nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒05‒27
eight papers chosen by
Marc Klemp
University of Copenhagen

  1. Frontier Culture: The Roots and Persistence of “Rugged Individualism†in the United States By Samuel Bazzi; Martin Fiszbein; Mesay Gebresilasse
  2. Demographics and Automation By Daron Acemoglu; Pascual Restrepo
  3. The Impact of Climate Change on Fertility By Gregory Casey; Soheil Shayegh; Juan Moreno-Cruz; Martin Bunzl; Oded Galor; Ken Caldeira
  4. Growth and bubbles: Investing in human capital versus having children By Xavier Raurich; Thomas Seegmuller
  5. Sectoral Composition of Output and the Wage Share: a Two-Sector Kaleckian Model. By Elton Beqiraj; Lucrezia Fanti; Luca Zamparelli
  6. Innovation Offshoring with Fully Endogenous Growth By Colin Davis; Ken-ichi Hashimoto
  7. A Stochastic Economic Growth Model with Health Capital and State-Dependent Probabilities. By La Torre, Davide; Marsiglio, Simone; Mendivil, Franklin; Privileggi, Fabio
  8. Investment, Autonomous Demand and Long Run Capacity Utilization: An Empirical Test for the Euro Area By Ettore Gallo

  1. By: Samuel Bazzi (Boston University, NBER and CEPR); Martin Fiszbein (Boston University and NBER); Mesay Gebresilasse (Boston University)
    Abstract: The presence of a westward-moving frontier of settlement shaped early U.S. history. In 1893, the his- torian Frederick Jackson Turner famously argued that the American frontier fostered individualism. We investigate the Frontier Thesis and identify its long-run implications for culture and politics. We track the frontier throughout the 1790–1890 period and construct a novel, county-level measure of to- tal frontier experience (TFE). Historically, frontier locations had distinctive demographics and greater individualism. Long after the closing of the frontier, counties with greater TFE exhibit more perva- sive individualism and opposition to redistribution. This pattern cuts across known divides in the U.S., including urban–rural and north–south. We provide suggestive evidence on the roots of fron- tier culture: selective migration, an adaptive advantage of self-reliance, and perceived opportunities for upward mobility through effort. Overall, our findings shed new light on the frontier’s persistent legacy of rugged individualism.
    Keywords: Culture, Individualism, Preferences for Redistribution, American Frontier, Persistence
    JEL: D72 H2 N31 N91 O43 P16
    Date: 2018–06
  2. By: Daron Acemoglu (MIT and CIFAR); Pascual Restrepo (Boston University)
    Abstract: We argue theoretically and document empirically that aging leads to greater (industrial) automation, and in particular, to more intensive use and development of robots. Using US data, we document that robots substitute for middle-aged workers (those between the ages of 36 and 55). We then show that demographic change—corresponding to an increasing ratio of older to middle-aged workers—is associated with greater adoption of robots and other automation technologies across countries and with more robotics-related activities across US commuting zones. We also provide evidence of more rapid development of automation technologies in coun- tries undergoing greater demographic change. Our directed technological change model further predicts that the induced adoption of automation technology should be more pronounced in industries that rely more on middle-aged workers and those that present greater opportunities for automation. Both of these predictions receive support from country-industry variation in the adoption of robots. Our model also implies that the productivity implications of aging are ambiguous when technology responds to demographic change, but we should expect produc- tivity to increase and labor share to decline relatively in industries that are most amenable to automation, and this is indeed the pattern we find in the data.
    Keywords: aging, automation, demographic change, economic growth, directed technological change, productivity, robots, tasks, technology
    JEL: J11 J23 J24 O33 O47 O57
    Date: 2018–03
  3. By: Gregory Casey (Williams College); Soheil Shayegh (Bocconi University, Milan, Italy); Juan Moreno-Cruz (School of Environment, Enterprise and Development, University of Waterloo); Martin Bunzl (Department of Philosophy, Rutgers University); Oded Galor (Brown University); Ken Caldeira (Department of Global Ecology, Carnegie Institution for Science, Stanford, CA)
    Abstract: We examine the potential for climate change to impact fertility via adaptations in human behavior. We start by discussing a wide range of economic channels through which climate change might impact fertility, including sectoral reallocation, the gender wage gap, longevity, and child mortality. Then, we build a quantitative model that combines standard economic- demographic theory with existing estimates of the economic consequences of climate change. In the model, increases in global temperature affect agricultural and non-agricultural sectors differently. Near the equator, where many poor countries are located, climate change has a larger negative effect on agriculture. The resulting scarcity in agricultural goods acts as a force towards higher agricultural prices and wages, leading to a labor reallocation into this sector. Since agriculture makes less use of skilled labor, climate damage decreases the return to acquiring skills, inducing parents to invest less resources in the education of each child and to increase fertility. These patterns are reversed at higher latitudes, suggesting that climate change may exacerbate inequities by reducing fertility and increasing education in richer northern countries, while increasing fertility and reducing education in poorer tropical countries. While the model only examines the role of one specific mechanism, it suggests that climate change could have an impact on fertility, indicating the need for future work on this important topic. Classification-
    Date: 2019–02
