nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒05‒06
fourteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Automation and New Tasks: How Technology Displaces and Reinstates Labor By Acemoglu, Daron; Restrepo, Pascual
  2. Malthus in the Light of Climate Change By Lucas Bretschger
  3. Demographic Aging, Industrial Policy, and Chinese Economic Growth By Michael Dotsey; Wenli Li; Fang Yang
  4. Occupational Choice and the Dynamics of Human Capital, Inequality and Growth By Dvorkin, Maximiliano; Monge-Naranjo, Alexander
  5. The effect of airports on the growth of service exports By Richard Kneller; Danny McGowan
  6. Dynastic Human Capital, Inequality and Intergenerational Mobility By Adermon, Adrian; Lindahl, Mikael; Palme, Mårten
  7. Access to Justice and Economic Development: Evidence from an International Panel Dataset By Arnaud Deseau; Adam Levai; Michèle Schmiegelow
  8. Population and the environment: the role of fertility, education and life expectancy By Fabio Mariani; Agustin Perez Barahona; Natacha Raffin
  9. Estimated human capital externalities in an endogenous growth framework By Jim Malley; Ulrich Woitek
  10. Illuminating Economic Growth By Yingyao Hu; Jiaxiong Yao
  11. Path Break versus Path Drift: A Comparative Approach to Explain Variations in Institutional Effects on Economic Growth By Tamilina, Larysa; Tamilina, Natalya
  12. Economic Development Thresholds for a Green Economy in Sub-Saharan Africa By Asongu, Simplice; Odhiambo, Nicholas
  13. The Human Capital Stock: A Generalized Approach Comment By Francesco Caselli; Antonio Ciccone
  14. Long-Run Tax Incidence in a Human Capital-based Endogenous Growth Model with Labor-Market Frictions By Been-Lon Chen; Hung-Ju Chen; Ping Wang

  1. By: Acemoglu, Daron (MIT); Restrepo, Pascual (Boston University)
    Abstract: We present a framework for understanding the effects of automation and other types of technological changes on labor demand, and use it to interpret changes in US employment over the recent past. At the center of our framework is the allocation of tasks to capital and labor – the task content of production. Automation, which enables capital to replace labor in tasks it was previously engaged in, shifts the task content of production against labor because of a displacement effect. As a result, automation always reduces the labor share in value added and may reduce labor demand even as it raises productivity. The effects of automation are counterbalanced by the creation of new tasks in which labor has a comparative advantage. The introduction of new tasks changes the task content of production in favor of labor because of a reinstatement effect, and always raises the labor share and labor demand. We show how the role of changes in the task content of production – due to automation and new tasks – can be inferred from industry-level data. Our empirical decomposition suggests that the slower growth of employment over the last three decades is accounted for by an acceleration in the displacement effect, especially in manufacturing, a weaker reinstatement effect, and slower growth of productivity than in previous decades.
    Keywords: automation, displacement effect, labor demand, inequality, productivity, reinstatement effect, tasks, technology, wages
    JEL: J23 J24
    Date: 2019–04
  2. By: Lucas Bretschger (ETH Zurich, Switzerland)
    Abstract: To reconsider the Malthusian predictions of natural limits to economic development, the paper develops a multi-sector growth model with exhaustible resource extraction, investments in physical and knowledge capital, climate change, and endogenous fertility. Economic growth is driven by endogenous innovations which increase in the availability and productivity of research labour. Poor substitution of natural resources triggers sectoral change. Climate change is the result of polluting resource use which is, like consumption and investments, based on the intertemporal optimization of the households. Highlighting the importance of bounded resource supply and of rational extraction decisions I show that climate change is independent of population growth in steady state and there is no causal relationship between climate and population during transition to steady state. The consumption per capita growth rate rises in the innovation rate and the output elasticities of labour and capital in the different sectors. Unlike climate policy, population policy is not warranted; it may be counterproductive because labour is crucial for the research sector.
    Keywords: Population growth, climate change, endogenous innovation, sectoral change, fertility choice
    JEL: Q43 O47 Q56 O41
    Date: 2019–04
  3. By: Michael Dotsey (Federal Reserve Bank of Philadelphia); Wenli Li (Federal Reserve Bank of Philadelphia); Fang Yang (Louisiana State University)
    Abstract: We examine the role of demographics and changing industrial policies in accounting for the rapid rise in household savings and in per capita output growth in China since the mid-1970s. The demographic changes come from reductions in the fertility rate and increases in life expectancy, while the industrial policies take many forms. These policies cause important structural changes; first benefiting private labor-intensive firms by incentivizing them to increase their share of employment, and later on benefiting capital-intensive firms resulting in an increasing share of capital devoted to heavy industries. We conduct our analysis in a general equilibrium economy that also features endogenous human capital investment. We calibrate the model to match key economic variables of the Chinese economy and show that demographic changes and industrial policies both contributed to increases in savings and output growth but with differing intensities and at different horizons. We further demonstrate the importance of endogenous human capital investment in accounting for the economic growth in China.
