nep-gro New Economics Papers
on Economic Growth
Issue of 2019‒11‒18
five papers chosen by
Marc Klemp
University of Copenhagen

  1. The fetters of inheritance? Equal partition and regional economic development By Huning, Thilo R.; Wahl, Fabian
  2. Comparative European Institutions and the Little Divergence, 1385-1800 By António Henriques; Nuno Palma
  3. The Growth Effects of El Nino and La Nina: Local Weather Conditions Matter By Couharde, C.; Damette, O.; Generoso, R.; Mohaddes, K.
  4. A Theory of Cultural Revivals By Murat Iyigun; Jared Rubin; Avner Seror
  5. Information Technology and Economic Growth: A Cross-Country Analysis By Pohjola, Matti

  1. By: Huning, Thilo R.; Wahl, Fabian
    Abstract: How can agricultural inheritance traditions affect structural change and economic development in rural areas? The most prominent historical traditions are primogeniture, where the oldest son inherits the whole farm, and equal partition, where land is split and each heir inherits an equal share. In this paper, we provide a theoretical model that links these inheritance traditions to the local allocation of labor and capital and to municipal development. First, we show that among contemporary municipalities in West Germany, equal partition is significantly related to measures of economic development. Second, we conduct OLS and fuzzy spatial RDD estimates for Baden-Württemberg in the 1950s and today. We find that inheritance rules caused, in line with our theoretical predictions, higher incomes, population densities, and industrialization levels in areas with equal partition. Results suggest that more than a third of the overall inter-regional difference in average per capita income in present-day Baden Württemberg, or 597 Euro, can be explained by equal partition.
    Keywords: inheritance rules,sectoral change,regional economic development,Baden-Württemberg,spatial inequalities
    JEL: D02 D82 H11 H21 N93
    Date: 2019
  2. By: António Henriques (Universidade do Porto and CEPESE); Nuno Palma (Department of Economics, University of Manchester; Instituto de Ciências Sociais, Universidade de Lisboa; CEPR)
    Abstract: Why did the countries which first benefitted from access to the New World - Castile and Portugal - decline relative to their followers, especially England and the Netherlands? The dominant narrative is that worse initial institutions at the time of the opening of Atlantic trade explain Iberian divergence. In this paper, we build a new dataset which allows for a comparison of institutional quality over time. We consider the frequency and nature of parliamentary meetings, the frequency and intensity of extraordinary taxation and coin debasement, and real interest spreads for public debt. We and no evidence that the political institutions of Iberia were worse until at least the English Civil War.
    Keywords: Atlantic Traders, New Institutional Economics, The Little Divergence
    JEL: N13 N23 O10 P14 P16
    Date: 2019–11
  3. By: Couharde, C.; Damette, O.; Generoso, R.; Mohaddes, K.
    Abstract: This paper contributes to the climate-economy literature by analysing the role of weather patterns in influencing the transmission of global climate cycles to economic growth. More specifically, we focus on El Nino Southern Oscillation (ENSO) events and their interactions with local weather conditions, taking into account the heterogeneous and cumulative effects of weather patterns on economic growth and the asymmetry and nonlinearity in the global influence of ENSO on economic activity. Using data on 75 countries over the period 1975-2014, we provide evidence for the negative growth effects of ENSO events and show that there are substantial differences between its warm (El Nino) and cold (La Nina) phases and between climate zones. These differences are due to the heterogeneity in weather responses to ENSO events, known as teleconnections, which has so far not been taken into account by economists, and which will become more important in the climate-economy relationship given that climate change may substantially strengthen long-distance relationships between weather patterns around the world. We also show that the negative growth effects associated with these teleconnections are robust to the definition of ENSO events and more important over shorter meteorological onsets.
    Keywords: Economic growth, ENSO events, weather shocks, climate change
    JEL: C33 O40 Q54
    Date: 2019–11–11
  4. By: Murat Iyigun (University of Colorado, Boulder); Jared Rubin (Chapman University); Avner Seror (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France)
    Abstract: Why do some societies fail to adopt more efficient institutions? And why do such failures often coincide with cultural movements that glorify the past? We propose a model highlighting the interplay—or lack thereof—between institutional change and cultural beliefs. The main insight is that institutional change by itself will not lead to a more efficient economy unless culture evolves in tandem. This is because institutional change can be countered by changes in cultural values complementary to a more "traditional" economy. In our model, forward-looking elites, who benefit from a traditional, inefficient economy, may over-provide public goods that are complementary to the production of traditional goods. This encourages individuals to transmit cultural beliefs complementary to the provision of traditional goods. A horse race results between institutions, which evolve towards a more efficient (less traditional) economy, and cultural norms, which are pulled towards "tradition" by the elites. When culture wins the horse race, institutions respond by giving more political power to traditional elites—even if in doing so more efficient institutions are left behind. We call the interaction between these cultural and institutional dynamics a cultural revival.
    Keywords: institutions, cultural beliefs, cultural transmission, institutional change
    JEL: D02 N40 N70 O33 O38 O43 Z10
    Date: 2019–11
  5. By: Pohjola, Matti
    Abstract: This paper explores the impacts of information technology investment on economic growth in a cross-section of 39 countries in the period 1980-95 by applying an explicit model of economic growth, the augmented version of the neoclassical (Solow) growth model. The results based on the full sample of 39 countries indicate that physical capital is a key factor in economic growth in both developed and developing countries. Its influence is even bigger than what is implied by the income share of capital in national income accounts. But neither human capital nor information technology seems to have a significant impact on GDP growth. However, investment in information technology has a strong influence on economic growth in the smaller sample of 23 developed (0ECD) countries. Its impact is almost as large as that of the rest of the capital stock. But since the share of IT investment in GDP, although growing, is still much lower than the share of non-IT investment, the net social return to IT capital is much larger than the return to non-IT capital: 60-80 per cent versus 4 per cent, respectively. The estimated return is very high; about twice the return to equipment investment and 10-12 times the return to R&D obtained in similar models as the one applied here.
    Keywords: International Development

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