nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒10‒21
six papers chosen by
Marc Klemp
University of Copenhagen

  1. Creativity over Time and Space By Serafinelli, Michel; Tabellini, Guido
  2. A Generalized Growth Model and the Direction of Technological Progress By Li, Defu; Bental, Benjamin
  3. Untimely Destruction: Pestilence, War and Accumulation in the Long Run By Bell, Clive; Gersbach, Hans; Komarov, Evgenij
  4. Wealth inequality and aggregate demand By Stefan Ederer; Miriam Rehm
  5. Uncertainty-Induced Reallocations and Growth By Bansal, Ravi; Croce, Mariano Massimiliano; Liao, Wenxi; Rosen, Samuel
  6. Extreme Weather and Long-term Health: Evidence from Two Millennia of Chinese Elites By Lee, Wang-Sheng; Li, Ben G.

  1. By: Serafinelli, Michel (University of California, Berkeley); Tabellini, Guido (Bocconi University)
    Abstract: Creativity is often highly concentrated in time and space, and across different domains. What explains the formation and decay of clusters of creativity? In this paper we match data on thousands of notable individuals born in Europe between the XIth and the XIXth century with historical data on city institutions and population. Our main variable of interest is the number of famous creatives (scaled to local population) born in a city during a century, but we also look at famous immigrants (based on location of death). We first document several stylized facts: famous births and immigrants are spatially concentrated and clustered across disciplines, creative clusters are persistent but less than population, and spatial mobility has remained stable over the centuries. Next, we show that the emergence of city institutions protecting economic and political freedoms and promoting local autonomy facilitates the attraction and production of creative talent.
    Keywords: innovation, agglomeration, political institutions, immigration, gravity
    JEL: R10 O10 J61 J24
    Date: 2019–09
  2. By: Li, Defu; Bental, Benjamin
    Abstract: Based on a general growth model, this paper finds that the steady-state direction of technological progress is determined by the scale return of the production function and the relative factor supply elasticities. A specific version of that model extends Acemoglu (2002) to provide the underlying determinants of the supply elasticities and demonstrates that the relative price (Hicks, 1932) and relative market size (Acemoglu, 2002) have only a short-term impact on the direction of technological progress. A consequence of the analysis is that the steady-state technological progress is purely labor-augmenting (i.e. delivers Uzawa’s steady-state theorem) if and only if the scale return of the production function is constant and the supply elasticity of capital is infinite. Analogously, an infinite labor supply elasticity is required if labor-augmenting technological progress is to be excluded prior to the Industrial Revolution. Accordingly, changing factor supply elasticities may have induced the Industrial Revolution.
    Keywords: Economic Growth, Direction of Technological Progress, Returns to Scale, Factor Supply Elasticities, Uzawa’s Steady-State Theorem, Industrial Revolution
    JEL: E13 E25 O33 O41
    Date: 2019–10–13
  3. By: Bell, Clive (Heidelberg University); Gersbach, Hans (ETH Zurich); Komarov, Evgenij (ETH Zurich)
    Abstract: This paper analyses the effects of disease and war on the accumulation of human and physical capital. We employ an overlapping-generations frame-work in which young adults, confronted with such hazards and motivated by old-age provision and altruism, make decisions about investments in schooling and reproducible capital. A poverty trap exists for a wide range of stationary war losses and premature adult mortality. If parents are altruistic and their sub-utility function for own consumption is more concave than that for the children's human capital, the only possible steady-state growth path involves full education. Otherwise, steady-state paths with incompletely educated children may exist, some of them stationary ones. We also examine, analytically and with numerical examples, a growing economy's robustness in a stochastic environment. The initial boundary conditions have a strong influence on outcomes in response to a limited sequence of destructive shocks.
    Keywords: premature mortality, capital accumulation and destruction, steady states, poverty traps, overlapping generations
    JEL: D91 E13 I15 I25 O11 O41
    Date: 2019–10
  4. By: Stefan Ederer (Austrian Institute of Economic Research (AT)); Miriam Rehm
    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
    JEL: D31 D33 E12 E21 E25 E64
    Date: 2019–10
  5. By: Bansal, Ravi; Croce, Mariano Massimiliano; Liao, Wenxi; Rosen, Samuel
    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.
    Keywords: growth; reallocation; Uncertainty shocks
    JEL: E3 E6 G18
    Date: 2019–08
  6. By: Lee, Wang-Sheng (Deakin University); Li, Ben G. (University of Massachusetts Lowell)
    Abstract: Modern technology empowers human beings to cope with various extreme weather events. Using Chinese historical data, we examine the impact of extreme weather on long-term human health in an environment where individuals have no access to modern technology. By combining life course data on 5,000 Chinese elites with historical weather data over the period 1-1840 AD, we find a significant and robust negative impact of droughts in childhood on the longevity of elites. Quantitatively, encountering three years of droughts in childhood reduces an elite's life span by about two years. A remarkably important channel of the childhood drought effect is the deterioration of economic conditions caused by droughts.
    Keywords: longevity, weather, early-life conditions, elites, history of China
    JEL: I15 N35
    Date: 2019–09

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