nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒04‒22
fifteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Trade, Technology, and the Great Divergence By Kevin Hjortshøj O'Rourke; Ahmed Rahman; Alan M. Taylor
  2. Censorship, Family Planning, and the Historical Fertility Transition By Brian Beach; W. Walker Hanlon
  3. Economic growth in sub-Saharan Africa, 1885-2008 By Broadberry, Stephen; Gardner, Leigh
  4. Dynastic Human Capital, Inequality and Intergenerational Mobility By Adermon, Adrian; Lindahl, Mikael; Palme, Mårten
  5. Ethnic Diversity and Inequality in sub-Saharan Africa: Do Institutions Reduce the Noise? By Kazeem B. Ajide; Olorunfemi Y. Alimi; Simplice A. Asongu
  6. Transitions between growth episodes: Do institutions matter and do some institutions matter more? By Selim Raihan; Sabyasachi Kar; Kunal Sen
  7. Overhead Labour and Skill-Biased Technological Change: The Role of Product Diversification By Choong Hyun Nam
  8. The population question in a neoclassical growth model: A brief theory of production per capita By Lüger, Tim
  9. Democracy Does Cause Growth: Comment By Eberhardt, Markus
  10. Decomposing a decomposition: Within-country differences and the role of structural change in productivity growth By Escobar, Octavio; Mühlen, Henning
  11. Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory By Ufuk Akcigit; Sina T. Ates
  12. Manufacturing Sector Performance, Exchange Rate Volatility and Inclusive Growth In Nigeria (1981-2015) By Kenny S, Victoria
  13. FDI, banking crisis and growth: direct and spill over effects By Brahim Gaies; Khaled Guesmi; Stéphane Goutte
  14. Explaining a ‘development miracle’: poverty reduction and human development in Malaysia since the 1970s By M Niaz Asadullah; Norma Mansor; Antonio Savoia
  15. Effective Demand and Quantity Constrained Growth: A Simple Two-Sector Disequilibrium Approach By Ogawa, Shogo

  1. By: Kevin Hjortshøj O'Rourke; Ahmed Rahman; Alan M. Taylor
    Abstract: Why did per capita income divergence occur so dramatically during the 19th Century, rather than at the outset of the Industrial Revolution? How were some countries able to reverse this trend during the globalization of the late 20th Century? To answer these questions, this paper develops a trade-and-growth model that captures the key features of the Industrial Revolution and Great Divergence between a core industrializing region and a peripheral and potentially lagging region. The model includes both endogenous biased technological change and intercontinental trade. An Industrial Revolution begins as a sequence of more unskilled-labor-intensive innovations in both regions. We show that the subsequent co-evolution of trade and directed technologies can create a delayed but inevitable divergence in demographics and living standards—the peripheral region increasingly specializes in production that worsens its terms of trade and spurs even greater fertility increases and educational declines. Allowing for technological diffusion between regions can mitigate and even reverse divergence, spurring a reversal of fortune for peripheral regions.
    JEL: F11 F16 F43 J10 J24 N10 N30 O11 O19 O33 O4 O41
    Date: 2019–04
  2. By: Brian Beach; W. Walker Hanlon
    Abstract: The historical fertility transition is one of the most important events in economic history. This study provides new evidence on the role of information and social norms in this transition. We begin by documenting a causal relationship between the public release of information on the morality of engaging in family planning that resulted from the famous Bradlaugh-Besant trial of 1877 and Britain's subsequent fertility decline. We then show that the release of this information had nearly simultaneous effects among British-origin populations abroad, in Canada, South Africa, Australia and the United States. These findings highlight the importance of information and changing social norms in the historical fertility transition, as well as the role that cultural and linguistic ties played in transmitting these changes around the world.
