nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒10‒28
twelve papers chosen by
Marc Klemp
University of Copenhagen

  1. Modernization Before Industrialization: Cultural Roots of the Demographic Transition in France By Guillaume Blanc
  2. Growth with heterogenous interdependence By Martinez Ibañez, Oscar; Manjón Antolín, M.; Miranda Gualdrón, Karen Alejandra
  3. 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
  4. Open Economy Growth Model with Human Capital and Public Debt By Micha? Konopczy?ski
  5. The strong porter hypothesis in an endogenous growth model with satisficing managers By Dominique Bianco; Evens Salies
  6. Inflation, Complexity and Endogenous Growth By Tiago Miguel Guterres Neves Sequeira; Pedro Mazeda Gil; Óscar Afonso
  7. Wages at the Wheel: Were Spinners Part of the High Wage Economy? By Jane Humphries; Benjamin Schneider
  8. Sources of Economic Growth in Models with Non-Renewable Resources By Sriket, Hongsilp; Suen, Richard M. H.
  9. The First Industrial Revolution: Creation of a New Global Human Era By Mohajan, Haradhan
  10. The Dynamics of Financial Development, Globalization, Economic Growth and Life Expectancy in Sub-Saharan Africa By Shahbaz, Muhammad; Shafiullah, Muhammad; Kumar, Mantu
  11. Oil Curse, Economic Growth and Trade Openness By Vespignani, Joaquin; Raghavan, Mala; Majumder, Monoj Kumar
  12. Resource Curse Hypothesis and Role of Oil Prices in USA By Shahbaz, Muhammad; Ahmed, Khalid; Tiwari, Aviral Kumar; Jiao, Zhilun

  1. By: Guillaume Blanc (Brown University)
    Abstract: This research identifies the origins of the early demographic transition in France, before the French Revolution and more than a century before the rest of Europe. We provide strong empirical evidence suggesting that secularization accounts for the bulk of the decline in fertility and document large, significant, and robust results across specifications, datasets, and estimation methods. We draw on a novel individual-level historical dataset crowdsourced from publicly available genealogies to establish a causal interpretation. This dataset allows to control for time-varying unobservables, to study the effect of secularization before and after demographic change, and to exploit the choice of migrants in the aftermath of the decline in religiosity. Finally, we discuss the roots of the rapid and early process of secularization and suggest that the strength of the Counter Reformation following the demise of Protestantism in France played an important part. Our findings demonstrate that cultural change and the transition to modernity and away from tradition can shape development.
    Keywords: fertility,modernization,development,secularization
    Date: 2019–10–16
  2. By: Martinez Ibañez, Oscar; Manjón Antolín, M.; Miranda Gualdrón, Karen Alejandra
    Abstract: We present a growth model with spatial interdependencies in the heterogeneous technological progress and the stock of knowledge that, under certain conditions, yields agrowth-initial equation that can be taken to the data. We then use data on EU-NUTS2 regions and a correlated random e ects specication to estimate the resulting spatial Durbin dynamic panel model with spatially weighted individual e ects. QML estimatessupport our model against simpler alternatives that impose a homogeneous technology. Also, our results indicate that rich regions tend to have higher (unobserved) productivityand are likely to stay rich because of the strong time and spatial dependence of the GDP per capita. Poor regions, on the other hand, tend to enjoy productivity spillovers but arelikely to stay poor unless they increase their saving rates.
    Keywords: Spatial Panel Data; Economic Growth; Durbin Model; Correlated Random Effects
    JEL: O47 C23
    Date: 2019–10–14
  3. 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 labor 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 0.04°C per year, in the absence of mitigation policies, reduces world real GDP per capita by more than 7 percent by 2100. On the other hand, abiding by the Paris Agreement, thereby limiting the temperature increase to 0.01°C per annum, reduces the loss substantially to about 1 percent. These effects vary significantly across countries depending on the pace of temperature increases and variability of climate conditions. 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 labor productivity and employment.
