, induces acceleration of dirty resource extractions and pollution emissions for fear of dirty assets becoming stranded - the Green Paradox effect. This paper uses an endogenous growth framework to revisit the problem of Green Paradox and stranded assets by taking a new perspective that focuses on capital accumulation with investment irreversibility. We show that if 1) direct irreversibility of investment does not rule out the indirect channel of converting dirty capital goods into clean ones through final goods allocations, and 2) interactions between dirty and clean capital as imperfect substitutes can generate reciprocal effects, then environmental regulation, through directing investment towards clean capital, does not necessarily leads to asset stranding of dirty capital. Accumulation of clean capital with a pollution-saving effect offsets the polluting impact of dirty one and leads to reversed Green Paradox. We further propose an endogenous growth mechanism through which the accumulation of both dirty and clean capital, as well as environmental improvement, can be sustained in the long run without converging to the steady state.
    Keywords: Research Methods/ Statistical Methods
    Date: 2019–01–14
  12. By: Ha Minh Nguyen (Ho Chi Minh City Open University, Vietnam.); Ngoc Hoang Bui (Graduate School, Ho Chi Minh City Open University, Vietnam, University of Labour and Social Affairs, Vietnam.); Duc Hong Vo (Business and Economics Research Group Ho Chi Minh City Open University, Vietnam.); Michael McAleer (Department of Quantitative Finance National Tsing Hua University, Taiwan and Econometric Institute Erasmus School of Economics Erasmus University Rotterdam, The Netherlands and Department of Quantitative Economics Complutense University of Madrid, Spain And Institute of Advanced Sciences Yokohama National University, Japan.)
    Abstract: The importance of non-renewable, renewable and sustainable energy sources and energy consumption in the economic development strategy of a country is undeniable. The purpose of the paper is to investigate the impacts of energy consumption on the economic growth of Vietnam during the 1980-2014 period. By applying the Autoregressive Distributed Lag (ARDL) model of Pesaran et al. (2001), and the Granger causality test of Toda and Yamamoto (1995), the empirical results provide evidence that electricity consumption has positive impacts on Vietnam’s economic growth in both the short run and long run. For public policy prescriptions, the empirical evidence suggests that an exploration of new sources of renewable and sustainable energy is essential for long run economic development.
    Keywords: Energy consumption, Renewable and sustainable energy, Economic growth, Economic development, ARDL, Granger causality.
    JEL: F42 O13 O47 Q42 Q43
  13. By: Hal Hill
    Abstract: This paper selectively surveys Southeast Asian economic development over the past half-century and anticipates some of the region’s challenges if it is to progress to the ranks of developed countries. In the long sweep of development, three key features stand out. First, the region’s “initial conditions” in the early post-independence period appeared to be quite unfavorable. The literature at this time reflected the resulting pessimism. But, second, several countries belong to the very small group to have achieved historically unprecedented growth since the 1960s. The drivers of rapid growth remain contested. But the common feature has been a strong commitment to reasonably broad-based economic growth. Moreover, third, the propensity for growth in the region has spread as countries have progressively joined the regional and global mainstream. Policy regimes that favored outward orientation and prudent macroeconomic management have generally resulted in faster growth. The accurate forecasting of crises and growth decelerations has proven to be elusive, reinforcing the view that an eclectic, historical, and multi-disciplinary framework is necessary to understand the region’s long-term development dynamics.
    Keywords: economic growth, global economy, Southeast Asia Association of Southeast Asian Nations
    JEL: N15 O53 P52
    Date: 2018
  14. By: Nauro Campos (Brunel University, London); Menelaos Karanasos (Brunel University, London); Panagiotis Koutroumpis (Queen Mary University of London)
    Abstract: This study revisits the growth-finance nexus using a new econometric approach and unique data set. In particular by employing the smooth transition framework and annual time series data for Brazil from 1890 to 2003, we attempt to address on the one side, what is the relationship between financial development, trade openness, political instability and economic growth and, on the other, how it changes over time. The main finding is that financial development has a mixed positive and negative time-varying impact on economic growth, which signifi cantly depends on jointly estimated trade openness thresholds. Moreover our estimates highlight a positive impact of trade openness on growth but with interesting variation regarding their size and power, whereas the effect of political instability (both formal and informal) on growth is mainly negative. We also find that changes between regimes tend not to be smooth. Finally, our estimates show that in 57% of the years in which financial development has a below the mean effect, we find that trade openness experiences a substantial above the mean change.
    Keywords: Economic growth; financial development; political instability; smooth transition models; trade openness
    JEL: C14 O40 E23 D72
    Date: 2019–03–20

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