    JEL: J1 N31 N33
    Date: 2019–04
  3. By: Broadberry, Stephen; Gardner, Leigh
    Abstract: Estimates of GDP per capita are provided on an annual basis for eight SubSaharan African economies for the period since 1885. Although the growth experienced in most of SSA since the mid-1990s has had historical precedents, there have also been episodes of negative growth or “shrinking”, so that long run progress has been limited. Despite some heterogeneity across countries, this must be seen as a disappointing performance for the region as a whole, given the possibilities of catch-up growth. Avoiding episodes of shrinking needs to be given a higher priority in understanding the transition to sustained economic growth.
    Keywords: growth; Africa; historical national accounts
    JEL: E01 N17 O47 O55
    Date: 2019–04
  4. By: Adermon, Adrian (Institute for Evaluation of Labor Market and Education Policy (IFAU), UCLS and UCFS); Lindahl, Mikael (Department of Economics, School of Business, Economics and Law, Göteborg University); Palme, Mårten (Department of Economics, Stockholm University and IZA)
    Abstract: We study the importance of the extended family – the dynasty – for the persistence in inequality across generations. We use data including the entire Swedish population, linking four generations. This data structure enables us to identify parents’ siblings and cousins, their spouses, and the spouses’ siblings. Using various human capital measures, we show that traditional parent-child estimates of intergenerational persistence miss almost one-third of the persistence found at the dynasty level. To assess the importance of genetic links, we use a sample of adoptees. We then find that the importance of the extended family relative to the parents increases.
    Keywords: Intergenerational mobility; extended family; dynasty; human capital
    JEL: I24 J24
    Date: 2019–04
  5. By: Kazeem B. Ajide (University of Lagos, Lagos, Nigeria); Olorunfemi Y. Alimi (University of Lagos, Lagos, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: Studies on the causes of income differences between the rich and the poor have received an extensive attention in the inequality empirics. While ethnic diversity hasalso been identified as one of the fundamental causes of income inequality, the role of institutions as a mediating factor in the ethnicity-inequality nexus has not received the scholarly attention it deserves. To this end, this study complements the existing literature by investigating the extent to which institutional framework corrects the noisy influence originating from the nexus between “ethnic diversity” and inequality in 26 sub-Saharan African countries for the period 1996-2015. The empirical evidence is based on pooled OLS, fixed effects and system GMM estimators. The main findings reveal that the mediating influences of institutional settingsaredefective, thus making it extremely difficult to modulatethe noisy impacts of ethno-linguistic and religious heterogeneity on inequality. In addition, the negative influencesorchestrated by ethnolinguistic and religious diversities on inequality fail toattenuate the impact of income disparityeven when interacted with institutions. On the policy front, institutional reforms tailored toward economic, political and institutional governances should be targeted.
    Keywords: Linguistic, religious, ethnicity, inequality, Institutions, Kuznets curve
    JEL: C23 D02 D63 E02
    Date: 2019–01
  6. By: Selim Raihan; Sabyasachi Kar; Kunal Sen
    Abstract: This paper examines the institutional and political determinants of the timing of growth episodes. We extend the earlier literature on the determinants of the onset of growth accelerations and decelerations by providing a more generalised approach to understanding growth episode transitions. We differentiate between six types of growth episodes – from growth collapses (where the episode specific growth rate, g, is -2 per year), to negative growth (g between -2 and 0), stagnation (g between 0 and +2), stable growth (g between +2 and +4), moderate growth (g between +4 and +6), and rapid growth (g over +6). Using multinomial logit models, in the context of a panel dataset of 125 countries from 1984 to 2010, we examine the likelihood of switching from one growth episode to another growth episode. We find that though bureaucracy quality has a positive effect while switching from negative growth episodes to positive growth episodes, it does not matter in most of the cases of switching from stable or moderate positive growth episodes to rapid positive growth episodes. Both contract viability and democratisation can explain the switching from negative growth episodes to positive growth episodes. Contract viability and democracy can also explain the movements from lower positive growth episodes to higher positive growth episodes. However, while contract viability is important for moving from stable or moderate positive growth episodes to rapid growth episodes, democracy is not important in explaining such switches. This suggests that while better economic and political institutions matter in taking a country from growth collapses to stable growth, economic institutions matter more than the political institutions for the transition from stable growth to rapid growth.
