nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒09‒30
nine papers chosen by
Marc Klemp
University of Copenhagen

  1. Energy Efficiency and Directed Technical Change: Implications for Climate Change Mitigation By Gregory Casey
  2. Flying or Trapped? By Yunfang Hu; Kazuo Nishimura; Ping Wang; Takuma Kunieda
  3. Climate Change, Directed Innovation, and Energy Transition: The Long-run Consequences of the Shale Gas Revolution By Daron Acemoglu; David Hemous; Lint Barrage; Philippe Aghion
  4. Demographic Obstacles to European Growth By Thomas Cooley; Edwin Nusbaum; Espen Henriksen
  5. Education and economic development. The influence of primary schooling on municipalities in nineteenth-century France By Adrien Montalbo
  6. Transition to a Modern Regime and Change in Plant Lifecycles: A Natural Experiment from Meiji Japan By Tomohiro Machikita; Tetsuji Okazaki
  7. Wealth inequality and aggregate demand By Ederer, Stefan; Rehm, Miriam
  8. Economic Development Thresholds for a Green Economy in Sub-Saharan Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  9. 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: Gregory Casey (Williams College)
    Abstract: I build a quantitative model of economic growth that can be used to evaluate the impact of environmental policy interventions on final-use energy consumption, an important driver of carbon emissions. In the model, energy demand is driven by endogenous and directed technical change (DTC). Energy supply is subject to increasing extraction costs. Unlike existing DTC models, I consider the case where multiple technological characteristics are embodied in each capital good, a formulation conducive to studying final-use energy. The model is consistent with aggregate evidence on energy use, efficiency, and prices in the United States. I examine the impact of new energy taxes and compare the results to the standard Cobb-Douglas approach used in the environmental macroeconomics literature, which is not consistent with data. When examining a realistic and identical path of energy taxes in both models, the DTC model predicts 22% greater cumulative energy use over the next century. I also use the model to study the macroeconomic consequences of R & D subsidies for new energy efficient technologies. I find large rebound effects that undo short-term reductions in energy use.
    Keywords: Energy, Climate Change, Directed Technical Change, Growth
    JEL: H23 O33 O44 Q43 Q55
    Date: 2019–09
  2. By: Yunfang Hu (Kobe University); Kazuo Nishimura (Kobe University); Ping Wang (Washington University in St. Louis); Takuma Kunieda (Kwansei Gakuin University)
    Abstract: We develop a unified theory under which not only a poverty trap but a middle income trap may also exist. In an otherwise standard growth model, we consider endogenous technology choice in human/knowledge capital accumulation, which enables us to establish a rich array of equilibrium development paradigms, including poverty trap, middle income trap and flying geese growth. We then generalize the baseline structure and establish conditions for different development paradigms to arise. By calibrating the general model to fit the data from several representative economies with different income and growth patterns, we identify various prolonged flying geese episodes and middle income traps. Our results suggest that improving human capital accumulation efficacy is most important, mitigating barriers to human capital accumulation is overall more rewarding than advancing total factor productivity.
    Date: 2019
  3. By: Daron Acemoglu (Massachusetts Institute of Technology); David Hemous (University of Zurich); Lint Barrage (Brown University); Philippe Aghion (LSE)
    Abstract: The shale gas revolution can potentially reduce CO2 emissions in the short-run in countries which depend heavily on coal. Yet, it may also discourage innovation in green technologies, leading to lower emissions in the long-run. We document that the shale gas revolution was accompanied by a collapse in innovation in green electricity. We build a model of directed technical change where energy is produced using coal, and/or natural gas, and/or a green source of energy. We derive conditions under which, as a result of the above trade-off, the shale gas revolution reduces emissions in the short-run but increases emissions in the long-run. We then use data on electricity production to calibrate the model.
    Date: 2019
  4. By: Thomas Cooley (New York University); Edwin Nusbaum (University of California, Santa Barbara); Espen Henriksen (University of California, Davis)
    Abstract: Since the early 1990’s there have been persistent slowdowns in the growth rates of the four largest European economies: France, Germany, Italy, and the United Kingdom. This persistence suggests a low-frequency structural change is at work. Aging populations, both in terms of longer individual life expectancies and declining fertility have caused a shift in the age-cohort distribution. Growth accounting identifies the following five sources of economic growth: total factor productivity, capital accumulation, labor supply on the intensive and extensive margin, and population growth. Changing demographics affect all these five margins. The effects of aging populations on economic growth are also exacerbated by the pension systems in place. In order to fund increasing liabilities with a shrinking tax base, tax rates must increase to balance budgets. This will impose distortions to individual factor-supply choices, providing further headwinds for economic growth. We quantify the additional growth effects resulting from these distortions.
