nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒04‒29
five papers chosen by
Marc Klemp
University of Copenhagen

  1. Income, Education and Democracy By Parente, Stephen L.; Sáenz, Luis Felipe; Seim, Anna
  2. The Magnification of a Lagging Region's Initial Economic Disadvantages on the Balanced Growth Path By Batabyal, Amitrajeet; Nijkamp, Peter
  3. Dynastic Human Capital, Inequality and Intergenerational Mobility By Adermon, Adrian; Lindahl, Mikael; Palme, Mårten
  4. Effects of foreign aid on the recipient country's economic growth By Pham, Ngoc-Sang; Pham, Thi Kim Cuong
  5. Sectoral productivity Growth and Innovation Policies By Ivanova, Olga; Chatzouz, Moustafa

  1. By: Parente, Stephen L. (Department of Economics, University of Illinois.); Sáenz, Luis Felipe (Department of Economics, University of South Carolina.); Seim, Anna (Dept. of Economics, Stockholm University)
    Abstract: This paper puts forth a unified theory of growth and polity in which economic development affects a country's polity and polity affects its development. Education crucially impacts both trajectories, first by moving resources out of the traditional sector and decreasing incomes of the landed class and second, by increasing the de facto power of the masses. An autocrat aligned with the landed class will try to retard education of its citizens but eventually will relinquish power when the transfers needed to prevent the masses from revolting become too large. At this point society democratizes and the economy's growth path is determined by the median voter. The model is calibrated to the economic and political histories of Britain from 1200-2000 and used to quantify the role of education, land inequality, constraints on the executive, and school curricula for the timing of modernization and democratization. The effects of these factors are found to be large, on the order of centuries. The paper also contributes to the empirical literature by showing that support for the modernization hypothesis based on System General Method of Moments estimation is more robust than previous research suggests and by showing that only primary education predicts democracy in this estimation method.
    Keywords: Modernization; Democratization; Unified Growth Theory; De Facto Power.
    JEL: D72 O41 O47 P16 Q15
    Date: 2019–04–17
  2. By: Batabyal, Amitrajeet; Nijkamp, Peter
    Abstract: We analyze aspects of long run economic growth in stylized lagging and leading regions. Both regions use physical capital, research and development (R&D), and knowledgeable workers to produce a final consumption good. The lagging region faces two key economic disadvantages. Specifically, the constant fractions of the output of the final consumption good that are saved to enhance the stocks of physical capital and R&D are assumed to be twice as large in the leading region as they are in the lagging region. In this scenario, we perform three tasks. First, we determine the ratio of the balanced growth path (BGP) value of output per knowledgeable worker in the leading region to its value in the lagging region. Second, we ascertain the ratio of the BGP value of R&D per knowledgeable worker in the leading region to its value in the lagging region. Finally, we show the extent to which the lagging region’s initial economic disadvantages are magnified on the BGP and then discuss some policy implications.
    Keywords: Economic Growth, Lagging Region, Leading Region, Magnification Effect
    JEL: O18 R11
    Date: 2019–01–15
  3. By: Adermon, Adrian (Institute for Evaluation of Labor Market and Education Policy (IFAU)); Lindahl, Mikael (Department of Economics, University of Gothenburg); Palme, Mårten (Dept. of Economics, Stockholm University)
    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 J62
    Date: 2019–04–11
  4. By: Pham, Ngoc-Sang; Pham, Thi Kim Cuong
    Abstract: We introduce an infinite-horizon endogenous growth framework for studying the effects of foreign aid on the economic growth in a recipient country. Aid is used to partially finance the recipient's public investment. We point out that the same rule of aid may have very different outcomes, depending on the recipient's circumstances in terms of development level, domestic investment, efficiency in the use of aid and in public investment, etc. Foreign aid may promote growth in the recipient country, but the global dynamics of equilibrium are complex (because of the non-monotonicity and steady state multiplicity). The economy may converge to a steady state or grow without bounds. Moreover, there are rooms for the divergence and a two-period cycle. We characterize conditions under which each scenario takes place. Our analysis contributes to the debate on the nexus between aid and economic growth and in particular on the conditionality of aid effects.
    Keywords: Aid effectiveness, economic growth, cycle, poverty trap, public investment, threshold.
    JEL: D9 H0 O1 O4
    Date: 2019–04–18
  5. By: Ivanova, Olga; Chatzouz, Moustafa
    Abstract: This papers studies the sectoral differences in the impacts of various innovation policies, human capital and R&D intensity on the productivity growth using econometric panel data techniques. We analyze the development of the sectoral productivity as depending on both knowledge creation and knowledge adoption, where both channels of productivity growth can be influenced by various types of R&D related public policy. We use the combination of the most recent EU-KLEMS database and OECD data for econometric analysis on six aggregated sectors of the economy. In contrast with other existing studies our econometric analysis covers the whole of the economy and includes various traditional, industrial and services sectors. The main contribution of the paper is in highlighting the differences between economic sectors and identifying potential for sector-specific innovation policies.
    Keywords: Endogenous growth, R&D, panel data, R&D policy, industrial sectors
    JEL: O47
    Date: 2019–04–23

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