    Date: 2018
  7. By: Choong Hyun Nam (Economic Research Institute, Bank of Korea)
    Abstract: This paper tries to explain why a certain type of technology is skill-biased. In contrast with existing literature, this paper regards skilled workers as overhead labour, and presents a model wherein skilled workers constitute a fixed input, required to produce a new product. The demand for skill increases with product variety, and information technology is skill-biased because it raises product variety by lowering the fixed cost of product creation. However, skill-biased change does not necessarily raise measured productivity because product diversification reallocates resources into fixed inputs, which is consistent with the historical fact that skill-biased change did not always accompany productivity growth.
    Keywords: Skill demand, Product innovation, Inequality, Productivity
    JEL: E24 J31 L1 O3 O4
    Date: 2019–04–08
  8. By: Lüger, Tim
    Abstract: This work seeks to answer the "population question," i.e. the effect of population growth on production per capita. This question has lingered in economic thought for centuries and to this day two general lines of thought can be identified, which might be marked as the "optimist" and the "pessimist" view. While the optimists claim that an increase in population will - chiefly owed to concomitant specialization and technological progress - raise average production per capita, the pessimists maintain that the latter would decline as a result of resources becoming relatively more scarce. Integrating both approaches and using a neoclassical framework, this work intends to show that sustainably increasing productivity is predominantly the result of reducing too high fertility toward a lower level such that diminishing returns are outweighed by the benefits from labor division. The paper argues that the historical reduction of fertility can almost completely explain long-run development.
    Keywords: Population Question,Division of Labor,Diminishing Returns,Demographic Transition,Economic Development,Classical Growth Theory,Neoclassical Growth Theory,Unified Growth Theory,History of Economic Thought
    JEL: B12 B22 J1 O47 N01 N3
    Date: 2019
  9. By: Eberhardt, Markus
    Abstract: I revisit the causal relationship between democracy and growth as recently studied in Acemoglu, Naidu, Restrepo, and Robinson (2019, ANRR). I demonstrate the sensitivity of their results to sample selection by dropping a small number of observations in a non-random fashion and use these findings to motivate a generalisation of their empirical approach. My own analysis relaxes the assumption of (i) a common democracy-growth relationship, and of (ii) the absence of strong cross-section correlation. Adopting novel methods for policy evaluation I find a robust positive long-run effect of democracy albeit with only around half the magnitude of that found in ANRR.
    Keywords: democracy; Difference-in-Difference Estimator; growth; Interactive Fixed Effects; Political development; Spillovers
    JEL: O10 P16
    Date: 2019–04
  10. By: Escobar, Octavio; Mühlen, Henning
    Abstract: In this article, we investigate the relevance of structural change in country-wide productivity growth considering within-country differences. For this purpose, we propose a two-step decomposition approach that accounts for differences among subnational units. To highlight the relevance of our procedure compared to the prevalent approach in the existing development literature (which usually neglects subnational differences), we show an application with data for the Mexican economy. Specifically, we contrast findings obtained from country-sector data on the one hand with those obtained from (more disaggregated) state-sector data on the other hand. One main insight is that the qualitative and quantitative results differ substantially between the two approaches. Our procedure reveals that structural change appeared to be growth-reducing during the period from 2005 to 2016. We show that this negative effect is driven mainly by the reallocation of (low-skilled) labor within subnational units.
