nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒06‒24
thirteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Effects of R&D Subsidies in a Hybrid Model of Endogenous Growth and Semi-Endogenous Growth By Chu, Angus C.; Wang, Xilin
  2. Entrepreneurship, Institutions, and Economic Growth: Does the Level of Development Matter? By Boudreaux, Christopher; Caudill, Steven
  3. The Role of Structural Transformation in Regional Convergence in Japan: 1874-2008 By Fukao, Kyoji; Paul, Saumik
  4. The Slave Trade and Conflict in Africa, 1400-2000 By Boxell, Levi; Dalton, John T.; Leung, Tin Cheuk
  5. Migrant Inventors and the Technological Advantage of Nations By Bahar, Dany; Choudhury, Prithwiraj; Rapoport, Hillel
  6. Economic Growth in Sub-Saharan Africa, 1885-2008 By Broadberry, Stephen; Gardner, Leigh
  7. On Trust Dynamics of Economic Growth By Shah, Syed Sibghatullah
  8. Can we have growth when population is stagnant? Testing linear growth rate formulas and their cross-unit cointegration of non-scale endogenous growth models By Ziesemer, Thomas
  9. Technology Gaps, Trade and Income By Thomas Sampson
  10. Optimal Positive Capital Taxes at Interior Steady States By Jess Benhabib; Bálint Szőke
  11. Fiscal rule and shock amplification : A stochastic endogenous growth model By Maxime Menuet
  12. Human Development in the Age of Globalisation By Prados de la Escosura, Leandro
  13. A simple characterization for sustained growth By Ha-Huy, Thai; Tran, Nhat-Thien

  1. By: Chu, Angus C.; Wang, Xilin
    Abstract: This study explores the effects of R&D subsidies in a hybrid growth model in which the economy may exhibit semi-endogenous growth or fully endogenous growth. We consider two types of R&D subsidies on variety-expanding innovation and quality-improving innovation. R&D subsidies on quality-improving innovation only have effects in the fully-endogenous-growth regime, in which a higher subsidy rate leads to an earlier activation of quality-improving innovation and increases the transitional and steady-state growth rate. R&D subsidies on variety-expanding innovation have contrasting effects in the two regimes. In the semi-endogenous-growth regime, a higher subsidy rate on variety-expanding innovation increases transitional growth but has no effect on steady-state growth. In the fully-endogenous-growth regime, a higher subsidy rate on variety-expanding innovation continues to increase short-run growth but delays the activation of quality-improving innovation and reduces long-run growth. Increasing R&D subsidies on variety-expanding (quality-improving) innovation makes the semi-endogenous-growth (fully-endogenous-growth) regime more likely to emerge in equilibrium.
    Keywords: R&D subsidies; innovation; endogenous growth regimes
    JEL: O3
    Date: 2019–06
  2. By: Boudreaux, Christopher; Caudill, Steven
    Abstract: This study questions the assumption that entrepreneurship unequivocally leads to economic growth. Using insights from institutional theory and development economics, we reevaluate entrepreneurship’s contribution towards economic growth. Our study uses Global Entrepreneurship Monitor (GEM) data for a panel of 83 countries from 2002 to 2014 and highlights several important findings. First, our evidence suggests that entrepreneurship encourages economic growth but not in developing countries. Second, we find that a country’s institutional environment—measured by GEM’s Entrepreneurial Framework Conditions (EFCs)—contributes to economic growth in more developed countries but not in developing countries. Lastly, we find that opportunity-motivated entrepreneurship encourages economic growth in developed countries, while necessity-motivated entrepreneurship discourages economic growth in developing countries. These findings have important policy implications. Namely, our evidence contradicts policy proposals that suggest entrepreneurship and the adoption of pro-market institutions that support it will encourage economic growth in developing countries. Our evidence suggests these policy proposals are unlikely to generate the desired economic growth.
