nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒02‒10
fourteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Does Birthplace Diversity affect Economic Complexity? Cross-country Evidence By Dany Bahar; Hillel Rapoport; Riccardo Turati
  2. Debt, Innovation, and Growth By Thomas Geelen; Jakub Hajda; Erwan Morellec
  3. Growth, Automation and the Long Run Share of Labor By Debraj Ray ⓡ; Dilip Mookherjee
  4. The impact of land fragmentation on household income: Evidence from rural Vietnam By Quang Tran, Tuyen; Van Vu, Huong
  5. Creative industries and economic performance: Should South Africa go to the movies? By Andrew Phiri
  6. Solow model and convergence's equation : mathematical processing By Jonas Kibala Kuma
  7. Demographics in MENA countries: a major driver for economic growth By Yeganeh Forouheshfar; Najat El Mekkaoui; Hippolyte d'Albis
  8. Structural Change Rediscovered : The Role of Human and Physical Capital By Martins,Pedro Miguel Gaspar
  9. 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
  10. A theory of heterogeneous city growth By Christian Ghiglino; Kazuo Nishimura; Alain Venditti
  11. Labor-Augmenting Technical Change and the Labor Share: New Microeconomic Foundations By Daniele Tavani; Luca Zamparelli
  12. Building Knowledge Economies in Africa: An Introduction By Simplice A. Asongu; John Kuada
  14. Adult education and growth By Dohmen, Dieter; Yelubayeva, Galiya

  1. By: Dany Bahar; Hillel Rapoport; Riccardo Turati
    Abstract: We empirically investigate the relationship between a country’s economic complexity and the diversity in the birthplaces of its immigrants. Our cross-country analysis suggests that birthplace diversity is strongly and positively associated with economic complexity. This holds particularly for diversity among highly educated migrants and for countries at intermediate levels of economic complexity. The results are robust to accounting for previous trends in birthplace diversity as well as to using alternatives diversity measures. We address endogeneity concerns by instrumenting diversity through predicted stocks from a pseudo-gravity model as well as from a standard shift-share approach. Finally, we provide evidence suggesting that birthplace diversity boosts economic complexity by increasing the diversification of the host country’s export basket.
    Keywords: Economic Complexity;Birthplace Diversity;Immigration;Growth
    JEL: F22 O31 O33
    Date: 2020–01
  2. By: Thomas Geelen (Copenhagen Business School - Department of Finance; Danish Finance Institute); Jakub Hajda (University of Lausanne; Swiss Finance Institute); Erwan Morellec (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute)
    Abstract: Recent empirical studies show that innovative firms heavily rely on debt financing. This paper investigates the relation between debt financing, innovation, and growth in a Schumpeterian growth model in which firms' dynamic R&D and financing choices are jointly and endogenously determined. The paper demonstrates that while debt hampers innovation by incumbents due to debt overhang, it also stimulates entry, thereby fostering innovation and growth at the aggregate level. The paper also shows that debt financing has large effects on firm entry, firm turnover, and industry structure and evolution. Lastly, it predicts substantial intra-industry variation in leverage and innovation, in line with the empirical evidence..
    Keywords: debt, innovation, industry dynamics, growth
    JEL: G32 O30
    Date: 2019–07
  3. By: Debraj Ray ⓡ; Dilip Mookherjee
    Abstract: We provide an argument for long-term automation and decline in the labor income share, driven by capital accumulation rather than technical progress or rising markups. We emphasize a fundamental asymmetry across physical and human capital. An individual can indefinitely replicate her claims on the former, but — after a point — her human endowment cannot be cloned and rescaled in the same way. Then ongoing capital accumulation gives rise to progressive automation, and the share of labor income converges to zero. The displacement of human labor is gradual, and real wages could rise indefinitely. The results extend to endogenous technical change.
    JEL: D33 E25 J24 J31 O33
    Date: 2020–01
  4. By: Quang Tran, Tuyen; Van Vu, Huong
    Abstract: Our study provides evidence that land fragmentation has negative consequences for household income, possibly because of its negative effects on crop income in ruralVietnam. Notably, using the Instrumental Variables (IV) method, we find that the negative effect is much greater after addressing the endogeneity of land fragmentation. IV analysis, therefore, suggests that a conventional approach which often uses the Ordinary Least Squares (OLS) method is likely to underestimate the impact of land fragmentation on rural households. Also, the finding implies that reducing land fragmentation would minimize its negative consequences for household income by reducing its negative effect on crop income.
