nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒09‒16
nineteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Technology Adoption in Agrarian Societies: the Effect of Volga Germans in Imperial Russia By Timur Natkhov; Natalia Vasilenok
  2. The Economics of Missionary Expansion: Evidence from Africa and Implications for Development By Jedwab, Rémi; Meier zu Selhausen, Felix; Moradi, Alexander
  3. Geography, Geology, and Regional Economic Development By Kevin Berry; Alexander James; Brock Smith; Brett Watson
  4. "Diversity and Conflict" By Cemal Eren Arbath; Quamrul H. Ashraf; Oded Galor; Marc Klemp
  5. Uncertainty-Induced Reallocations and Growth By Ravi Bansal; Mariano Max Croce; Wenxi Liao; Samuel Rosen
  6. Corruption and Economic Growth: New Empirical Evidence By Klaus Gründler; Niklas Potrafke
  7. Working for a Living? Women and Children’s Labour Inputs in England, 1260-1850 By Sara Horrell; Jane Humphries; Jacob Weisdorf
  8. Public Debt, Redistribution, and Growth By Axelle Ferriere; Dominik Sachs; Philipp Grubener
  9. Cities of Workers, Children or Seniors? Age Structure and Economic Growth in a Global Cross-Section of Cities By Remi Jedwab; Daniel Pereira; Mark Roberts
  10. Remittances and economic growth : Empirical evidence from South Africa By Nyasha, Sheilla; Odhiambo, Nicholas M
  11. Does remittance inflow granger-cause economic growth in South Africa? A dynamic multivariate causality test By Nyasha, Sheilla; Odhiambo, Nicholas M
  12. The macroeconomic consequences of artificial intelligence: A theoretical framework By Huang, Xu; Hu, Yan; Dong, Zhiqiang
  13. Threshold Effects of Inequality on Economic Growth in the US States: The Role of Human Capital to Physical Capital Ratio By Oguzhan Cepni; Rangan Gupta; Zhihui Lv
  14. Structural Change, Capital Deepening, and TFP Growth in Japan : 1885-1970 By Fukao, Kyoji; Makino, Tatsuji; Settsu, Tokihiko
  15. The role of ICT in modulating the effect of education and lifelong learning on income inequality and economic growth in Africa By Vanessa S. Tchamyou; Simplice A. Asongu; Nicholas M. Odhiambo
  16. Causality between public debt, public debt service and economic growth: Evidence from South Africa By Saungweme, Talknice; Odhiambo, Nicholas M
  17. The Great Divergence in South Africa: Population and Wealth Dynamics Over Two Centuries By von Fintel, Dieter; Fourie, Johan
  18. ECONOMIC GROWTH IN SUB-SAHARAN AFRICA, 1885-2008 By Stephen Broadberry; Leigh Gardner
  19. On the transmission channels for the resource curse By K. Peren Arin; Elias Braunfels; Christina Zenker

  1. By: Timur Natkhov (National Research University Higher School of Economics); Natalia Vasilenok (National Research University Higher School of Economics)
    Abstract: This paper examines technology adoption in pre-industrial societies. We use the case of a technologically advanced and spatially concentrated German minority in Saratov province of the Russian Empire to study adoption patterns among Russian peasants in late 19th–early 20th century. We find that distance from German colonies predicts the prevalence of heavy ploughs, fanning mills and wheat sowing among Russians, who traditionally sowed rye and plowed with wooden ard (sokha). We show a significant rise in labor productivity in agriculture resulting from the adoption of heavy ploughs. However, we find no evidence for the adoption of non-codified knowledge like blacksmithing, carpentry, textile manufacture, tanning and other artisan skills. Hence, the adoption of advanced tools does not necessary induce the diffusion of skills required to produce those tools. This may well be the key to the problem of slow technological convergence
    Keywords: technology adoption, economic development, agriculture, Russian Empire
    JEL: N33 N53 I15 O15
    Date: 2019
  2. By: Jedwab, Rémi (African Economic History Network); Meier zu Selhausen, Felix (African Economic History Network); Moradi, Alexander (African Economic History Network)
    Abstract: How did Christianity expand in sub-Saharan Africa to become the continent’s dominant religion? Using annual panel data on all Christian missions from 1751 to 1932 in Ghana, as well as cross-sectional data on missions for 43 sub-Saharan African countries in 1900 and 1924, we shed light on the spatial dynamics and determinants of this religious diffusion process. Missions expanded into healthier, safer, more accessible, and more developed areas, privileging these locations first. Results are confirmed for selected factors using various identification strategies. This pattern has implications for extensive literature using missions established during colonial times as a source of variation to study the long-term economic effects of religion, human capital and culture. Our results provide a less favorable account of the impact of Christian missions on modern African economic development. We also highlight the risks of omission and endogenous measurement error biases when using historical data and events for identification.