    Keywords: decomposition approach,economic development,labor reallocation,regional differences,structural change
    JEL: L16 O10 O18 R11
    Date: 2019
  11. By: Ufuk Akcigit; Sina T. Ates
    Abstract: In this paper, we review the literature on declining business dynamism and its implications in the United States and propose a unifying theory to analyze the symptoms and the potential causes of this decline. We first highlight 10 pronounced stylized facts related to declining business dynamism documented in the literature and discuss some of the existing attempts to explain them. We then describe a theoretical framework of endogenous markups, innovation, and competition that can potentially speak to all of these facts jointly. We next explore some theoretical predictions of this framework, which are shaped by two interacting forces: a "composition effect" that determines the market concentration and an "incentive effect" that determines how firms respond to a given concentration in the economy. The results highlight that a decline in "knowledge diffusion" between frontier and laggard firms could be a significant driver of empirical trends observed in the data. This study emphasizes the potential of growth theory for the analysis of factors behind declining business dynamism and the need for further investigation in this direction.
    JEL: E22 K20 L10 L41 O33 O34
    Date: 2019–04
  12. By: Kenny S, Victoria
    Abstract: The effects of the recent global economic crisis on Nigeria have reaffirmed the urgent need for the diversification of the economy. Although, no country is immune to such global crisis, the over-reliance on oil export revenue by Nigeria exposes her exchange rate and economy excessively to external shocks. Therefore, there is the need to conduct a research of this nature to examine Nigeria’s exchange rate sensitivity. This study employed Neo-Classical theory with financial intervention using Cobb Douglas growth model in assessing the impact of manufacturing productivity, exchange rate volatility on inclusive growth in Nigeria using the time series data from 1981 to 2015. The study investigates the long run agriculturally driven economic inclusive growth using Johansen Co-integration test and Normalized Co-integration. This study found out there is a long run relationship between these variables. While manufacturing sector exact more long run effect on per capita income.
    Keywords: Global crisis, economic diversification and growth
    JEL: E0
    Date: 2019–04–13
  13. By: Brahim Gaies (IPAG Business School); Khaled Guesmi (IPAG Business School); Stéphane Goutte (LED - Université Paris 8)
    Abstract: This study suggests a new decomposition of the effect of Foreign Direct Investment (FDI) on long-term growth in developing countries. It reveals that FDI not only have a positive direct effect on growth, but also increase the latter by reducing the recessionary effect resulting from a banking crisis. Even more, they reduce its occurrence. JEL: F65, F36, G01, G15
    Keywords: growth,FDI,system GMM,panel logit model
    Date: 2019–04–07
  14. By: M Niaz Asadullah; Norma Mansor; Antonio Savoia
    Abstract: This paper provides a systematic assessment of the alleged exceptionality of Malaysia’s development progress and its likely explanations, in a comparative perspective. Using cross-country regressions and aggregate indices of education, health, poverty and gender equality outcomes, we offer three findings. First, we provide evidence supporting the hypothesis that Malaysia’s human development progress has been exceptional compared with that of countries with a similar level of economic development, primarily for the 1970s and 1980s, so showing that progress has early origins. Next, we show that such progress is explained by a combination of income-mediated and support-led mechanisms, including Malaysia’s early emphasis on education and health inputs and infrastructure development. Finally, we argue that an early advantage in state capacity, vis-à-vis other countries of similar income level, may be at the origin of Malaysia’s successful implementation of poverty-reduction and growth-enhancing policies.
    Date: 2019
  15. By: Ogawa, Shogo
    Abstract: In this study, we construct a simple disequilibrium growth model to explore the dynamic property of effective demand. This study's main concern is the effect of the quantity constraint: How do the quantities of consumption and investment goods demand and the productive capacity affect capital accumulation? To answer this, we build a two-sector growth model with quantity constraints. One interesting result is that consumption goods demand enhances capital accumulation when the capital is sufficiently accumulated but impedes it when the capital is insufficient. The latter case is shown as a shrinking path by graphical analysis and a numerical experiment.
    Keywords: Disequilibrium macroeconomics; Non-Walrasian analysis; Economic growth; Two-sectors; Quantity constraints
    JEL: E12 O41
    Date: 2019–04–12

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