nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒09‒23
six papers chosen by
Marc Klemp
University of Copenhagen

  1. The global distribution of economic activity: nature, history, and the role of trade By Henderson, Vernon; Squires, Tim; Storeygard, Adam; Weil, David
  2. The Globe as a Network: Geography and the Origins of the World Income Distribution By Matthew Delventhal
  3. Innovation and Inequality from Stagnation to Growth By Chu, Angus C.; Peretto, Pietro
  4. Trade openness and economic growth:Empirical evidence from Lesotho By Malefane, Malefa R; Odhiambo, Nicholas M
  5. Nonlinear Impact of Public Debt on Economic Growth: Evidence from Sub-Saharan African Countries By Koffi, Siméon
  6. The Role of ICT and Financial Development on CO2 Emissions and Economic Growth By Ibrahim D. Raheem; Aviral K. Tiwari; Daniel Balsalobre-lorente

  1. By: Henderson, Vernon; Squires, Tim; Storeygard, Adam; Weil, David
    Abstract: We explore the role of natural characteristics in determining the worldwide spatial distribution of economic activity, as proxied by lights at night, observed across 240,000 grid cells. A parsimonious set of 24 physical geography attributes explains 47% of worldwide variation and 35% of within-country variation in lights. We divide geographic characteristics into two groups, those primarily important for agriculture and those primarily important for trade, and confront a puzzle. In examining within-country variation in lights, among countries that developed early, agricultural variables incrementally explain over 6 times as much variation in lights as do trade variables, while among late developing countries the ratio is only about 1.5, even though the latter group is far more dependent on agriculture. Correspondingly, the marginal effects of agricultural variables as a group on lights are larger in absolute value, and those for trade smaller, for early developers than for late developers. We show that this apparent puzzle is explained by persistence and the differential timing of technological shocks in the two sets of countries. For early developers, structural transformation due to rising agricultural productivity began when transport costs were still high, so cities were localized in agricultural regions. When transport costs fell, these agglomerations persisted. In late-developing countries, transport costs fell before structural transformation. To exploit urban scale economies, manufacturing agglomerated in relatively few, often coastal, locations. Consistent with this explanation, countries that developed earlier are more spatially equal in their distribution of education and economic activity than late developers.
    Keywords: agriculture; physical geography; development
    JEL: O13 O18 R12
    Date: 2018–02–01
  2. By: Matthew Delventhal (Claremont McKenna College)
    Abstract: In this paper I develop a quantitative dynamic spatial model of global economic development over the long run. There is an agricultural (ancient) sector and a non-agricultural (modern) sector. Innovation, technology diffusion, and population growth are endogenous. A set of plausible parameter restrictions makes this model susceptible to analysis using classic network theory concepts. Aggregate connectivity is summarized by the largest eigenvalue of the matrix of inverse iceberg transport costs, and the long-run path of the world economy displays threshold behavior. If transport costs are high enough, the world remains in a stagnant, Malthusian steady state; if they are low enough enough, this sets off an endogenous process of sustained growth in population and income. Taking the model to the data, I divide the world into 16,000 1 degree by 1 degree quadrangles. I infer bilateral transport costs by calculating the cheapest route between each pair of locations given the placement of rivers, oceans and mountains. I infer a series of global transport networks using historical estimates of the costs of transport over land and water and their evolution over time. I then simulate the evolution of population and income from the year 1000 until the year 2000 CE. I use the model to calculate two sets of location-specific efficiency parameters, one for the ancient sector and one for the modern sector, that rationalize both the year 1000 population distribution and the year 2000 distribution of income per capita. I then calculate the relative contributions of each set of efficiency wedges, and key historical shifts in transport costs, to the year 2000 variance of per-capita real income.
    Date: 2019
  3. By: Chu, Angus C.; Peretto, Pietro
    Abstract: This study explores the evolution of income inequality in an economy featuring an endogenous transition from stagnation to growth. We incorporate heterogenous households into a Schumpeterian model of endogenous takeoff. In the pre-industrial era, the economy is in stagnation, and income inequality is determined by an unequal distribution of land ownership and remains stationary. When takeoff occurs, the economy experiences innovation and economic growth. In this industrial era, income inequality gradually rises until the economy reaches the balanced growth path. Finally, we calibrate the model for a quantitative analysis and compare the simulation results to historical data in the UK.
    Keywords: income inequality; innovation; economic growth; endogenous takeoff
    JEL: D3 O3 O4
    Date: 2019–09
  4. By: Malefane, Malefa R; Odhiambo, Nicholas M
    Abstract: This paper examines the dynamic impact of trade openness on economic growth in Lesotho using the autoregressive distributed lag (ARDL) bounds testing approach. The study employs four indicators of trade openness, which include three trade-based proxies and an index of trade openness. The empirical results of this study show that trade openness has no significant impact on economic growth in both the short run and long run irrespective of which proxy of trade openness is used. These empirical results have important policy implications for Lesotho. Among others, this study suggests that the policymakers adopt policies aimed at boosting human capital and infrastructural development so that the economy grows to a threshold level required to reap the benefits of trade openness in its various forms. The policymakers should also pursue policies that enable the expansion in both international trade and economic growth, such that beneficial growth effects can be realized from trade with no exclusions.
    Keywords: Trade Openness, Economic Growth; ARDL; Exports; Imports; Lesotho
    Date: 2019–09
  5. By: Koffi, Siméon
    Abstract: This paper empirically explores the impact of public debt on economic growth in Sub-Saharan African (SSA) countries over the period 1960 to 2015 by using a system Generalized Methods of Moments (s-GMM). Specifically, this work studies the nonlinear relationship between public debt and economic growth. To do so, we perform the Sasabuchi-Lind-Mehlum’s test (or U-test) to check if the required and sufficient conditions are met for an inverted U-shape. The results strongly suggest the presence of a nonlinear relationship between public debt and economic growth. By applying the Delta method, this threshold is evaluated at about 36.18 percent ratio debt-to-GDP with its confidence interval associated (13, 59). The public debt boosts the economic growth when its level is less than this turning point. Above this threshold, an increase in public debt would lower the economic growth. Accordingly, a re-examination of the public debt level of some convergence policies which set this level (debt-to-GDP ratio) to 70 per cent (cf. Boxes 1 and 2) is proposed.
    Keywords: s-GMM, U-test, Delta method.
    JEL: E6 F3 F4 N4
    Date: 2019–09–13
  6. By: Ibrahim D. Raheem (EXCAS, Liège, Belgium); Aviral K. Tiwari (Kochi, India); Daniel Balsalobre-lorente (Ciudad Real, Spain)
    Abstract: This study explores the role of the information and communication Technology (ICT) and financial development (FD) on both carbon emissions and economic growth for the G7 countries for the period 1990-2014. Using PMG, we found that ICT has a long run positive effect on emissions, while FD is a weak determinant. The interactive term between the ICT and FD produces negative coefficients. Also, both variables are found to impact negatively on economic growth. However, their interactions show they have mixed effects on economic growth (i.e., positive in the short-run and negative in the long-run). Policy implications were designed based on these results.
    Keywords: ICT; Financial development; Carbon emissions; Economic growth and G7 countries
    JEL: E23 F21 F30 O16
    Date: 2019–01

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