    Date: 2019
  5. By: Adrien Montalbo (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The impact of education on growth or individual earnings has been vastly studied in economics. However, much remains to know about this association before the mid-20th century. In this article, I investigate the effect of primary schooling on the economic devel- opment of French municipalities during the 19th century and up to World War I. Before the Guizot Law of 1833, no national legislation on primary schooling existed in France. Therefore, I evaluate if the municipalities with higher educational achievements before this law grew more than their counterparts during the following years. To do so, I exploit first the fact that the Guizot Law forced municipalities over 500 inhabitants to open and fund a primary school for boys. I implement a regression discontinuity around this cut-off on municipalities with no primary school in 1833. Second, I instrument educational achieve- ment, namely enrolment rates and schooling years, by the proximity of municipalities to printing presses established before 1500. Each method returns a positive impact of edu- cation on development. Education quality also mattered in this perspective. A matching estimation on municipalities with a school in 1833 indicates a positive impact of better teaching conditions provided by public grants on the subsequent growth of municipalities. Primary schooling is therefore an important factor which favoured the development of French municipalities during the century of industrialisation and modernisation.
    Keywords: Primary instruction,Economic development,Nineteenth-century France
    Date: 2019–09
  6. By: Tomohiro Machikita; Tetsuji Okazaki
    Abstract: This paper examines how political, social, and economic regime changes affect the lifecycles of manufacturing plants exploiting Japans transition from a feudal regime to a modern regime in the late nineteenthcenturyasanaturalexperiment. Usingplant-leveldatafor1902, includingthefoundation year of each plant, we explored how the experience-size profiles of plants differ before and after the regime change. Plants were found to grow much faster after the regime change and the acceleration of growth after the regime change was much greater for the plants in exporting industries, industries intensively using steam power, and plants adopting a corporate form. These findings suggest that access to export markets, access to modern technologies, and availability of the modern corporate form were the channels through which the regime change affected the experience-size profile of plants. The findings on the acceleration of plant growth after the regime change are supported by the analyses of more detailed data from the silk-reeling industry.
    Date: 2019–08
  7. By: Ederer, Stefan; Rehm, Miriam
    Abstract: The paper investigates how including the distribution of wealth changes the demand effects of redistributing functional income. It develops a model with an endogenous wealth distribution and shows that the endogenous rise in wealth inequality resulting from a redistribution towards profits weakens the growth effects of this redistribution. Consequently, a wage-led regime becomes more strongly wage-led. A profit-led regime on the other hand becomes less profit-led and there may even be a regime switch - in this case the short-run profit-led economy becomes wage-led in the long run due to the endogenous effects of wealth inequality. The paper thereby provides a possible explanation for the instability of demand regimes over time.
    Keywords: Wealth, Distribution, Aggregate Demand
    Date: 2019
  8. By: Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This study investigates how increasing economic development affects the green economy in terms of CO2 emissions, using data from 44 countries in the SSA for the period 2000-2012. The Generalised Method of Moments (GMM) is used for the empirical analysis. The following main findings are established. First, relative to CO2 emissions, enhancing economic growth and population growth engenders a U-shaped pattern whereas increasing inclusive human development shows a Kuznets curve. Second, increasing GDP growth beyond 25% of annual growth is unfavorable for a green economy. Third, a population growth rate of above 3.089% (i.e. annual %) has a positive effect of CO2 emissions. Fourth, an inequality-adjusted human development index (IHDI) of above 0.4969 is beneficial for a green economy because it is associated with a reduction in CO2 emissions. The established critical masses have policy relevance because they are situated within the policy ranges of adopted economic development dynamics.
    Keywords: CO2 emissions; Economic development; Africa
    JEL: C52 O38 O40 O55 P37
    Date: 2019–01
  9. By: Ibrahim D. Raheem (EXCAS, Liège, Belgium); Aviral K. Tiwari (Rajagiri Business School, 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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