    Date: 2019–10–11
  4. By: Micha? Konopczy?ski (Pozna? University of Economics and Business)
    Abstract: This paper presents an endogenous growth model of an open economy with wide range of instruments of fiscal policy. We distinguish three factors of production: capital, raw labor, and human capital. Education expenditures and investment spending are crucial for long-run growth. Economic agents are continuously optimizing under conditions of imperfect information (externalities). The government may play the role of the benevolent social planner which may transform the second-best decisions of individual agents into the first-best outcome. To that end we search for the optimal values of certain parameters of fiscal policy, including public consumption, public spending on education, the size of public deficit (as percent of GDP). As the model incorporates some open-economy variables, it is very complex, and consequently does not have a closed-form (analytical) solution. We present a numerical procedure which may be applied to numerically solve the model. Finally, we present some preliminary simulations based on stylized values of parameters and exogenous variables.
    Keywords: fiscal policy, economic growth, human capital, public deficit, government debt
    JEL: E13 E62 F43
    Date: 2019–10
  5. By: Dominique Bianco (UB - Université de Bourgogne); Evens Salies (OFCE - Observatoire Français des Conjonctures économiques - Institut d'Études Politiques [IEP] - Paris - Fondation Nationale des Sciences Politiques [FNSP])
    Abstract: Few endogenous growth models have focused attention on the strong Porter hypothesis that stricter environmental policies induce innovations, the benefits of which exceed the costs. A key assumption underlying this hypothesis is that policy strictness pushes firms to overcome some obstacles to profit maximization. This paper incorporates pollution and taxation in the model of Aghion and Griffith (2005) of growth which includes satisficing managers and non-drastic innovation. Our theoretical results predict the strong Porter hypothesis. However, assuming drastic innovation in the model, we predict the weak Porter hypothesis. We also consider several extensions, such as a simultaneous competition policy or a command and control policy.
    Keywords: Endogeneous growth model
    Date: 2017–11
  6. By: Tiago Miguel Guterres Neves Sequeira (CeBER and Faculty of Economics, University of Coimbra); Pedro Mazeda Gil (CEF.UP, Faculty of Economics, University of Porto); Óscar Afonso (CEF.UP, Faculty of Economics, University of Porto)
    Abstract: In this article, we argue that inflation increases complexity pertaining to knowledge production (or R&D). Then, we expand a recently developed complexity index based on entropy to include the effect of inflation. As a result of this new mechanism in an endogenous growth model, inflation is no longer superneutral. In the model, inflation can decrease economic growth in a nonlinear way, a sudden upward shock on inflation can severely hurt economic growth and an inflation cut can be responsible for a take-off. These effects are illustrated quantitatively.
    Keywords: Inflation, endogenous economic growth, complexity effects, entropy.
    JEL: O10 O30 O40 E22
    Date: 2019–09
  7. By: Jane Humphries; Benjamin Schneider
    Abstract: In our earlier paper we used archival and printed primary sources to construct the first long-run series of wages for hand spinning in early modern Britain. Our evidence challenged Robert Allen’s claim that spinners were part of the ‘High Wage Economy’, which he sees as motivating invention, innovation, and mechanisation in the spinning section of the textile industry. Here we respond to Allen’s criticism of our argument, sources and methods, and his presentation of alternative evidence. Allen contends that we have understated both the earnings and associated productivity of hand spinners by focussing on part-time and low-quality workers. His rejoinder is found to rest on an ahistorical account of spinners’ work and similarly weak evidence on wages as did his initial claims. We also present an expanded version of the spinners’ wages dataset, which confirms our original findings: spinners’ wages were low even compared with other women workers and did not follow a trajectory which could explain the invention and spread of the spinning jenny.
    Keywords: hand spinning, women's wages, Industrial Revolution, textiles, Great Divergence, induced innovation, High Wage Economy
    JEL: J24 J31 J42 J46 N13 N33 N63 O14 O31
    Date: 2019–10–24
  8. By: Sriket, Hongsilp; Suen, Richard M. H.
    Abstract: This paper re-examines the possibility of endogenous long-term economic growth in neoclassical models with non-renewable resources. Instead of using a Cobb-Douglas production function as in most existing studies, we consider a general form in which physical capital is functionally separable from labour and natural resources. It is shown that if the elasticity of substitution between labour and resources is identical to one, then long-term economic growth is endogenous. But if this elasticity is not equal to one, as suggested by empirical studies, then long-term economic growth is entirely driven by an exogenous technological factor.
    Keywords: Non-Renewable Resources; Endogenous Growth; Elasticity of Substitution.
