nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒07‒22
eight papers chosen by
Marc Klemp
University of Copenhagen

  1. Skill-biased technological change, endogenous labor supply, and the skill premium By Knoblach, Michael
  2. Long-term macroeconomic effects of climate change: A cross-country analysis By Matthew E. Kahn; Kamiar Mohaddes; Ryan N. C. Ng; M. Hashem Pesaran; Mehdi Raissi; Jui-Chung Yang
  3. Commanding Nature by Obeying Her: A Review Essay on Joel Mokyr’s A Culture of Growth By Enrico Spolaore
  4. Development Priorities: The Relative Benefits of Agricultural Growth By Fabio Monteforte; Mathan Satchi; Jonathan Temple
  5. A Keynes + Schumpeter model to explain development, speculation and crises By Giancarlo Bertocco; Andrea Kalajzić
  6. Will this time be different? A review of the literature on the Impact of Artificial Intelligence on Employment, Incomes and Growth By Bertin Martens; Songül Tolan
  7. The human capital-economic growth nexus in SSA countries: What can strengthen the relationship? By Natalya Apopo; Ronney Ncwadi; Andrew Phiri
  8. Katugampola Generalized Conformal Derivative Approach to Inada Conditions and Solow-Swan Economic Growth Model By G. Fern\'andez-Anaya; L. A. Quezada-T\'ellez; B. Nu\~nez-Zavala; D. Brun-Battistini

