nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒02‒03
eight papers chosen by
Marc Klemp
University of Copenhagen

  1. The End of Economic Growth? Unintended Consequences of a Declining Population By Charles I. Jones
  2. Sustainability traps: patience and innovation By Christos Karydas; Evangelos V. Dioikitopoulos
  3. Relative consumption, relative wealth, and long-run growth: When and why is the standard analysis prone to erroneous conclusions? By Hof, Franz X.; Prettner, Klaus
  4. Urban Growth and its Aggregate Implications By Gilles Duranton; Diego Puga
  5. Urbanization and mortality decline By Bandyopadhyay, Sanghamitra; Green, Elliott D.
  6. An Econometric Model of International Long-run Growth Dynamics By Ulrich K. Müller; James H. Stock; Mark W. Watson
  7. A theory of heterogeneous city growth By Christian Ghiglino; Kazuo Nishimura; Alain Venditti
  8. Resource–Economic Growth Nexus, Role of Governance, Financial Development, Globalisation and War: Dynamic Approach By Niknamian, Sorush

  1. By: Charles I. Jones
    Abstract: In many models, economic growth is driven by people discovering new ideas. These models typically assume either a constant or a growing population. However, in high income countries today, fertility is already below its replacement rate: women are having fewer than two children on average. It is a distinct possibility — highlighted in the recent book, “Empty Planet” — that global population will decline rather than stabilize in the long run. What happens to economic growth when population growth turns negative?
    JEL: E0 J11 O4
    Date: 2020–01
  2. By: Christos Karydas (Center of Economic Research (CER-ETH), ETH Zurich, Switzerland); Evangelos V. Dioikitopoulos (King's Business School, Group of Economics, King's College London, UK)
    Abstract: This paper argues that the joint relation between long-term orientation, environmental quality and innovation plays a key role in explaining environment-poverty traps. Based on empirical observations, we allow for the subjective discount rate to negatively depend on environmental quality in an R&D-driven endogenous growth model with local pollution externalities. Our model reconciles two empirical facts: i) multiple equilibria of economic and environmental development; ii) opposite responses to technological improvements depending on the initial equilibrium. Our results suggest that -- in addition to traditional policies such as development aid and technology transfer -- policies that aim at improving both the economic and the environmental dimension of sustainability, should also focus on changing individuals' long-term views in countries that face weak environmental conditions.
    Keywords: Endogenous growth, innovation, time preference, environmental poverty traps, economic poverty traps
    JEL: D90 E21 O13 O44 Q55 Q56
    Date: 2020–01
  3. By: Hof, Franz X.; Prettner, Klaus
    Abstract: We employ a novel approach for analyzing the effects of relative consumption and relative wealth preferences on both the decentralized and the socially optimal economic growth rates. In the pertinent literature these effects are usually assessed by examining the dependence of the growth rates on the two parameters of the instantaneous utility function that seem to measure the strength of the relative consumption and the relative wealth motive. We go beyond the sole consideration of parameters by revealing the fundamental factors that ultimately determine long-run growth. In doing so we identify widely used types of status preferences in which the traditional approach is prone to erroneous conclusions. For example, in one of these specifications the parameter that seems to determine the strength of the relative consumption motive actually also affects the strength of the relative wealth motive and the elasticity of intertemporal substitution.
    Keywords: relative consumption,relative wealth,quest for status,long-run economic growth,social optimality,deep factors
    JEL: D31 D62 O10 O30
    Date: 2019
  4. By: Gilles Duranton; Diego Puga
    Abstract: We develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogenous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains. The model builds on strong microfoundations, matches key regularities at the city and economy-wide levels, and generates novel predictions for which we provide evidence. It can be quantified relying on few parameters, provides a basis to estimate the main ones, and remains transparent regarding its mechanisms. We examine various counterfactuals to assess quantitatively the effect of cities on economic growth and aggregate income.
    JEL: C52 D24 R12
    Date: 2019–12
  5. By: Bandyopadhyay, Sanghamitra; Green, Elliott D.
    Abstract: We investigate the relationship between mortality decline and urbanization, which has hitherto been proposed by demographers but has yet to be tested rigorously in a global context. Using cross-national panel data we find evidence of a robust negative correlation between crude death rates and urbanization. The use of instrumental variables suggest that this relationship is causal, while historical data from the early 20th century suggests that this relationship holds in earlier periods as well. Finally, we find robust evidence that mortality decline is correlated with urbanization through the creation of new cities rather than promoting urban growth in already-extant cities.
    Keywords: Urbanization; Mortality Decline; Economic Development; Structural Change; Demographic Transition
    JEL: Q15
    Date: 2018–03–01
  6. By: Ulrich K. Müller; James H. Stock; Mark W. Watson
    Abstract: We develop a Bayesian latent factor model of the joint evolution of GDP per capita for 113 countries over the 118 years from 1900 to 2017. We find considerable heterogeneity in rates of convergence, including rates for some countries that are so slow that they might not converge (or diverge) in century-long samples, and evidence of “convergence clubs” of countries. The joint Bayesian structure allows us to compute a joint predictive distribution for the output paths of these countries over the next 100 years. This predictive distribution can be used for simulations requiring projections into the deep future, such as estimating the costs of climate change. The model’s pooling of information across countries results in tighter prediction intervals than are achieved using univariate information sets. Still, even using more than a century of data on many countries, the 100-year growth paths exhibit very wide uncertainty.
    JEL: C32 C55 O47
    Date: 2019–12
  7. By: Christian Ghiglino (Department of Economics, University of Essex, UK); Kazuo Nishimura (RIEB, Kobe University, Japan); Alain Venditti (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE, Marseille, France.)
    Abstract: We consider an economy with three cities producing different outputs. Two cities produce intermediate goods, a type 1 producing an intermediate "agricultural" good with capital and labor only, and a type 2 producing an intermediate "industrial" good with capital, labor and human capital, and the last type 3 city produces the final good which is obtained from the two intermediate goods and labor. The asymmetric introduction of human capital allows us to prove that the three cities experience at the equilibrium heterogeneous endogenous growth rates which are proportional to the growth rate of human capital. We show that the "industrial" type 2 city is characterized by the larger growth rate while the "agricultural" type 1 city experiences the lower growth rate, and thus the type 3 city is characterized by a growth rate which is a convex combination of the two formers. This implies that the relative size in terms of output of the "agricultural" city decreases over time. This property allows to recover the empirical fact that most nonagricultural production occurs in growing metropolitan areas. But, simultaneously, as we prove that total labor employed in each city is proportional to the total population, the relative population size distribution of cities is constant over time as shown in empirical studies.
    Keywords: urban dynamics, human capital, endogenous growth, heterogeneous growth rates, city inequalities
    JEL: C61 C62 O41 R11 R12
    Date: 2020–01
  8. By: Niknamian, Sorush
    Abstract: This study reassesses the resource–economic growth nexus by incorporating several channels. Advanced panel time series techniques are used to analyse panel time series data from 1980 to 2015 in 31 oil-rich countries. Results show that oil rent augments economic growth; thus, oil rent is conducive rather than impediment for economic growth. The role of governance in economic growth is significant in the selected countries. Oil rent exerts a positive significant impact on economic growth in countries with good governance compare to countries with poor governance. Financial development is an unimportant channel in the resource–growth nexus because FD is often unable to mobilise oil rent from the government to the private sector in oil-rich countries. Globalisation is advantageous for countries and promote economic growth. Moreover, war exerts a significant negative effect on growth in the long term.
    Date: 2019–12–31

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