    Keywords: aging, credit policy, household saving, output growth, China
    JEL: E21 J11 J13 L52
    Date: 2019–04
  4. By: Dvorkin, Maximiliano (Federal Reserve Bank of St. Louis); Monge-Naranjo, Alexander (Federal Reserve Bank of St. Louis)
    Abstract: We develop a tractable dynamic Roy model in which workers choose occupations to maximize their lifetime utility. In our setting, a worker’s human capital is driven by his labor market choices, given idiosyncratic occupation-specific productivity shocks and the costs of switching occupations. We characterize the equilibrium assignment of workers to jobs and show that the resulting evolution of aggregate human capital across occupations ultimately determines the long-run rate of growth of the economy. We then use our model to quantitatively study the impact of labor-saving technical changes on workers’ occupational choices and on the economy’s income inequality, job polarization and long-run growth.
    Keywords: Occupational Choice; Human Capital; Dynamics; Inequality; Endogenous Growth; General Equilibrium
    JEL: E24 J24 J31 J62
    Date: 2019–04–23
  5. By: Richard Kneller; Danny McGowan
    Abstract: This paper studies the causal effect of airports on the growth of service exports. We exploit the location of historic military-built airfields as instruments for the current stock of international airports across UK regions. The estimates show that an additional airport increases the growth rate of exports by 76% over an 8-year time period. Airports affect exports by increasing both the intensive and extensive margins. The evidence is consistent with airports improving market access and reducing fixed and variable trade costs. These results are robust to the addition of contemporaneous and historic controls and various falsification and robustness tests.
    Keywords: airports; exports; service sector
    Date: 2019
  6. By: Adermon, Adrian (IFAU); Lindahl, Mikael (University of Gothenburg); Palme, Mårten (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
  7. By: Arnaud Deseau (Université Saint-Louis - Bruxelles, CEREC); Adam Levai (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Michèle Schmiegelow (UCLouvain, CRIDES)
    Abstract: We empirically investigate the impact of access to justice (ATJ) on GDP per capita growth in a panel of 83 countries from 1970 to 2014. Our analysis relies on a new database documenting the number of judges per capita as a proxy for capturing the cross-country evolution of ATJ. The proxy measures the extent to which disputes between economic actors can be resolved at a relatively low cost, without dysfunctional delay and discrimination. In a dynamic panel setting using internal instruments, we find that increasing ATJ by 1% increases the five-year growth rate of GDP per capita by 0.86 p.p. (0.17 p.p. annually) with diminishing marginal returns. In line with the diminishing marginal returns argument, we find that the effect of ATJ is two times smaller in Europe compared to other regions due to higher levels of ATJ. We find no evidence of a differential effect of ATJ across other regions, income levels, legal origins, democracy, corruption of the judicial system or human capital levels.
    Keywords: Access to Justice, Legal development, Economic Development, Growth, Institution
    JEL: E02 K00 O11 O43 O47
    Date: 2019–04
  8. By: Fabio Mariani (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Agustin Perez Barahona (University of Cergy-Pontoise and Ecole Polytechnique); Natacha Raffin (Normandie Univ, UNIROUEN, CREAM and EconomiX, University Paris Nanterre)
    Abstract: This paper explores the interplay between population and environmental quality. After reviewing the existing literature, we set up a theoretical framework suitable to analyze two major endogenous forces of demographic change - fertility and life expectancy - and their dynamic interaction with human capital and environmental conditions. We thus revisit and encompass in a unified model some key results of the literature, and gain new insight on the consequences of policy intervention on environmental dynamics and economic development. In particular, we highlight (i) the possible perverse effects of pollution control, (ii) a demographic explanation of the environmental Kuznets curve, (iii) the opportunity of relying on educational subsidies to alleviate the pressure on natural resources, and (iv) the existence of poverty traps related to human capital and environmental quality.
