nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒01‒13
eleven papers chosen by
Marc Klemp
University of Copenhagen

  1. Mastering Panel Metrics: Causal Impact of Democracy on Growth By Shuowen Chen; Victor Chernozhukov; Ivan Fernandez-Val
  2. Political Fragmentation & Economic Growth in U.S. Metropolitan Areas By Goodman, Christopher B
  3. The unintended consequences of increasing returns to scale in geographical economics By Steven Bond-Smith
  4. Growth Effects of Additive and Multiplicative Robots alongside Conventional Machines By Hoon, Hian Teck
  5. Delegation of Governmental Authority in Historical Perspective: Lordships, State Capacity and Development By Oto-Peralías, Daniel
  6. Growth and inequalities in a physicist's view By Angelo Tartaglia
  7. More development, less emigration to OECD countries: Identifying inconsistencies between cross-sectional and time-series estimates of the migration hump By Bencek, David; Schneiderheinze, Claas
  8. An Empirical Analysis of Foreign Direct Investment and Domestic Investment as Drivers of Economic Growth in South Africa By Lerato Mothibi; Lorainne Ferreira
  9. Analysis of the nexus between Environmental quality and Economic growth By Ilu, Ahmad Ibraheem
  10. Labor productivity, labor supply of the old, and economic growth By Chen, Hung-Ju; Miyazaki, Koichi
  11. Analysis of Government Spending: The Transportation Sector and Economic Growth in Indonesia from 1986 to 2016 By Abdul Wahid Tuasikal

