nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒07‒08
ten papers chosen by
Marc Klemp
University of Copenhagen

  1. Time for Growth By Severgnini, Battista; Boerner, Lars
  2. The Historical Roots of Ethnic Differences: The Role of Geography and Trade By Andrew Dickens
  3. Fertility and Modernity By Enrico Spolaore; Romain Wacziarg
  4. The decades-long dispute over scale effects in the theory of economic growth By Steven Bond-Smith
  5. Individualism and Venture Capital: A Cross-Country Study By Pascal Gantenbein; Axel Kind; Christophe Volonte
  6. Catch-Up Growth and Inter-Industry Productivity Spillovers By Bolhuis, Marijn
  7. High Wages or Wages For Energy? An Alternative View of The British Case (1645-1700) By José L. Martínez González
  8. Persistence of entrepreneurship in different historical contexts By Michael Fritsch; Korneliusz Pylak; Michael Wyrwich
  9. Does Culture Matter? A Test of the Harrison Hypothesis By Colin A. Moore; Elizabeth Mubanga Chishimba; Paul N. Wilson
  10. Is the relationship between infrastructure and economic growth symmetric or asymmetric? evidence from Indonesia based on linear and non-linear ARDL By Maruf, Aminudin; Masih, Mansur

  1. By: Severgnini, Battista (Department of Economics, Copenhagen Business School); Boerner, Lars
    Abstract: This paper studies the impact of the early adoption of one of the most important high-technology machines in history, the public mechanical clock, on long-run growth in Europe. We avoid endogeneity by considering the relationship between the adoption of clocks with an instrument based on the appearance of repeated solar eclipses. This is motivated by the predecessor technologies of mechanical clocks, astronomic instruments that measured the course of heavenly bodies. We find a significant increase in growth rates between 1500 and 1700 in the range of 30 percentage points in early adopter cities and areas. Finally, additional quantitative analysis suggests a positive relationship between mechanical clocks and contemporary long-term orientation nowadays.
    Keywords: technological adoption; cities; mechanical clocks; information technology; long-term orientation
    JEL: N13 N93 O33
    Date: 2019–03–28
  2. By: Andrew Dickens (Department of Economics, Brock University)
    Abstract: The impact of ethnic divisions on economic growth and development are well understood, yet there is little known about the source of these divisions. This study takes the importance of ethnic group differences as given, and goes a step deeper to explore the geographic and economic foundation of group differences. I construct a novel georeferenced dataset to examine the border region of spatially adjacent ethnic groups, together with variation in the set of potentially cultivatable crops at the onset of the Columbian Exchange, to identify how variation in land productivity impacts linguistic differences between adjacent ethnic groups. I find that ethnic groups separated across geographic regions with high variation in land productivity are more similar in language than groups separated across more homogeneous regions. This finding is consistent with the proposed mechanism: historical trade was more frequent in these high variation regions and the frequency of trade served as a social tie between culturally distinct ethnic groups. To highlight this mechanism, I show that the productivity of a tract of land predicts a group’s historical mode of subsistence, where high productivity regions relied on agriculture and low productivity regions relied on pastoralism. Taken together, these findings suggest that geographic regions with high variation in land productivity relied on various modes of subsistence, thus creating an opportunity for trade. I then document the persistence of this fact with suggestive evidence that neighbouring ethnic groups in close proximity to Old World trade routes are more similar in language today.
    Date: 2019–06
  3. By: Enrico Spolaore; Romain Wacziarg
    Abstract: We investigate the determinants of the fertility decline in Europe from 1830 to 1970 using a newly constructed dataset of linguistic distances between European regions. We find that the fertility decline resulted from a gradual diffusion of new fertility behavior from French-speaking regions to the rest of Europe. We observe that societies with higher education, lower infant mortality, higher urbanization, and higher population density had lower levels of fertility during the 19th and early 20th century. However, the fertility decline took place earlier and was initially larger in communities that were culturally closer to the French, while the fertility transition spread only later to societies that were more distant from the cultural frontier. This is consistent with a process of social influence, whereby societies that were linguistically and culturally closer to the French faced lower barriers to the adoption of new social norms and attitudes towards fertility control.
    JEL: J13 N13 O40
    Date: 2019–06
  4. By: Steven Bond-Smith (Bankwest Curtin Economic Centre, Curtin University)
    Abstract: The so-called ‘new growth theory’ is characterized by the now Nobel Prize winning insight that ideas are a non-rival input to and output from endogenous investment in innovation. Non-rivalry implies increasing returns to scale, but this also unintentionally creates an empirically-disputed scale effect that a growing population implies an ever-increasing growth rate. Empirical evidence supports fully-endogenous growth without scale effects, but theoretical issues sustain the decades-long dispute over exactly how to negate the scale effect. This article surveys theoretical approaches to resolving the scale effect and shows how four generations of endogenous growth theory are defined by the maturing of modeling techniques for constraining increasing returns. The synthesis suggests that the dispute over scale effects is really a narrative about how the powerful application of increasing returns has followed a standard theoretical development pattern. This implies that a fourth generation is now emerging that negates the scale effect while retaining fully-endogenous growth without relying on assumptions of linearity. Instead, the market response to excessive increasing returns to innovation constrains explosive growth by expanding the market, rather than by a linear assumption. This latest class of endogenous growth models may be the final chapter to resolving the long running dispute.
    Keywords: endogenous growth, scale effects, increasing returns, innovation, invention
    JEL: E10 L16 O41
    Date: 2019–03
  5. By: Pascal Gantenbein (University of Basel, Faculty of Business and Economics, Switzerland); Axel Kind (University of Konstanz, Department of Economics, Universitätsstrasse 10, D-78457 Konstanz, Germany); Christophe Volonte (University of Basel, Faculty of Business and Economics, Switzerland)