    Keywords: Entrepreneurship, Institutions, Economic Growth, Policy, Global Entrepreneurship Monitor, Developing Countries
    JEL: L26 L53 M13 O43 O47
    Date: 2019–06–01
  3. By: Fukao, Kyoji; Paul, Saumik
    Abstract: Extending the literature on productivity convergence to a multi-sector growth framework, we show that 𝜎-convergence in regional productivity growth can be decomposed into 𝜎-convergence in sectoral productivity growth and 𝜎-convergence in structural transformation-led productivity growth. Empirical support is provided using novel historical datasets at the Japanese prefecture level from 1874 to 2008. In pre-war Japan (1874–1940), regional convergence was primarily driven by productivity growth in the secondary sector. The rapid productivity convergence within the secondary and tertiary sectors relative to that in the primary sector between 1890 and 1940 provided an important base for the large convergence effects of structural transformation in the post-war years through a larger sectoral productivity gap in the lagging regions compared to the leading regions. However, the pace of regional convergence gradually slowed down and since the early 1970s the 𝜎-convergence of structural transformation has been offset by the 𝜎-divergence of within-sector productivity growth and vice versa, thwarting the pace of convergence in aggregate productivity.
    Keywords: Structural transformation, Labor productivity, Regional convergence, Japan
    JEL: O40 O10
    Date: 2017–08
  4. By: Boxell, Levi; Dalton, John T.; Leung, Tin Cheuk
    Abstract: Can the slave trade explain Africa's propensity for conflict? Using variation in slave exports driven by the interaction between foreign demand shocks and heterogeneity in trade costs, we show that the slave trade increased conflict propensities in pre-colonial Africa and that this effect has persisted to the present. Moreover, we find empirical evidence suggesting two related mechanisms for this persistence--natural resources and national institutions. These results "decompress" history by connecting the short-run and long-run effects of the African slave trade.
    Keywords: slave trade; conflict; resource curse; institutions; Africa
    JEL: N47 N57 O13
    Date: 2019–06–13
  5. By: Bahar, Dany (Brookings Institution); Choudhury, Prithwiraj (Harvard Business School); Rapoport, Hillel (Paris School of Economics)
    Abstract: We investigate the relationship between the presence of migrant inventors and the dynamics of innovation in the migrants' receiving countries. We find that countries are 25 to 50 percent more likely to gain advantage in patenting in certain technologies given a twofold increase in the number of foreign inventors from other nations that specialize in those same technologies. For the average country in our sample this number corresponds to only 25 inventors and a standard deviation of 135. We deal with endogeneity concerns by using historical migration networks to instrument for stocks of migrant inventors. Our results generalize the evidence of previous studies that show how migrant inventors "import" knowledge from their home countries which translate into higher patenting. We complement our results with micro-evidence showing that migrant inventors are more prevalent in the first bulk of patents of a country in a given technology, as compared to patents filed at later stages. We interpret these results as tangible evidence of migrants facilitating the technology-specific diffusion of knowledge across nations.
    Keywords: innovation, migration, patent, technology, knowledge
    JEL: O31 O33 F22
    Date: 2019–05
  6. By: Broadberry, Stephen (Nuffield College, Oxford, CEPR and CAGE); Gardner, Leigh (London School of Economics and Stellenbosch University)
    Abstract: Estimates of GDP per capita are provided on an annual basis for eight Sub-Saharan 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: JEL Classification:
    Date: 2019
  7. By: Shah, Syed Sibghatullah
    Abstract: Trust among individuals in society may have various economic and social implications. Though, worldwide data on economic growth rarely consider trust as an ingredient in manipulating economic outcomes. Thus, we include trust instigating from individual, affecting community and state thus, forming trust-based economy. In order to explore the relationship of trust with growth and its benefits implications, this study suggests a model which is validated by Markov process. Consequently, results indicate significant impact of trust on economic growth by achieving convergence in very few iterations in the case of trust-based economy. On the other hand, economy with lowest trust level shows delayed convergence and takes around 4 times more iterations to attain equilibrium. Additionally, socio-economic benefits are more visible in a trust-based economy.
    Keywords: Trust, Markov process, Equilibrium, Convergence, Economic Growth
    JEL: C15 C53 D71 E21 H20 O47 Z10 Z13
    Date: 2019–05–23
  8. By: Ziesemer, Thomas (UNU-MERIT)
    Abstract: We sub-divide scale-invariant fully or semi-endogenous growth models into six sub-categories for formulas relating steady-state growth rates of income per capita and the growth rate of the population depending on the properties of slopes and intercepts. We capture their steady-state relation by a long-term relation in panel vector-error-correction models for 16 countries, and estimate the 16 models simultaneously allowing successively for more heterogeneity. The slope and intercepts of the growth equations are positive in this setting under slope homogeneity but less significant or even negative when allowing for heterogeneity. Slopes are mostly non-positive. Intercepts are positive for a large majority of countries. Results therefore favour fully over semi-endogenous growth with and without slope homogeneity and allow for growth rate policies. The more frequent case is that long-run growth can remain positive if population stops growing. Analysis of cross-unit cointegration suggests that long-run results are internationally connected.