    Keywords: Economics of Religion; Religious Diffusion; Path Dependence; Economic Development; Compression of History; Measurement; Christianity; Africa
    JEL: N30 N37 N95 O12 O15 Z12
    Date: 2019–09–06
  3. By: Kevin Berry (University of Alaska Anchorage); Alexander James (University of Alaska Anchorage); Brock Smith (Montana State University); Brett Watson (University of Alaska Anchorage)
    Abstract: We examine long-run development effects of regional productivity shocks in the United States. We exploit the timing and location of large resource discoveries to measure exogenous variation in labor demand and consider heterogeneous effects based on environmental amenity and geographic isolation, developing novel measures of both. Using a dynamic event-study analysis we find that productivity shocks increase population both in the short and long-run, but this largely refl ects the experience of low amenity, geographically isolated places that may otherwise struggle to develop. Moreover, this study offers several insights into the observed spatial pattern of development in the United States.
    Keywords: Natural-Resource Discoveries; Regional Development; Long-Run Growth; Geography; Environmental Amenities; Resource Economics
    JEL: Q32 Q33 R11
    Date: 2019–08
  4. By: Cemal Eren Arbath; Quamrul H. Ashraf; Oded Galor; Marc Klemp
    Abstract: This research advances the hypothesis and establishes empirically that interpersonal population diversity, rather than fractionalization or polarization across ethnic groups, has been pivotal to the emergence, prevalence, recurrence, and severity of intrasocietal conflicts. Exploiting an exogenous source of variations in population diversity across nations and ethnic groups, as determined predominantly during the exodus of humans from Africa tens of thousands of years ago, the study demonstrates that population diversity, and its impact on the degree of diversity within ethnic groups, has contributed significantly to the risk and intensity of historical and contemporary civil conflicts. The findings arguably reflect the contribution of population diversity to the non-cohesivnesss of society, as reflected partly in the prevalence of mistrust, the divergence in preferences for public goods and redistributive policies, and the degree of fractionalization and polarization across ethnic, linguistic, and religious groups.
    Date: 2019
  5. By: Ravi Bansal; Mariano Max Croce; Wenxi Liao; Samuel Rosen
    Abstract: Focusing on both micro and aggregate U.S. data, we show the existence of a significant link between aggregate uncertainty and reallocation of resources away from R&D-intensive capital. This link is important because a decrease in the aggregate share of R&D-oriented capital forecasts lower medium-term growth. In a multi-sector production economy in which (i) growth is endogenously supported by risky R&D investments, and (ii) the representative agent is volatility-risk averse and has access to other safer technologies that do not support growth, uncertainty shocks have a first-order negative impact on medium-term growth and welfare.
    JEL: E3 E6 G18
    Date: 2019–09
  6. By: Klaus Gründler; Niklas Potrafke
    Abstract: The nexus between corruption and economic growth has been examined for a long time. Many empirical studies measured corruption by the reversed Transparency International’s Perception of Corruption Index (CPI) and ignored that the CPI was not comparable over time. The CPI is comparable over time since the year 2012. We employ new data for 175 countries over the period 2012-2018 and re-examine the nexus between corruption and economic growth. The cumulative long-run effect of corruption on growth is that real per capita GDP decreased by around 17% when the reversed CPI increased by one standard deviation. The effect of corruption on economic growth is especially pronounced in autocracies and transmits to growth by decreasing FDI and increasing inflation.