    Keywords: Cropland; Endonegeity; Land law 1993; Land reform; Fragmentation; Household income, rural Vietnam
    JEL: Q1 Q12 Q18
    Date: 2019
  5. By: Andrew Phiri (Department of Economics, Nelson Mandela University)
    Abstract: Creative industries have been recently considered as a possible avenue for improving economic performance. Our study focuses on the film sector and its influence on the South African economic growth, per capita income and employment. Our autoregressive lag distributive (ARDL) estimates on a log-linearized endogenous growth model augmented with creative capital indicate that the production of movies has no significant effects on long-run GDP growth, per capita GDP and employment. We only find a short-run positive and significant influence of film production on per capita income. However, re-estimating the regressions with interactive terms between movie production and i) government spending ii) foreign direct investment, improve the significance of film regression coefficients which all turn positive and significant over the long-run equilibrium. Policy implications based on our empirical findings are discussed.
    Keywords: Creative sector; Film production; Economic activity; Autoregressive distributive lag (ARDL) model; South Africa.
    JEL: C32 C51 L82 O40 Z11
    Date: 2020–01
  6. By: Jonas Kibala Kuma (UNIKIN - Université de Kinshasa)
    Date: 2020–01–06
  7. By: Yeganeh Forouheshfar (Université Paris-Dauphine, IRD - Institut de Recherche pour le Développement, PSL - PSL Research University, LEDa - Laboratoire d'Economie de Dauphine - CNRS - Centre National de la Recherche Scientifique - IRD - Institut de Recherche pour le Développement - Université Paris-Dauphine, DIAL - Développement, institutions et analyses de long terme); Najat El Mekkaoui (Université Paris-Dauphine, IRD - Institut de Recherche pour le Développement, PSL - PSL Research University, LEDa - Laboratoire d'Economie de Dauphine - CNRS - Centre National de la Recherche Scientifique - IRD - Institut de Recherche pour le Développement - Université Paris-Dauphine, DIAL - Développement, institutions et analyses de long terme); Hippolyte d'Albis (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: MENA region is undergoing rapid demographic transition, where 50% of the population is under the age 25 and high youth unemployment rates are argued to be one of the main sources of political instability. Fighting youth ex- clusion from work is one of the main challenges in the region. In this paper we evaluate the economic impact of the demographic transition for selected coun- tries which experience di_erent speeds of transition, namely: Iran, Morocco and Egypt. The impact of demographic shift on the evolution of human capital stock and physical capital stock, has been highlighted by the literature. Since _nan- cial markets play a crucial role to allocate capital and channel the funds to the productive sector, it is hence fundamental to take into account the role of the _nancial markets in the growth process associated with demographic change. We have developed a general equilibrium overlapping generations model with a cost for capital mobilisation as a proxy for _nancial markets' e_ciency. We have found that the demographic shift will be an important driver for growth in the upcoming decades. Furthermore, our results show that a more e_cient _nancial sector leads to better economic performance. Speci_cally, youth are the primary bene_ciaries: an increase in the _nancial sector e_ciency can reduce up to 8 percentage points of the youngest age group unemployment.
    Keywords: Financial efficiency,Development,MENA region,Demographic transition
    Date: 2019–12
  8. By: Martins,Pedro Miguel Gaspar
    Abstract: Changes in economic structures are an essential feature of development. But how are these brought about? A growing body of evidence underscores the transformative role that human and physical capital can have in enhancing and sustaining economic growth. Investments in education, health, and economic infrastructure need to be at the core of national policy agendas.
    Keywords: Food Security,Economic Theory&Research,Economic Growth,Industrial Economics,Labor Markets,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,General Manufacturing,Food&Beverage Industry,Common Carriers Industry,Construction Industry,Business Cycles and Stabilization Policies,Plastics&Rubber Industry,Transport Services
    Date: 2019–07–01
  9. 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 economicgrowth,social optimality,deep factors
    JEL: D31 D62 O10 O30
    Date: 2020
  10. By: Christian Ghiglino (Department of Economics, University of Essex - University of Essex); Kazuo Nishimura (RIEB, Kobe University - Kobe University); Alain Venditti (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, EDHEC - EDHEC Business School)
    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: city inequalities,heterogeneous growth rates,endogenous growth,human capital,urban dynamics
    Date: 2020–01
  11. By: Daniele Tavani (Department of Economics, Colorado State University); Luca Zamparelli (Department of Economics and Law, Sapienza University of Rome)
    Abstract: An important question in alternative economic theories has to do with the relationship between the functional income distribution and the growth rate of labor productivity. According to both the induced innovation hypothesis and Marx-biased technical change, labor productivity growth should be an increasing function of the labor share. In this paper, we first discuss the shortcomings of both theories and then provide a novel microeconomic foundation for a direct relationship between the labor share and labor productivity growth. The result arises because of profit-seeking behavior by capitalist firms that face a trade-off between investing in new capital stock and innovating to save on labor costs. Embedding this finding in the Goodwin (1967) growth cycle model, we show that: i) the resulting steady state is locally stable; ii) unlike in the original Goodwin model, the long-run employment rate is sensitive to investment decisions; finally, iii) we numerically identify parametric configurations that establish whether convergence to the long-run growth path is cyclical or monotonic.