  4. By: Xavier Raurich; Thomas Seegmuller (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: As it is documented, households' investment in their own education (human capital) is negatively related to the number of children individuals will have and requires some loans to be financed. We show that this contributes to explain episodes of bubbles associated to higher growth rates. This conclusion is obtained in an overlapping generations model where agents choose to invest in their own education and decide their number of children. A bubble is a liquid asset that can be used to finance either education or the cost of rearing children. The time cost of rearing children plays a key role in the analysis. If the time cost per child is sufficiently high, households have only a small number of children. Then, the bubble has a crowding-in effect because it is used to provide loans to finance investments in education. On the contrary, if the time cost per child is low enough, households have a large number of children. Then, the bubble is mainly used to finance the total cost of rearing children and has a crowding-out effect on investment. Therefore, the new mechanism we highlight shows that a bubble enhances growth if the economy is characterized by a high rearing time cost per child.
    Keywords: Bubble,Sustained growth,Fertility,Human capital
    Date: 2019–05
  5. By: Elton Beqiraj (Department of Economics and Law, Sapienza University of Rome (IT).); Lucrezia Fanti (National Institute for Public Policy Analysis (INAPP).); Luca Zamparelli (Department of Economics and Law, Sapienza University of Rome (IT).)
    Abstract: This paper looks at structural change as one additional source of decline in the wage share. First, we provide a decomposition of changes in aggregate wage shares into changes due to variations in output composition and in sectoral wage shares for nine OECD countries between 1977 and 2010. We show that the rise in the service sector is a relevant factor in explaining the fall of the wage share, at least for some countries. Next, we develop a two-sector Kaleckian growth model consisting of the service and manufacturing sectors. We assume that structural change is exogenous as it arises from a shift in consumers' preferences or in the saving rate. We show that, when mark-ups are relatively higher in the service sector, a shift in the sectoral composition of demand in favor of the service sector good generates a rise in the profit share.
    Keywords: structural change, functional income distribution, manufacturing, service.
    JEL: D33 E11 O14
    Date: 2019–05
  6. By: Colin Davis; Ken-ichi Hashimoto
    Abstract: In recent years firms have started to offshore their innovation activities to emerging economies. This paper investigates the implications of innovation offshoring for productivity growth in a two-country framework that features a tension between access to technical knowledge and low-cost high-skilled labor in the innovation location decision. Industry and innovation tend to concentrate in the asset-wealthy country when trade costs are relatively high. A positive relationship between innovation costs and industry concentration then ensures that improved international knowledge diffusion coincides with an increase in net offshoring flows in innovation from the asset-wealthy country to the asset-poor country, and potentially with faster productivity growth.
    Date: 2019–05
  7. By: La Torre, Davide; Marsiglio, Simone; Mendivil, Franklin; Privileggi, Fabio (University of Turin)
    Abstract: We analyze a simple stochastic model of economic growth in which physical and health capital accumulation jointly contribute to determine long run economic growth. Health capital is subject to random shocks via the effects of behavioral changes: unpredictable changes in individuals’ attitude toward healthy behaviors may reduce the effectiveness of health services provision; this in turn, by reducing the production of new health capital, lowers economic production activities negatively affecting economic growth. Unlike the extant literature, we assume that the probability with which such random shocks occur is not constant but state-dependent. Specifically, the probability that behavioral changes will negatively impact on health capital and economic growth depends on the level of economic development, proxied by the relative abundance of health capital with respect to physical capital. We show that our model’s dynamics can be converted into an iterated function system with state-dependent probabilities which converges to an invariant self-similar measure supported on a (possibly fractal) compact attractor. We develop a numerical method to approximate the invariant distribution to illustrate its features in specific model’s parametrizations, exemplifying thus the effects of state-dependent probabilities on the model’s steady state.
    Date: 2019–04
  8. By: Ettore Gallo (Department of Economics, New School for Social Research)
    Abstract: This paper reviews and empirically tests the validity and policy conclusions of the Sraffian Supermultiplier model (SSM) and the modified Neo-Kaleckian model after the inclusion of autonomous components of aggregate demand. First, we theoretically assess whether the SSM may constitute a complex variant of the Neo-Kaleckian model. In this sense, it is shown that results compatible with the SSM can be obtained by implementing a set of mechanisms in a modified Neo-Kaleckian model. Second, the paper empirically tests the main implications of the models in the Euro Area, based on Eurostat data. In particular, the discussion outlines the short and long-run relation between autonomous demand and output, by testing cointegration and causality with a VECM model. Moreover, the role accounted by both theories to the rate of capacity utilization is empirically assessed, through a time-series estimation of the Sraffian and Neo-Kaleckian investment functions. While confirming the theoretical relation between autonomous demand and output in the long run, the results show that capacity utilization still plays a key role in the short-run adjustment mechanism. Therefore, admitting that Keynesian results may hold even after the traverse, our work suggests to be Kaleckian in the short run and Sraffian in the long run.
    Keywords: Distribution, effective demand, Eurozone, growth, Neo-Kaleckian, Sraffian, Supermultiplier
    JEL: B51 E11 E12 O41 O47 O52
    Date: 2019–05

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