    Keywords: perceived corruption, economic growth, panel data
    JEL: C23 H11 K40 O11
    Date: 2019
  7. By: Sara Horrell; Jane Humphries; Jacob Weisdorf
    Abstract: We use new estimates of men, women, and children’s wages in combination with cost-of-living indices to explore family living standards across six centuries of English history. A family perspective enables us to quantify the labour inputs required from women and children in circumstances when men’s earnings alone were insufficient to secure a decent standard of living, and so to register the historical relevance of the male breadwinner model. We employ a life-cycle approach where pre-marital savings help married couples manage increasing numbers of dependent children as well as other periods of economic pressure. We find that the male breadwinner model was generally insufficient for a ‘respectable’ standard of living; women and sometimes children were required to contribute and, even then, couples still faced poverty during old age. However, with the exception of the pre-Black Death period and the first half of the 17th-century, child labour was not essential and in the early modern era and old-age poverty was in retreat. We reconcile our findings with evidence of a surge in child-labour in the late 1700s and early 1800s, with reference to early modern economic growth, and its association with industriousness and consumerism, twin developments which served to stimulate the Industrial Revolution.
    Keywords: Living Standards; Prices, Wages
    JEL: J22 N13 O10
    Date: 2019–08–30
  8. By: Axelle Ferriere (PSE); Dominik Sachs (LMU Munich); Philipp Grubener (EUI)
    Abstract: We study the implications of economic growth for the generosity and the financing of the welfare state. In a simple model without savings, we first derive some benchmark conditions under which both the generosity of the welfare state and tax progressivity are independent of the level of economic development. This homothetic benchmark extends to the case of external public debt if the interest rate equals a threshold which depends not only on preference parameters, but also on the growth rate. When growth rates are high and interest rates are be- low this threshold, governments of growing economies should issue public debt to finance a generous welfare state initially; tax progressivity will then increase eventually to finance the service of the debt. We show that this force is quantitatively large. Finally, homotheticity also extends to internal savings between the government and the private agents, as long as there is no initial wealth inequality across agents: the optimal welfare state and tax progressivity are constant and the endogenous interest rate is such that there is no savings. Next, we break homotheticity by introducing subsistence levels. We analytically show that in autarky, positive subsistence levels imply a more generous welfare state at earlier stages of development, financed with more progressive taxes. When allowing for external borrowing, even at the interest rate threshold for which there is no motive for borrowing in the homothetic benchmark, subsistence levels translate into interesting dynamics. The welfare state should be more generous initially, but this should solely be financed with public debt. The standard tax smoothing result remains. With internal debt, the government should use public debt to finance an initially more generous welfare state. However, optimal tax progressivity initially increases. The increase in tax progressivity is desirable because it improves the terms of trade for the government. Finally, we study the effects of initial asset inequality. Preliminary analytical results suggest that wealth inequality generate a force for increasing tax progres- sivity to improve the terms of trade for the poor households. The magnitude of this price manipulation mechanism depends on initial and future growth.
    Date: 2019
  9. By: Remi Jedwab (George Washington University); Daniel Pereira (George Washington University); Mark Roberts (The World Bank)
    Abstract: A large literature documents the positive influence of a city’s skill structure on its rate of economic growth. By contrast, the effect of a city’s age structure on its economic growth has been a hitherto largely neglected area of research. We hypothesize that cities with more working-age adults are likely to grow faster than cities with more children or seniors and set-out the potential channels through which such differential growth may occur. Using data from a variety of historical and contemporary sources, we show that there exists marked variation in the age structure of the world’s largest cities, both across cities and over time. We then study how age structure affects economic growth for a global cross-section of mega-cities. Using various identification strategies, we find that mega-cities with higher dependency ratios - i.e. with more children and/or seniors per working-age adult - grow significantly slower. Such effects are particularly pronounced for cities with high shares of children. This result appears to be mainly driven by the direct negative effects of a higher dependency ratio on the size of the working-age population and the indirect effects on work hours and productivity for working age adults within a city.
    Keywords: Urbanization; Cities; Age Structure; Dependency Ratios; Children; Ageing; Demographic Cycles; Agglomeration Effects; Human Capital; Growth; Development
    JEL: R10 R11 R19 J11 J13 J14 O11 N30
    Date: 2019
  10. By: Nyasha, Sheilla; Odhiambo, Nicholas M
    Abstract: In this paper, we have empirically examined the impact of remittances on economic growth in South Africa over the period from 1970-2017. The study was motivated by the conflicting empirical findings that have emerged in the literature on the impact of remittance on economic growth in various countries. The study was also motivated by the need to find an empirical backing on the assertion that remittances are good for economic growth and can play a key role in lowering the inequality levels in developing countries. Using the autoregressive distributed lag (ARDL) bounds testing approach, the empirical results, contrary to expectations, have revealed that in South Africa, remittances have a negative impact on economic growth, irrespective of whether the regression analysis is conducted in the long run, or in the short run. The study, therefore, cautions policy makers when it comes to policies related to harnessing remittances for economic growth. The study argues that it is not only remittance inflows that matter, but also how the remittances are utilised to influence economic growth.