    Keywords: Endogenous growth, population growth, panel times series estimation
    JEL: C33 O47
    Date: 2019–06–11
  9. By: Thomas Sampson
    Abstract: This paper studies the origins and consequences of international technology gaps. I develop an endogenous growth model where R&D efficiency varies across countries and productivity differences emerge from firm-level technology investments. The theory characterizes how innovation and learning determine technology gaps, trade and global income inequality. Countries with higher R&D efficiency are richer and have comparative advantage in more innovation-dependent industries where the advantage of backwardness is lower and knowledge spillovers are more localized. I estimate R&D efficiency by country and innovation-dependence by industry from R&D and bilateral trade data. Calibrating the model implies technology gaps, due to cross-country differences in R&D efficiency, account for around one-quarter to one-third of nominal wage variation within the OECD.
    Keywords: technology gaps, trade, technology investment, Ricardian comparative advantage, international income inequality
    JEL: F11 F43 O14 O41
    Date: 2019–06
  10. By: Jess Benhabib; Bálint Szőke
    Abstract: We generalize recent results of Bassetto and Benhabib (2006) and Straub and Werning (2018) in a model with endogenous labor-leisure choice where all agents are allowed to save and accumulate capital. In particular, using a neoclassical infinite horizon model with standard balanced growth preferences and agents heterogeneous in their initial wealth holdings, we provide a sufficient condition under which optimal redistributive capital taxes can remain at their allowed upper bound forever, even if the resulting equilibrium trajectory converges to a unique steady state with positive and finite consumption, capital, and labor. We first generate some simple parametric examples which satisfy our sufficient condition and for which closed form solutions exist. We then provide an interpretation of our sufficient condition for equilibria induced by general constant returns neo-classical production functions. Using recent evidence on wealth distribution in the United States, we argue that our sufficient condition is empirically plausible.
    JEL: E62 H21 H23
    Date: 2019–05
  11. By: Maxime Menuet (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper develops a discrete-time stochastic endogenous growth model to study the amplification role of fiscal rules. In our model, transitory shocks exert permanent effects on the level of variables in equilibrium (hysteresis), and can be strongly amplified by the public debt adjustment, leading to a procyclical amplification mechanism (the "public debt accelerator"). This procyclical stance depends on the speed of adjustment of the debt-to-GDP ratio under a fixed-fiscal rule. A cold turkey strategy removes the public debt shock, but at the risk of destabilizing other variables, while a gradualist strategy has a stabilization effect, with detrimental consequences in the long-run. Finally, we show that a flexible-fiscal rule helps smooth aggregate variables by limiting the cuts in productive public spending.
    Keywords: Endogenous growth model,Hysteresis,Fiscal Rules
    Date: 2019–06–12
  12. By: Prados de la Escosura, Leandro (Universidad Carlos III, CEPR, and CAGE)
    Abstract: This paper provides a long run view of human development as a capabilities measure of well-being for the last one-and-a-half centuries on the basis of an augmented historical human development index [AHHDI] that combines achievements in health, education, living standard, plus liberal democracy, and provides an alternative to the UN Human Development Index, HDI. The AHHDI shows substantial gains in world human development since 1870, especially during 1913-1970, but much room for improvement exists. Life expectancy has been the leading force behind its progress, especially until 1970. Human development spread unevenly. The absolute gap between western Europe and its offshoots plus Japan -the OECD- and the Rest of the world deepened over time, though fell in relative terms, with catching-up driven by longevity during the epidemiological transition and by democratization thereafter. This result compares favourably with the growing income gap. Economic growth and human development do not always go hand-in-hand.
    Keywords: Human Development, Well-being, Capabilities, Life Expectancy, Health Transition, Schooling, Income, Liberal Democracy. JEL Classification: I00, N30, O15
    Date: 2019
  13. By: Ha-Huy, Thai; Tran, Nhat-Thien
    Abstract: This article considers an inter-temporal optimization problem in a fairly general form and give sufficient conditions ensuring the convergence to infinity of the economy. These conditions are easy to verify and can be applied for a large class of problems in literature. As examples, some applications for different economies are also given.
    Keywords: Unbounded growth, sustained growth, non-convex dynamic programming
    JEL: C02 C61 O4 O40 O41
    Date: 2019–05–21

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