nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒01‒20
sixteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Linguistic Traits and Human Capital Formation By Oded Galor; Ömer Özak; Assaf Sarid
  2. Geographical Roots of the Coevolution of Cultural and Linguistic Traits By Galor, Oded; Özak, Ömer; Sarid, Assaf
  3. The Origins of the Division of Labor in Pre-modern Times By Depetris-Chauvin, Emilio; Özak, Ömer
  4. Dynamic Effects of Patent Policy on Innovation and Inequality in a Schumpeterian Economy By Angus C. Chu; Yuichi Furukawa; Sushanta Mallick; Pietro Peretto; Xilin Wang
  5. The impact of foreign debt and government debt on economic growth in South Africa By Lerato Mothibi
  6. Human Capital, Economic Growth, and Public Expenditure By Bethencourt, Carlos; Perera-Tallo, Fernando
  7. Innovation and Inequality from Stagnation to Growth By Angus C. Chu; Pietro Peretto
  8. Climate, Diseases, and the Origins of Corruption By Vu, Trung V.
  9. The growth conundrum: Paul Romer’s endogenous growth By Schilirò, Daniele
  10. Growth Accounting and Regressions:new approach and results By Tiago Sequeira; Hugo Mourão
  11. Can a Growing World Be Fed When the Climate Is Changing? By Simon Dietz; Bruno Lanz
  12. Safety at Sea during the Industrial Revolution By Kelly, Morgan; Gráda, Cormac Ó; Solar, Peter
  13. Labor supply and the no-growth trap By Guilherme Strifezzi Leal; David Turchick
  14. Does institutional quality foster economic complexity? By Vu, Trung V.
  15. Corporate Tax Cuts and Economic Growth By Suzuki, Keishun
  16. A Reassessment of the Relation between Economic Growth and Maldistribution of Income By Clavijo-Cortes, Pedro; Robledo-Campo, Jacobo; Mendoza-Tolosa, Henry

  1. By: Oded Galor (Brown University); Ömer Özak (Southern Methodist University); Assaf Sarid (Brown University)
    Abstract: This research establishes the influence of linguistic traits on human behavior. Exploiting variations in the languages spoken by children of migrants with identical ancestral countries of origin, the analysis indicates that the presence of periphrastic future tense, and its association with long-term orientation has a significant positive impact on educational attainment, whereas the presence of sex-based grammatical gender, and its association with gender bias, has a significant adverse impact on female educational attainment.
    Keywords: Human capital, Long-term Orientation, Gender Bias, Periphrastic Future Tense, Sex-Based Grammatical Gender, Culture, Language
    JEL: D91 I25 J16 J24 Z10 Z13
    Date: 2020–01
  2. By: Galor, Oded; Özak, Ömer (Southern Methodist University); Sarid, Assaf
    Abstract: This research explores the geographical origins of the coevolution of cultural and linguistic traits in the course of human history, relating the geographical roots of long-term orientation to the structure of the future tense, the agricultural determinants of gender bias to the presence of sex-based grammatical gender, and the ecological origins of hierarchical orientation to the existence of politeness distinctions. The study advances the hypothesis and establishes empirically that: (i) geographical characteristics that were conducive to higher natural return to agricultural investment contributed to the existing cross-language variations in the structure of the future tense, (ii) the agricultural determinants of gender gap in agricultural productivity fostered the existence of sex-based grammatical gender, and (iii) the ecological origins of hierarchical societies triggered the emergence of politeness distinctions.
    Date: 2018–11–07
  3. By: Depetris-Chauvin, Emilio; Özak, Ömer (Southern Methodist University)
    Abstract: This research explores the historical roots of the division of labor in pre-modern societies. Exploiting a variety of identification strategies and a novel ethnic level dataset combining geocoded ethnographic, linguistic and genetic data, it shows that higher levels of intra-ethnic diversity were conducive to economic specialization in the pre-modern era. The findings are robust to a host of geographical, institutional, cultural and historical confounders, and suggest that variation in intra-ethnic diversity is a key predictor of the division of labor in pre-modern times.
    Date: 2018–10–29
  4. By: Angus C. Chu; Yuichi Furukawa; Sushanta Mallick; Pietro Peretto; Xilin Wang
    Abstract: This study explores the dyanmic effects of patent policy on innovation and income inequality in a Schumpeterian growth model with endogenous market structure and heterogeneous households. We find that strengthening patent protection has a positive effect on economic growth and a positive or an inverted-U effect on income inequality when the number of differentiated products is fixed or in the short run. However, when the number of products adjusts endogenously, the effects of patent protection on growth and inequality become negative in the long run. We also calibrate the model to US data to perform a quantative analysis and find that the long-run negative effect of patent policy on inequality is much larger than its short-run positive effect. This result is consistent with our empirical finding from a panel vector autoregression.