    Keywords: Remittances, Economic Growth; South Africa
    Date: 2019–08
  11. By: Nyasha, Sheilla; Odhiambo, Nicholas M
    Abstract: In this study we examine the dynamic causal relationship between remittances and economic growth in South Africa during the period from 1970 to 2017. Although South Africa is well known for being a source of cross-border remittances to various countries, especially in the African continent, remittance inflows to South Africa have grown in the recent past. The growth in remittances on the one hand, and the need to fight against poverty and inequality in South Africa and ultimately improve economic growth, on the other hand, prompted the need for this study. The study uses the autoregressive distributed lag (ARDL) approach within a multivariate Granger-causality setting to examine the remittance-growth causal link ? in an effort to address the variable omission bias. The empirical findings of the study show that remittances and economic growth are not causally related in South Africa, irrespective of whether the estimations are done in the long run or in the short run. This finding, though contrary to the expectation, is not surprising, given the level of financial sector development South African.
    Keywords: Remittances; Economic Growth; South Africa; Granger-Causality
    Date: 2019–08
  12. By: Huang, Xu; Hu, Yan; Dong, Zhiqiang
    Abstract: The authors explore the impact of artificial intelligence on the economy by improving the neoclassical production function and the task-based model. Based on the capital accumulation of artificial intelligence and technological progress, they present a theoretical model that explores the effect of alternative and complementary artificial intelligence on wages, capital prices, labor share, capital share and economic growth. The model shows that artificial intelligence capital lowers the capital prices and increases wages. In addition, if artificial intelligence and labor force are complementary, artificial intelligence capital has a positive impact on labor share, but if artificial intelligence and labor force can substitute each other, labor share is negatively influenced by artificial intelligence capital. The authors extend the task-based model and find that technological progress increases both wages and labor share by generating new tasks. In the long run, without consideration of exogenous technology, as the artificial intelligence capital accumulates, per capita output, per capita traditional capital and per capita artificial intelligence capital grow at the same rate, and economic growth finally reaches steady state equili- brium. With exogenous technology considered, artificial intelligence technology improves, and sustained economic growth is achieved.
    Keywords: artificial intelligence,automation,economic growth,share of labor
    JEL: J23 J24
    Date: 2019
  13. By: Oguzhan Cepni (Central Bank of the Republic of Turkey, Anafartalar Mah. Istiklal Cad. No:10 06050, Ankara, Turkey); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa); Zhihui Lv (KLASMOE & School of Mathematics and Statistics, Northeast Normal University, Changchun 130024, China)
    Abstract: Theory suggests that the effect of inequality on growth varies with the level of economic development, as captured by the ratio of human capital to physical capital. In particular, the effect is shown to be positive at lower levels of this ratio, and turns negative beyond a threshold in such models. Using a comprehensive panel of annual data for the 48 contiguous US states over the period 1948 to 2014, we find overwhelming evidence in support of this theory, unlike prior work on this topic. Hence, our paper highlights the importance of accurately measuring the process of economic development using data on human capital and physical capital, instead of using proxies that are not theoretically consistent. Understandably, if not done so, policymakers would end up undertaking incorrect decisions.
    Keywords: Inequality, Economic Growth, Ratio of Human Capital to Physical Capital, Panel Threshold Model, State-Level Data of the United States
    JEL: C23 C24 E24 O11 O15
    Date: 2019–08
  14. By: Fukao, Kyoji; Makino, Tatsuji; Settsu, Tokihiko
    Abstract: After the Meiji Restoration of 1868, Japan modernized its institutions and economic growth gradually picked up. Growth accelerated especially during the so-called high-speed growth era from 1955 to 1970, when Japan rapidly caught up with Western economies. The long-term sustained high-speed growth recorded during this period was unprecedented not only in Japan but worldwide. While other East Asian countries such as Singapore, Taiwan, South Korea, and China subsequently also experienced remarkable growth over a prolonged period, Japan's place in history as the first country to record such sustained high-speed growth means that its experience continues to garner worldwide interest. Using newly constructed Hitotsubashi estimates of Japan's historical GDP statistics and a growth accounting framework, we analyze the sources of Japan's economic growth from 1885 to 1970 and try to answer why Japan was not able to accomplish such high-speed growth before 1955. Since until the mid-1960s the primary sector accounted for a large share of economic activity and was a major determinant of overall economic growth, we use a Hayashi and Prescott (2008) type two-sector model in which the economy overall is divided into the primary sector and the non-primary sector.