    Abstract: We investigate the effect of individualism – a dimension of culture that is strongly associated with entrepreneurship – on venture-capital investments using a large cross-country sample. Our sample consists of 1,496 country-year observations and includes 88 countries from 1998 to 2014. Controlling for economic conditions, the legal environment, and different aspects of culture, we find that individualism is positively and significantly related to venture-capital investments and explains 30% of cross-country variation. This result is stable across different subsamples, several measures of venture-capital investments, and even holds when using the political system 200 years ago as an instrument for individualism. The quality of formal institutions (rule of law) and entrepreneurial attitudes (uncertainty avoidance) partially mediate the effect of individualism on venture-capital investments, while economic conditions (GDP per capita) moderate this effect.
    Keywords: Comparative Entrepreneurship; Cultural values; Individualism; Institutions; Venture Capital
    Date: 2019–06–25
  6. By: Bolhuis, Marijn
    Abstract: Developing economies tend to export more skill-intensive products as they become more productive. This paper provides a new tractable, quantitative framework to examine the role of inter-industry productivity spillovers in this development process. I start by documenting that a country’s comparative advantage tends to increase in industries that employ occupations that are used most intensively in current exports. In the model, productivity growth is driven by occupation-specific dynamic scale economies, which generate productivity spillovers between occupationally similar sectors. By exploiting cross-sector heterogeneity in foreign demand shocks, I find that dynamic scale economies are substantial in high-skilled production but negligible in low-skilled production. As a result, inter-industry productivity spillovers are larger in richer countries, and access to foreign markets allows developing countries to shift labor into sectors that contribute more to aggregate productivity growth. The model can account for a substantial share of the variation in aggregate and industry-level labor productivity growth across developing economies. Counterfactual exercises suggest that inter-industry spillovers play a quantitatively substantial role in accounting for slow cross-country convergence. Moreover, spillovers increase the gains from trade, especially in developing economies with a comparative advantage in manufacturing.
    Keywords: Productivity; Convergence; Spillovers; Dynamic scale economies; Comparative advantage; Exports
    JEL: F1 F4 O1 O3 O4
    Date: 2019–06–16
  7. By: José L. Martínez González (University of Barcelona)
    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: Energy, physical activity, subsistence wages, incomes, wage gap, Malthusian trap, Seventeenth Century, England
    JEL: B11 J30 N13 N33 N53 N73 Q43 Q54
    Date: 2019–06
  8. By: Michael Fritsch; Korneliusz Pylak; Michael Wyrwich
    Abstract: Persistence of entrepreneurship over longer periods of time could indicate a culture of entrepreneurship among the local population that may be an important factor for regional development, but does persistence of economic activity require cultural transmission? We exploit the diverse historical developments in the territory that is Poland today to analyze the level and the sources of persistence from the 1920s until today. Persistence is mainly found in those regions that were part of Germany before World War II. This persistence is noticeable despite the exchange of most of the pre- war population, ruling out that persistence is driven by transmission of culture. In most regions that were already part of Poland before World War II, the relationship between historical and current levels of entrepreneurship is not significant. Persistence of entrepreneurship is related to the historical success of regions, which we capture by the pre-war level of and self- employment in manufacturing industries, particularly in those that can be regarded as knowledge intensive. Our main conclusion is that persistence of entrepreneurship requires a certain level of successful economic development that we capture by the degree of industrialization in the early 20th century, but it does not necessarily require persistence of the local population.
    Keywords: Persistence, entrepreneurship, self-employment
    JEL: L26 M13 O1 O18 R11
    Date: 2019–06
  9. By: Colin A. Moore; Elizabeth Mubanga Chishimba; Paul N. Wilson
    Abstract: This study utilizes unique data from the World Values Survey to test the hypothesis that fatalism and the practice of the Golden Rule influence the economic development of nations. We use standard econometric models that account for endogeneity to understand the relative roles of culture, productivity, institutions, and geography in explaining human flourishing. Our analysis supports Harrison’s cultural hypothesis and demonstrates that fatalism and altruism’s explanatory powers, in our full model, are no less powerful than productivity, institutions, and geography in explaining economic performance. However, transforming existing fatalistic and altruistic attitudes in a positive direction using public policy to provide greater support for human flourishing may prove more challenging than overcoming other development constraints.
    Keywords: International Development
    Date: 2019–06–28
  10. By: Maruf, Aminudin; Masih, Mansur
    Abstract: Although there are a number of studies on the relationship between infrastructure and economic growth, this study is the first attempt at investigating whether the relationship between infrastructure and economic growth is symmetric or asymmetric in Indonesia. Using the non-linear ARDL technique, this study employs quarterly data from 1990:Q1 – 2016:Q1. The paper finds a long-run asymmetric relationship between infrastructure and economic growth but symmetric relationship in the short-run. Moreover, this study also finds the causal direction of economic development in Indonesia from gross fixed capital formation to labor. The paper suggests the expansion of investment in the infrastructural industry to boost the growth of the Indonesian economy. The study also urges the policy makers to design robust infrastructure policies guiding the infrastructure and country’s economy in both the short-run and long-run period.
    Keywords: Infrastructure, Economic Growth, Non-Linear ARDL, Indonesia
    JEL: C58 O4
    Date: 2019–06–22

This nep-gro issue is ©2019 by Marc Klemp. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.