    Keywords: minimum wage, unemployment, innovation, automation
    JEL: D30 O30 O40
    Date: 2019–09
  5. By: Lerato Mothibi (North West University)
    Abstract: Debt management has always been a major concern for many developing countries. South Africa?s foreign debt was reported to have reached its highest in 2017, where debt levels reached 48.8 percent of gross domestic product. At economically sustainable levels, borrowing in itself ought not to be an issue, however it is rather unfortunate that most sub-Saharan nations including South Africa have accumulated high, unsustainable amounts of debt, which may have constrained the progression of economic growth and development. Making use of the auto regressive distributive lag model (ARDL), this study examines the relationship between foreign debt and government debt on economic growth in South Africa from 1980 to 2018. The findings of the study reveal that sound debt management may lead to economic prosperity.
    Keywords: South AfricaGovernment debtForeign debtEconomic growth
    JEL: A10 C01 B26
    Date: 2019–10
  6. By: Bethencourt, Carlos (Asian Development Bank Institute); Perera-Tallo, Fernando (Asian Development Bank Institute)
    Abstract: To understand the weak empirical relationship between human capital and macroeconomic performance, we present a model in which human capital is allocated to three activities: production, tax collection (bureaucracy), and public education. The effective tax rate is low in poor countries because tax collection requires human capital, which is scarce. Throughout the transition, the effective tax rate rises, which involves a diversion of human capital from production to bureaucracy and public education. Consequently, human capital has a weak effect on production, even when human capital is efficiently allocated. Differences in institutional quality may involve a spurious negative correlation between gross domestic product and human capital.
    Keywords: economic growth; human capital; bureaucracy; public education
    JEL: D73 I20 O15 O42
    Date: 2020–01–09
  7. By: Angus C. Chu; Pietro Peretto
    Abstract: This study explores the evolution of income inequality in an economy featuring an endogenous transition from stagnation to growth. We incorporate heterogenous households into a Schumpeterian model of endogenous takeoff. In the pre-industrial era, the economy is in stagnation, and income inequlaity is determined by an unequal distribution of land ownership and remains stationary. When takeoff occurs, the economy experiences innovation and economic growth. In this industrial era, income inequality gradually rises until the economy reaches the balanced growth path. Finally, we calibrate the model for quantitative analysis and compare the simulation results to historical data in the UK.
    Keywords: income inequality, innovation, economic growth, endogenous takeoff
    JEL: D30 O30 O40
    Date: 2019–09
  8. By: Vu, Trung V.
    Abstract: It has been commonly observed that tropical countries typically suffer from intense corruption and underdevelopment. I offer an explanation for this long-standing disparity across the world based on variation in the intensity of ultraviolet radiation (UV-R). The central idea of this paper holds that UV-R is positively associated with the (historical) prevalence of eye diseases, which significantly shortens work-life expectancy as a skilled worker. This arguably shapes the global pattern of corrupt practices. Interestingly, this finding appears to be strong and insensitive to accounting for different theories explaining differences in corruption levels across the globe. Further analyses using individual-level data taken from the World Values Survey and provincial level data for China lend strong credence to the cross-country evidence.
    Keywords: corruption, climate, diseases, ultraviolet radiation, comparative prosperity.
    JEL: O11 O43 O57 Q54
    Date: 2020–01
  9. By: Schilirò, Daniele
    Abstract: The explanation and causes of economic growth, the problem of convergence of per capita income among different economies, the low productivity growth in many advanced economies, and the presence of disrupting technological innovations remain at th e center of the debate among economists. The present contribution analyzes the endogenous growth theory of Paul Romer and discusses its features and content through Romer’s main works on the topic. This study on Romer’s work highlights the existence and im portance of increasing returns in the process of growth, the key role of knowledge, the ideas as non rival goods, the existence of externalities, the endogeneity of technological change, and the primary role of human capital, especially in research activity. Institutions, such as property rights are important as well. The state also has a decisive role in education and the research sector. Another relevant aspect is that economic growth and technological change are closely interconnected; they cannot be separated. Romer’s theory of endogenous technological change ties the development of new ideas and economic growth to the number of people working in the knowledge sector. New ideas, being non rival and partially excludable, are fundamental for growth since they make everyone producing physical goods and services more productive. Finally, Romer’s endogenous growth highlights the factors that provide incentives for knowledge creation; thus, his theory can also be considered a significant contribution to the theory of the knowledge-based economy.
    Keywords: endogenous growth; technical change; human capital; knowledge accumulation; externalities; property rights
    JEL: D62 I20 J24 O30 O40
    Date: 2019–05
  10. By: Tiago Sequeira; Hugo Mourão
    Abstract: We seek for determinants of the sources of growth. Using a growth accounting method that accounts for time variations in factor shares, we run growth regressions for a panel of 101 countries between 1950 and 201. Our methodology takes into account the specific features of the data (namely outliers, heterogeneity, and cross panel correlations) and overcomes most criticisms previously raised on growth regressions. The most important evidence reveals that government current expenditure decreases the factor shhares and has no effect on total factor productivity (TFP). Trade affects the TFP and the Biased Technical Chance (BTC) components, decreasing the factor shares. Moreover, human capital decreases TFP and increases the BTC contribution to growth. This unveils the channels through wchich determinants of growth act in influencing economic growth.