  1. By: Shuowen Chen (Institute for Fiscal Studies); Victor Chernozhukov (Institute for Fiscal Studies and MIT); Ivan Fernandez-Val (Institute for Fiscal Studies and Boston University)
    Abstract: The relationship between democracy and economic growth is of long standing interest. We revisit the panel data analysis of this relationship by Acemoglu et al. (forthcoming) using state of the art econometric methods. We argue that this and lots of other panel data settings in economics are in fact high-dimensional, resulting in principal estimators – the ?xed e?ects (FE) and Arellano-Bond (AB) estimators – to be biased to the degree that invalidates statistical inference. We can however remove these biases by using simple analytical and sample-splitting methods, and thereby restore valid statistical inference. We ?nd that the debiased FE and AB estimators produce substantially higher esti-mates of the long-run e?ect of democracy on growth, providing even stronger support for the key hypothesis in Acemoglu et al. (forthcoming). Given the ubiquitous nature of panel data, we conclude that the use of debiased panel data estimators should substantially improve the quality of empirical inference in economics.
    Date: 2019–06–12
  2. By: Goodman, Christopher B (Northern Illinois University)
    Abstract: This paper analyzes the impact of local political fragmentation on long-run population, employment, and per capita money income growth in 314 U.S. metropolitan areas. The results suggest a positive relationship between fragmentation and long-run population growth; however, the type of fragmentation matters. Local government fragmentation in both the horizontal (cities) and vertical (special districts) are important. The results do not generalize to long-run employment or per capita money income growth. These findings partially support the hypothesis that governmental fragmentation can enhance local economic growth; however, taking into account the local context in the measurement of local political structure is important.
    Date: 2019–06–06
  3. By: Steven Bond-Smith (Bankwest Curtin Economic Centre, Curtin University)
    Abstract: Increasing returns to scale is now fundamental to both economics and economic geography. But first generation theories of endogenous growth imply an empirically-refuted scale effect. This scale effect and assumptions to negate the scale effect both imply unintentional spatial consequences. A review of the broad economic geography literature reveals the widespread use and misuse of first generation and semi-endogenous growth techniques despite these distortions. Techniques are suggested for avoiding these unintended spatial consequences. Crucially, the scale-neutral Schumpeterian branch of endogenous growth theory enables research in economic geography to focus on the distinctly spatial mechanisms that define the spatial economy.
    Keywords: endogenous growth, scale effects, increasing returns, innovation, economic geography
    JEL: E10 L16 O41
    Date: 2019–11
  4. By: Hoon, Hian Teck (School of Economics, Singapore Management University)
    Abstract: We study the effects of introducing two different types of robots (additive and multiplicative) in an infinitely lived one-sector aggregative model with malleable capital on wages. The wage effects of these two polar cases are dramatically different. Given malleable capital that can be retrofitted for use either as conventional machines or as robots, we show that when it is profitable for firms to adopt additive robots in the production process, the real wage drops on impact and remains permanently at the lower level even as total malleable capital accumulates. However, when multiplicative robots are adopted, we show that while the immediate impact on the real wage is ambiguous, the real wage enjoys a positive trend growth even in the absence of steady technological progress.
    Date: 2019–12–23
  5. By: Oto-Peralías, Daniel (Universidad Pablo de Olavide)
    Abstract: This paper investigates the long-term consequences of delegation of governmental authority through the study of a pivotal local political institution in historical Europe: the lordship. I collect data on seigneurial jurisdictions for ancien-regime Spain and document a negative relationship between having been a seigneurial town in the 18th century and current economic development. To shed light on the causal effect, I focus on the distribution of lordships in the former Kingdom of Granada after its conquest by the Catholic Monarchs, which can be considered as conditionally random. The results confirm the negative effect of lordship found for the whole country: towns that shortly after the conquest were granted to nobles are relatively poorer today. In addition, I explore the mechanisms of persistence, with the results pointing to lower state capacity as a main explanatory factor. This finding is consistent with an interpretation of seigneurial jurisdictions as a privatization of the local government, which has historically hindered the application of central government policies and lowered the state’s infrastructural capacity in former manorial towns.
    Date: 2019–08–09
  6. By: Angelo Tartaglia (INAF and Department of Applied Science and Technology, Politecnico di Torino, Italy)
    Abstract: The constraints on a continuous growth in a finite environment are formally analyzed, adding the effect of the necessary dynamics of costs. The unavoidable global collapse is deduced. The effect of competition in a growing economic system on the evolution of unequal share of wealth is also analyzed and discussed, showing the necessity of increase of inequalities under the premises of growth and competition.
    Date: 2019–12
  7. By: Bencek, David; Schneiderheinze, Claas
    Abstract: Comparing the emigration rates of countries at different stages of economic development, an inverse u-shape emerges. Although merely based on cross-sectional evidence, the 'migration hump' is often treated as a causal relationship. Since the peak is located at rather high per capita incomes of 6000-10 000 USD policy makers in rich destination countries worry that supporting economic development in poor origin countries might increase migration. In this paper we systematically test whether the migration hump holds up to more scrutiny, finding that the crosssectional pattern is misleading. Using 35 years of migration flow data from 198 countries of origin to OECD destinations, we successfully reproduce the hump-shape in the cross-section. However, more rigorous fixed effects panel estimations that exploit the variation over time consistently show a negative association between income and emigration. This result is independent of the level of income a country starts out at and thus casts doubt on any causal interpretation of the migration hump.
    Keywords: international migration,economic development,development assistance
    JEL: F22 F63 O15
    Date: 2019
  8. By: Lerato Mothibi (North West University); Lorainne Ferreira (North West University)
    Abstract: The South African economy has made great strides since its advent to democracy in 1994. However, South Africa is constrained by its continuous policy uncertainty generated by the South African government. This has resulted in poor sector performance, declining investments and slow economic growth. Investment, nonetheless, plays a crucial role in growing the South African economy. As such, policymakers often debate whether to focus on FDI or domestic investment, especially in developing countries. In order to point out where most government resources should be allocated, this study will investigate which type of investment ? FDI or domestic investment ? will have the most significant impact on economic growth in South Africa. This study makes use of the autoregressive distributive lag model (ARDL) over the period 1994 to 2018 to determine the impact of both FDI and domestic investment on economic growth in the short- and long-run. The study concludes that when policymakers seek to harness the potential of investment to encourage economic growth, they should not be distinguishing whether domestic or foreign investment should be a priority, but rather, what can be done to make the two forms of investment work together to achieve optimal benefits for the growth of the economy?
    Keywords: South Africa, Foreign direct investment, Domestic investment, Economic growth
    JEL: A10 C01 E22
    Date: 2019–10
  9. By: Ilu, Ahmad Ibraheem
    Abstract: This Paper inquiries into analysis of the nexus between environmental quality and economic growth for the period 1990-2018. In an attempt to realize the major objectives of the study various researcher’s’ works on relevant studies were exhaustively reviewed. The study utilizes annual time series data for its analysis and data on Carbon emissions metric tons per capita, GDP, Energy use and Access to electricity as a percentage of total population were collected for the period under review. Autoregressive distributed lag (ARDL) model approach was applied to estimate long run and short run relationship among the aforementioned variables. Both the short run and long run levels result fairly distinct with each other that GDP is positively and insignificantly related to carbon emissions both in the short run and long run which implies that Kuznet’s Curve was not found in Nigeria, access to electricity was found to be negatively and significantly related to carbon emissions in the short run, ite in the short run.
    Keywords: Carbon Emissions, GDP, Environmental Kuznet Curve, IPAT, ARDL
    JEL: Q47 Q5 Q56
    Date: 2019–12–01
  10. By: Chen, Hung-Ju; Miyazaki, Koichi
    Abstract: This study develops an overlapping generations model with human capital accumulation and endogenous labor supply of the old to examine the effects of an old agent's labor productivity on labor supply, educational investments, and economic growth. We present a unique existence of the balanced-growth-path (BGP) equilibrium and find that a rise in an old agent's labor productivity induces more labor supply of the old. Moreover, the growth rate at the BGP equilibrium is hump-shaped in an old agent's labor productivity. As an old agent's labor productivity grows, this growth rate first increases then decreases, which implies that there is no clear negative relationship between an old agent's labor productivity and economic growth.
    Keywords: Human capital; OLG; Labor productivity; Labor supply of the old
    JEL: J24 J26 O11
    Date: 2019–12–03
  11. By: Abdul Wahid Tuasikal (Master of Applied Economics, Padjadjaran University)
    Abstract: The main objective of this research is to examine the effect of government expenditures on the transportation sector and that effect on economic growth in Indonesia from 1986 to 2016. The research employed long time series data, utilizing the Ordinary Least Square (OLS) regression method to analyze the data collected. The data analyzed show that government expenditures on transportation as a physical capital and government expenditures on education as human capital significantly affect economic growth in Indonesia. On the contrary, the expenditures on housing and health indicated no contribution for national economic activity. This study recommended that government must ensure the budget for transportation development. The government must pay more attention to the allocation of the education budget for regions outside Java, by building educational facilities in areas that are still in the poor category that will improve their standard of living. Lastly, government should pay more attention to bureaucratic system specifically the procurement of goods and services and give punishment to those who divert and embezzle public funds.
    Keywords: Government Expenditure, Transportation Sector, Economic Growth, Indonesia
    JEL: H0
    Date: 2020–01

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