    Keywords: Endogenous Technical Change, Income Shares, Labor Productivity, Employment
    JEL: E32 O33
    Date: 2020–01
  12. By: Simplice A. Asongu (Yaoundé/Cameroon); John Kuada (Aalborg University, Denmark)
    Abstract: Knowledge has emerged as a fundamental driver of economic growth and development by inter alia improving the effectiveness and efficiency of economic projects and boosting the process of finding new avenues of addressing developmental policy syndromes. Recent evidence suggests that Africa is on the threshold of significant and sustainable economic growth if its human and material resources can be effectively mobilised to support the process (Kuada & Mensah, 2017; Asongu & Tchamyou, 2019). Consequently, the World Bank’s Knowledge Economy Framework aims to explore and support the extent to which current policies in African countries affect the knowledge development process (and thereby competitiveness) on the continent. A knowledge economy is an economy in which economic prosperity largely depends on the accessibility, quality and quantity of information available, instead of the means of production (Asongu, 2017a, 2017b). This themed issue of Contemporary Social Science-‘Building Knowledge Economies in Africa’ - consists of papers that focus on, but are not limited to, the four dimensions of the World Bank’s Knowledge Economy Index. These are: information and communication technology, education, economic incentives and institutional regime, and innovation (Tchamyou, 2017). The themed issue engages with high quality contributions which, taken together, address the drivers towards knowledge-based economies. This introduction provides a context for understanding the importance of building knowledge economies in Africa and summarises the main contributions to the themed issue. The paper ends by advising scholars and policy makers regarding the risks associated with a colonial view of knowledge- notably the importance of proposing knowledge-based policies while avoiding hegemonic paradigms and hierarchical constructs. In summary, the issue consists of a set of theoretically informed, empirically robust, policy-relevant and accessible articles for both specialists and non-specialists.
    Keywords: Knowledge economy; Development; Africa
    JEL: O10 O30 O38 O55 O57
    Date: 2020–01
  13. By: Houda Boubaker (LAREQUAD, FSEGT, University of Tunis El Manar, Tunisia and Amse, Aix-Marseille School of Economics); Eric Girardin (Amse, Aix-Marseille School of Economics); Christophe Muller (Amse, Aix-Marseille School of Economics)
    Abstract: This paper investigates the role of shocks to trend in explaining the business cycle fluctuations in MENA countries. Therefore, We estimate a stochastic growth model with both transitory and permanent shocks. Our results provide the evidence about the shocks to trend productivity as a driver of the macroeconomic movements in the region. We find also that the model succeed to match a key of the empirical regularities as for emerging economies, which is the high relative volatility of consumption to output. The examination of the model performance for oil exporting and importing MENA countries indicate that the role of trend is more pronounced for the former group. The examination of the determinants of MENA countries’ volatility identifies the trade openness, volatility of inflation rate, the quality of institution and the volatility of government consumption as source of shocks to productivity. Length: 83
    Date: 2019–09–20
  14. By: Dohmen, Dieter; Yelubayeva, Galiya
    Abstract: The paper presents an appraisal of theoretical links between adult education (human capital in general) and macroeconomic growth and provides a summary of the findings in the main empirical macro-studies for European countries. An initial analysis of broad statistics for all EU member states suggests a correlation between investments in adult education (human resources), the working environment and growth, however, clear causal relationships are difficult to establish. The paper provides a broad historical survey of empirical macro-studies following the theory of human capital growth. This paper aims to answer the following research questions: (1) What are the various historical antecedents and early conceptualisations of the human capital theory that are useful in understanding the impact of education on economic growth? (2) What is current state of research that measures this impact econometrically? (3) What is the impact of human capital (determined as adult education) to economic growth? (4) How to consolidate these findings in a systematic way that builds on the theoretical basis of human capital (adult education) theory?
    Date: 2019

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