    JEL: O13 O41 Q32
    Date: 2019–09–27
  9. By: Mohajan, Haradhan
    Abstract: The First Industrial Revolution began in England in about 1750–1760 that lasted to sometime between 1820 and 1840. It is one of the most distinguished turning points in human history. During this period human and animal labour technology transformed into machinery, such as the steam engine, the spinning jenny, coke smelting, puddling and rolling processes for making iron, etc. Industrial Revolution is renewed for global economic growth, increase in production and consumption of common people. The system of transportation communication through canals, road and rails had improved. Also banking and other financial systems improved to run the industries and business firms smoothly. Child and infant mortality rate decreased and fertility rate increased. As a result, population growth had dramatically changed. On the other hand, women and child labour has increased in dangerous and unhygienic condition. Factory workers have to work sixteen hours in a day merely to save the family from starvation. Industrial Revolution created a wide gap between the rich and the poor. An attempt has taken here to describe the various effects of Industrial Revolution.
    Keywords: Industrial Revolution, Technological Change, Human Capital, Economic Development
    JEL: N0 N5
    Date: 2019–05–30
  10. By: Shahbaz, Muhammad; Shafiullah, Muhammad; Kumar, Mantu
    Abstract: The importance of life expectancy is recognized in the development economics literature because of its increasing effects on labor productivity and economic growth in in long-run. However, no published study to date empirically examines the nonlinear relationships between globalization, financial development, economic growth and life expectancy in Sub-Saharan African (SSA) countries. Therefore, our study intends to fill this gap by using non-parametric cointegration test and multivariate Granger causality test towards a non-linear empirical understanding of the factors affecting the life expectancy. We consider the case of 16 Sub-Saharan African economies using annual data over the period 1970-2012. The empirical analysis indicates that financial development, globalization and economic growth appear to have a positive impact upon life expectancy in Sub-Saharan African economies, except for Gabon and Togo. Our empirical findings may provide insightful policy implications towards improving population health conditions which are vital for promoting the productivity of labor force and long-run economic growth in Sub-Saharan African countries. In light of these policy implications, governments should incorporate globalization, financial development and economic growth as key economic instruments in formulating sustainable developmental policy to promote life expectancy for the people in Sub-Saharan African countries.
    Keywords: Financial development; Life expectancy; Sub-Saharan Africa; Nonlinear causality
    JEL: I0
    Date: 2019–10–09
  11. By: Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania); Raghavan, Mala (Tasmanian School of Business & Economics, University of Tasmania); Majumder, Monoj Kumar (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: An important economic paradox that frequently arises in the economic literature is that countries with abundant natural resources are poor in terms of real gross domestic product per capita. This paradox, known as the ‘resource curse’, is contrary to the conventional intuition that natural resources help to improve economic growth and prosperity. Using panel data for 95 countries, this study revisits the resource curse paradox in terms of oil resources abundance for the period 1980–2017. In addition, the study examines the role of trade openness in influencing the relationship between oil abundance and economic growth. The study finds that trade openness is a possible avenue to reduce the resource curse. Trade openness allows countries to obtain competitive prices for their resources in the international market and access advanced technologies to extract resources more efficiently. Therefore, natural resource–rich economies can reduce the resource curse by opening themselves to international trade.
    Keywords: Oil rents, real GDP per capita, trade openness, dynamic panel data model
    JEL: E23 F13 Q43
    Date: 2019
  12. By: Shahbaz, Muhammad; Ahmed, Khalid; Tiwari, Aviral Kumar; Jiao, Zhilun
    Abstract: This paper employs an augmented production function to examine resource curse hypothesis by incorporating oil prices as an additional determinant of economic growth. In doing so, the bounds testing approach to cointegration is applied in the presence of structural breaks in the series. The directional of causal association between the variables is examined by applying the VECM Granger causality approach. The empirical results show the existence of long run relationship between the variables. Moreover, natural resource abundance is negatively linked with economic growth confirms the validation of resource curse hypothesis. The nonlinear relationship between natural resource abundance and economic growth is inverted U-shaped. Oil prices add in economic growth. Capitalization increases economic growth. Labor boosts economic growth. The causality analysis reveals the unidirectional causal relationship running from natural resource abundance to economic growth. The feedback effect exists between oil prices and economic growth. Capitalization causes economic growth and in return, economic growth causes capitalization in Granger sense.
    Keywords: Natural Resources, Economic Growth, Oil Prices, USA
    JEL: E0
    Date: 2019–10–06

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