  1. By: Knoblach, Michael
    Abstract: The evolution of the U.S. skill premium over the past century has been characterized by a U-shaped pattern. The previous literature has attributed this observation mainly to the existence of exogenous, unexpected technological shocks or changes in institutional factors. In contrast, this paper demonstrates that a U-shaped evolution of the skill premium can also be obtained using a simple two-sector growth model that comprises both variants of skill-biased technological change (SBTC): technological change (TC) that is favorable to high-skilled labor and capital-skill complementarity (CSC). Within this framework, we derive the conditions necessary to achieve a non-monotonic evolution of relative wages and analyze the dynamics of such a case. We show that in the short run for various parameter constellations an educational, a relative substitutability, and a factor intensity effect can induce a decrease in the skill premium despite moderate growth in the relative productivity of high-skilled labor. In the long run, as the difference in labor productivity increases, the skill premium also rises. To underpin our theoretical results, we conduct a comprehensive simulation study.
    Keywords: Skill-Augmenting Technological Change,Capital-Skill Complementarity,Skill Premium,Neoclassical Growth Model
    JEL: E24 J24 J31 O33 O41
    Date: 2019
  2. By: Matthew E. Kahn; Kamiar Mohaddes; Ryan N. C. Ng; M. Hashem Pesaran; Mehdi Raissi; Jui-Chung Yang
    Abstract: We study the long-term impact of climate change on economic activity across countries, using a stochastic growth model where labour productivity is affected by country-specific climate variables - defined as deviations of temperature and precipitation from their historical norms. Using a panel data set of 174 countries over the years 1960 to 2014, we find that per-capita real output growth is adversely affected by persistent changes in the temperature above or below its historical norm, but we do not obtain any statistically significant effects for changes in precipitation. Our counterfactual analysis suggests that a persistent increase in average global temperature by 0.04oC per year, in the absence of mitigation policies, reduces world real GDP per capita by 7.22 percent by 2100. On the other hand, abiding by the Paris Agreement, thereby limiting the temperature increase to 0.01oC per annum, reduces the loss substantially to 1.07 percent. These effects vary significantly across countries. We also provide supplementary evidence using data on a sample of 48 U.S. states between 1963 and 2016, and show that climate change has a long-lasting adverse impact on real output in various states and economic sectors, and on labour productivity and employment.
    Keywords: Climate change, economic growth, adaptation, counterfactual analysis
    JEL: C33 O40 O44 O51 Q51 Q54
    Date: 2019–07
  3. By: Enrico Spolaore
    Abstract: Why is modern society capable of cumulative innovation? In A Culture of Growth: The Origins of the Modern Economy, Joel Mokyr persuasively argues that sustained technological progress stemmed from a change in cultural beliefs. The change occurred gradually during the seventeenth and eighteenth century and was fostered by an intellectual elite that formed a transnational community and adopted new attitudes toward the creation and diffusion of knowledge, setting the foundation for the ethos of modern science. The book is a significant contribution to the growing literature that links culture and economics. This review discusses Mokyr’s historical analysis in relation to the following questions: What is culture and how should we use it in economics? How can culture explain modern economic growth? Will the culture of growth that caused modern prosperity persist in the future?
    JEL: N0 N13 N33 O3 O52 Z1
    Date: 2019–07
  4. By: Fabio Monteforte; Mathan Satchi; Jonathan Temple
    Abstract: Should agriculture or non-agriculture be a priority for development? We revisit this longstanding and intractable question using a two-sector, three-factor dynamic model with an asymptotic balanced growth path. The model allows a forward-looking assessment of development priorities based on lifetime welfare. A comparison of sector-specific productivity gains indicates that gains in non-agriculture are often more valuable, even when agriculture is initially the largest sector in terms of employment. We discuss the robustness of this result, including the roles of capital intensity, the discount rate, and taxes on profits in influencing the rates of investment and structural transformation
    Keywords: Structural transformation, agriculture, development policies, investment
    Date: 2019–06–21
  5. By: Giancarlo Bertocco (University of Insubria (IT)); Andrea Kalajzić
    Abstract: Recently, Dosi and his co-authors have developed a ‘Keynes+Schumpeter’ model which “endogenously generates self-sustained growth patterns together with persistent economic fluctuations ...”. The aim of this work is twofold. First, to show that the K+S model developed by Dosi and his co-authors does not allow to explain the instability that characterizes a capitalist economy. This limitation is due to the fact that the model overlooks some key elements of Schumpeter’s analysis. The second objective is to show that a solid K+S model can be built starting from the elements of Schumpeter’s theory neglected by Dosi and his co-authors.
    Keywords: bank money, innovations, crisis
    JEL: O11 O16 O42
    Date: 2019–07
  6. By: Bertin Martens (European Commission – JRC - IPTS); Songül Tolan (European Commission – JRC)
    Abstract: There is a long-standing economic research literature on the impact of technological innovation and automation in general on employment and economic growth. Traditional economic models trade off a negative displacement or substitution effect against a positive complementarity effect on employment. Economic history since the industrial revolution as strongly supports the view that the net effect on employment and incomes is positive though recent evidence points to a declining labour share in total income. There are concerns that with artificial intelligence (AI) "this time may be different". The state-of-the-art task-based model creates an environment where humans and machines compete for the completion of tasks. It emphasizes the labour substitution effects of automation. This has been tested on robots data, with mixed results. However, the economic characteristics of rival robots are not comparable with non-rival and scalable AI algorithms that may constitute a general purpose technology and may accelerate the pace of innovation in itself. These characteristics give a hint that this time might indeed be different. However, there is as yet very little empirical evidence that relates AI or Machine Learning (ML) to employment and incomes. General growth models can only present a wide range of highly diverging and hypothetical scenarios, from growth implosion to an optimistic future with growth acceleration. Even extreme scenarios of displacement of men by machines offer hope for an overall wealthier economic future. The literature is clearer on the negative implications that automation may have for income equality. Redistributive policies to counteract this trend will have to incorporate behavioural responses to such policies. We conclude that that there are some elements that suggest that the nature of AI/ML is different from previous technological change but there is no empirical evidence yet to underpin this view.
    Keywords: labour markets, employment, technological change, task-based model, artificial intelligence, income distribution,
    JEL: J62 O33
    Date: 2018–08
  7. By: Natalya Apopo (Department of Economics, Nelson Mandela University); Ronney Ncwadi (Department of Economics, Nelson Mandela University); Andrew Phiri (Department of Economics, Nelson Mandela University)
    Abstract: The World Bank has recently placed increasing emphasis on the role of human capital development in facilitating economic development in the Sub-Saharan African (SSA) region. Our study examines the impact of human capital on economic growth for a selected sample of 9 SSA countries between 1980 and 2016 using a panel econometric approach. Interestingly enough, our empirical analysis shows an insignificant effect of human capital on economic growth for our selected sample. These findings remain unchanged even after adding interactive terms to human capital which are representative of government spending as well as foreign direct investment. Nevertheless, we establish a positive and significant effect of the interactive term between urbanization and human capital on economic growth, a result which emphasizes the importance of developing urbanized, ‘smart’, technologically-driven cities within the SSA region as a platform towards strengthening the impact of human capital- economic growth relationship.
    Keywords: Efficient Market Hypothesis (EMH); Cryptocurrencies; Random Walk Model (RWM); Flexible Fourier Form (FFF) unit root tests; Smooth structural breaks.
    JEL: C22 C32 C51 E42 G14
    Date: 2019–07
  8. By: G. Fern\'andez-Anaya; L. A. Quezada-T\'ellez; B. Nu\~nez-Zavala; D. Brun-Battistini
    Abstract: This article shows a new focus of mathematic analysis for the Solow-Swan economic growth model, using the generalized conformal derivative Katugampola (KGCD). For this, under the same Solow-Swan model assumptions, the Inada conditions are extended, which, for the new model shown here, depending on the order of the KGCD. This order plays an important role in the speed of convergence of the closed solutions obtained with this derivative for capital (k) and for per-capita production (y) in the cases without migration and with negative migration. Our approach to the model with the KGCD adds a new parameter to the Solow-Swan model, the order of the KGCD and not a new state variable. In addition, we propose several possible economic interpretations for that parameter.
    Date: 2019–06

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