    Date: 2019–05
  15. By: Vanessa S. Tchamyou (University of Antwerp, Belgium); Simplice A. Asongu (Yaoundé, Cameroon); Nicholas M. Odhiambo (University of South Africa, Pretoria, South Africa)
    Abstract: This study assesses the role of ICT in modulating the impact of education and lifelong learning on income inequality and economic growth. It focuses on a sample of 48 African countries from 2004 to 2014. The empirical evidence is based on the generalised method of moments (GMM). The following findings are established. First, mobile phone and internet each interact with primary school education to decrease income inequality. Second, all ICT indicators interact with secondary school education to exert a negative impact on the Gini index. Third, fixed broadband distinctly interacts with primary school education and lifelong learning to have a positive effect on economic growth. Fourth, ICT indicators do not significantly influence inequality and economic growth through tertiary school education and lifelong learning. These main findings are further substantiated. Policy implications are discussed.
    Keywords: Education; Lifelong learning; ICT; Inequality; Africa
    JEL: I28 I20 I30 L96 O55
    Date: 2019–01
  16. By: Saungweme, Talknice; Odhiambo, Nicholas M
    Abstract: This paper explores the causality between public debt and economic growth, and betweenpublic debt service and economic growth in South Africa covering the period 1970 ? 2017. Thestudy employed the autoregressive distributed lag (ARDL) bounds testing approach tocointegration and the multivariate Granger-causality test. The empirical results indicate thatthere is unidirectional causality from economic growth to public debt, but only in the short run.However, the study fails to establish any causality between public debt service and economicgrowth, both in the short run and in the long run. In line with the empirical evidence, the studyconcludes that it is economic growth that drives public debt in South Africa, and that the causalrelationship between public debt and economic growth is sensitive to the time frameconsidered. The paper recommends that South Africa should prioritise the implementation ofappropriate policies and strategies that could drive economic growth in order to uphold asustainable public debt level.
    Keywords: Economic growth, Granger-causality, public debt, public debt service, South
    Date: 2019–08
  17. By: von Fintel, Dieter (African Economic History Network); Fourie, Johan (African Economic History Network)
    Abstract: Does wealth persist over time, despite the disruptions of historical shocks like colonisation? This paper shows that South Africa experienced a reversal of fortunes after the arrival of European settlers in the eastern half of the country. Yet this was not, as some have argued was the case elsewhere in colonial Africa, because of an institutional reversal. We argue, instead, that black South Africans found themselves at the mercy of two extractive regimes: those in `white South Africa and those in the `homelands. The political and economic institutions of each of those regimes favoured a small elite: in white South Africa, whites, and in the homelands, the black chiefs and headmen. Democracy brought inclusive institutions for black residents in white South Africa but not for those in the former home- lands. This is why we see mass migration to the urban areas of South Africa today, and why addressing the institutional weaknesses of the former homelands is key to alleviating the poverty in these regions where a third of South Africans still reside.
    Keywords: reversal of fortunes; population persistence; institutional reversal; colonial impact; settler economy; African economic history; traditional leaders
    JEL: J10 J11 N37 N57
    Date: 2019–08–22
  18. By: Stephen Broadberry; Leigh Gardner
    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.
    Date: 2019–03–19
  19. By: K. Peren Arin; Elias Braunfels; Christina Zenker
    Abstract: Recent literature shows that oil revenues may have a positive effect on long-run economic growth. However, there is no clear evidence for such an effect in the medium-run, suggesting the existence of a so-called resource-curse in the medium-run. Taking this as a starting point, we investigate all the transmission channels through which oil revenues can retard growth in the medium-run within a Bayesian Model Averaging (BMA) framework. Our results show that oil revenues have indeed a negative effect on the medium-run economic growth, which is transmitted through medium-term trends in oil prices and (poor) institutional quality.
    Date: 2019–09

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