    Keywords: Economic Growth;Growth Accounting;Growth Regressions;Time-varying shares;Government Expenditure; Robust estimation;Bootstrap
    JEL: O47 O50
    Date: 2020–01
  11. By: Simon Dietz; Bruno Lanz
    Abstract: We study the capacity to meet food demand under conditions of climate change, economic and population growth. We take a novel approach to quantifying climate impacts, based on a model of the global economy structurally estimated on the period 1960 to 2015. The model integrates several features necessary to study the problem, including an explicit agriculture sector, endogenous fertility, directed technical change and fossil/renewable energy. We estimate the world economy is more than one trillion dollars smaller, and world population more than 80 million smaller, than would have been the case without climate change. This is despite substantial adaptation having taken place in general equilibrium through R&D and agricultural land expansion. Policy experiments with the model suggest that optimal GHG taxes are high and future temperatures held well below 2°C.
    Keywords: adaptation, agricultural productivity, climate change, directed technical change, energy, food security, economic growth, population growth, structural estimation
    JEL: C51 O13 O44 Q54
    Date: 2019
  12. By: Kelly, Morgan (University College Dublin); Gráda, Cormac Ó (University College); Solar, Peter (VUB, Brussels)
    Abstract: Shipping was central to the rise of the Atlantic economies, but an extremely hazardous activity: in the 1780s, roughly five per cent of British ships sailing in summer for the United States never returned. Against the widespread belief that shipping technology was stagnant before iron steamships, in this paper we demonstrate that between the 1780s and 1820s, a safety revolution occurred that saw shipping losses and insurance rates on oceanic routes almost halved thanks to steady improvements in shipbuilding and navigation. Iron reinforcing led to stronger vessels while navigation improved, not through chronometers which remained too expensive and unreliable for general use, but through radically improved charts, accessible manuals of basic navigational techniques, and improved shore-based navigational aids.
    Keywords: shipping, insurance, Industrial Revolution JEL Classification: N, N73, G22
    Date: 2019
  13. By: Guilherme Strifezzi Leal; David Turchick
    Abstract: We include elastic labor supply and risk aversion in a standard vertical innovation model in order to address four main questions. First, under what conditions will we find workers in the R&D sector of the economy? Second, under what conditions will these workers actually do any research? Third, can a simple redistributive policy provide an escape route from the so-called no-growth trap? And fourth, to what extent is this policy capable of correcting the inherent inefficiencies of the model?
    Keywords: labor supply; Schumpeterian growth; income redistribution; no-growth trap; research effort
    JEL: H21 O3 O4
    Date: 2019–12–31
  14. By: Vu, Trung V.
    Abstract: This paper examines the extent to which the quality of institutions, measured by the Economic Freedom of the World index, helps shape cross-country differences in economic complexity. To this end, I employ the intensity of ultraviolet radiation (UV-R) to isolate an exogenous source of variation in institutions, which helps circumvent endogeneity concerns. Empirical results indicate that the exogenous component of institutional quality exerts a strong and robust positive effect on economic complexity. The findings prevail after performing a battery of robustness tests. Furthermore, I find that institutions affect economic complexity by inducing human capital accumulation and strengthening incentives for innovative activities.
    Keywords: Economic Complexity, Economic Freedom, Institutions, Capabilities, Productive Structures.
    JEL: H11 O11 O43
    Date: 2019–12
  15. By: Suzuki, Keishun
    Abstract: Empirical evidence on the effect of corporate income tax on economic growth is mixed. This paper explores the ambiguous mechanism of corporate income tax by using a Schumpeterian growth model with heterogeneous innovators and endogenous market structure. Our main findings are as follows: (i) Corporate tax cuts do not necessarily enhance innovation. (ii) Corporate tax cuts are likely to have a positive growth effect when the research and development (R&D) productivity across firms is heterogeneous. (iii) R&D tax deduction increases the growth rate. (iv) Based on our calibration, the corporate tax cut in 2018 had a negative effect on economic growth and welfare in the U.S. economy.
    Keywords: Corporate income tax, R&D tax deduction, Innovation, Heterogeneity, Endogenous entry, Market competition
    JEL: H21 H25 O31
    Date: 2019–12
  16. By: Clavijo-Cortes, Pedro; Robledo-Campo, Jacobo; Mendoza-Tolosa, Henry
    Abstract: This article aims to evaluate the effect of the maldistribution of income on economic growth. From the empirical point of view, the literature on the matter is considerable. However, previous studies have employed the Gini index as a measure of inequality which tends to underestimate income disparities across countries. Because the complexity of inequality has changed over time and due to the Gini index is incapable of capturing the changing nature of distribution, we employ the Palma Ratio instead of the Gini index. The main advantage of employing the Palma Ratio is that it captures the dynamics of inequality and allows us to analyze the roots of this maldistribution. The relationship is estimated employing the methodology of Arellano-Bond for dynamic panels, and the results suggest that maldistribution of income generates a sluggish economic growth. In fact, our results suggest that inequality could be associated with a substantial reduction in growth.
    Keywords: Palma Ratio, dynamic panels, inequality, economic growth.
    JEL: C23 D63 E25 O11 O47
    Date: 2019–11–20

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