    Keywords: Environmental quality; Life expectancy; Education; Fertility
    JEL: J11 O44 Q56
    Date: 2019–04
  9. By: Jim Malley; Ulrich Woitek
    Abstract: To better understand the quantitative implications of human capital externalities at the aggregate level, we estimate a two-sector endogenous growth model with knowledge spill-overs. To achieve this, we account for trend growth in a model consistent fashion and employ a Markov-chain Monte-Carlo (MCMC) algorithm to estimate the model's posterior parameter distributions. Using U.S. quarterly data from 1964-2017, we find significant positive externalities to aggregate human capital. Our analysis further shows that eliminating this market failure leads to sizeable increases in education-time, endogenous growth and aggregate welfare.
    Keywords: human capital externalities, endogenous growth, Bayesian estimation
    JEL: C11 C52 E32
    Date: 2019
  10. By: Yingyao Hu; Jiaxiong Yao
    Abstract: This paper seeks to illuminate the uncertainty in official GDP per capita measures using auxiliary data. Using satellite-recorded nighttime lights as an additional measurement of true GDP per capita, we provide a statistical framework, in which the error in official GDP per capita may depend on the country’s statistical capacity and the relationship between nighttime lights and true GDP per capita can be nonlinear and vary with geographic location. This paper uses recently developed results for measurement error models to identify and estimate the nonlinear relationship between nighttime lights and true GDP per capita and the nonparametric distribution of errors in official GDP per capita data. We then construct more precise and robust measures of GDP per capita using nighttime lights, official national accounts data, statistical capacity, and geographic locations. We find that GDP per capita measures are less precise for middle and low income countries and nighttime lights can play a bigger role in improving such measures.
    Date: 2019–04–09
  11. By: Tamilina, Larysa; Tamilina, Natalya
    Abstract: This study introduces a comprehensive model of institutional grafting wherein cultural, structural, and political forces shape new legal institutions. The model is used to argue that a country’s growth rates are a function of the distance that the new legal institutions develop to these three forces. We further argue that the distance’s size varies depending on the mode of institutional change: drift phase or path break. We demonstrate that the distance is usually large during a path break but tends to be significantly smaller for institutions emerging in the drift phase. As such, the new legal institutions strongly impact economic growth in the drift phase and only modestly influence growth rates during institutional path change. In the latter case, the political dimension’s quality determines the success of both a country’s growth trajectories and institutional reforms. These propositions are tested empirically based on a sample of 106 countries derived from the POLITY IV Project’s website.
    Keywords: Institutional economics, formal institutions, institutional change, institutional grafting
    JEL: O17 O47 O57
    Date: 2018–01–01
  12. By: Asongu, Simplice; Odhiambo, Nicholas
    Abstract: This study investigates how increasing economic development affects the green economy in terms of CO2 emissions, using data from 44 countries in the SSA for the period 2000-2012. The Generalised Method of Moments (GMM) is used for the empirical analysis. The following main findings are established. First, relative to CO2 emissions, enhancing economic growth and population growth engenders a U-shaped pattern whereas increasing inclusive human development shows a Kuznets curve. Second, increasing GDP growth beyond 25% of annual growth is unfavorable for a green economy. Third, a population growth rate of above 3.089% (i.e. annual %) has a positive effect of CO2 emissions. Fourth, an inequality-adjusted human development index (IHDI) of above 0.4969 is beneficial for a green economy because it is associated with a reduction in CO2 emissions. The established critical masses have policy relevance because they are situated within the policy ranges of adopted economic development dynamics.
    Keywords: CO2 emissions; Economic development; Africa
    JEL: C52 O38 O40 O55 P37
    Date: 2019–01
  13. By: Francesco Caselli; Antonio Ciccone
    Date: 2019–04
  14. By: Been-Lon Chen; Hung-Ju Chen; Ping Wang
    Abstract: In a second-best optimal growth setup with only factor taxes, it is in general optimal to fully replace capital by labor income taxation in the long run. We revisit this important issue by developing a human capital-based endogenous growth model with frictional labor search, allowing each firm to create multiple vacancies and each worker to determine market participation. We find that the conventional efficient bargaining condition is necessary but not sufficient for achieving constrained social optimality. We then conduct tax incidence exercises in balanced growth by calibrating to the U.S. economy with a pre-existing 20% flat tax on capital and labor income. Our quantitative results suggest that, due to a dominant channel via the interactions between vacancy creation and market participation, it is optimal to switch only partially from capital to labor taxation in a benchmark economy where human capital formation depends on both physical and human capital stocks. This main finding is robust even along the transition with time-varying factor tax rates. Moreover, our quantitative analysis under alternative setups suggest that while endogenous human capital and labor market frictions are essential for obtaining a positive optimal capital tax, endogenous leisure, nonlinear human capital accumulation and endogenous growth are not crucial.
    JEL: E62 H22 J24 O41
    Date: 2019–04

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