nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒02‒24
fifteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Linguistic Traits and Human Capital Formation By Oded Galor; Ömer Özak; Assaf Sarid
  2. Infectious Diseases, Human Capital and Economic Growth By Aditya Goenka; Lin Liu
  3. The Origins of Creativity: The Case of the Arts in the United States since 1850 By Karol J. Borowiecki
  4. A New Impetus for Endogenous Growth: R&D Offshoring via Virtual Labor Mobility By Nakanishi, Noritsugu; Long, Ngo Van
  5. Optimal location of economic activity and population density: The role of the social welfare function By Raouf Boucekkine; Giorgio Fabbri; Salvatore Federico; Fausto Gozzi
  6. Childless Aristocrats. Inheritance and the Extensive Margin of Fertility By Paula Eugenia Gobbi; Marc Goñi
  7. Exits from the Poverty Trap and Growth Accelerations in a Dual Economy Model By Jean-Claude Berthélemy
  8. Classical Unified Growth Theory By Lueger, Tim
  9. Labor-augmenting technical change and the labor share: New microeconomic foundations By Daniele Tavani; Luca Zamparelli
  10. A “Silent Revolution”: school reforms and Italy’s educational gender gap in the Liberal Age (1861-1921) By Gabriele Cappelli; Michelangelo Vesta
  11. Rebundling Institutions By Katja Kalkschmied
  12. THE GROWTH EFFECTS OF EL NIÑO AND LA NIÑA: LOCAL WEATHER CONDITIONS MATTER By Cécile Couharde; Olivier Damette; Rémi Generoso; Kamiar Mohaddes
  13. Analyzing the importance of forward orientation in financial development-growth nexus: Evidence from big data By Taniya Ghosh; Prashant Mehul Parab; Sohini Sahu
  14. Structural transformation, openness, and productivity growth in sub-Saharan Africa By Karimu Suale
  15. Can the optimal tariff be zero for a growing large country? By Takumi Naito

  1. By: Oded Galor; Ömer Özak; Assaf Sarid
    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.
    JEL: D91 I25 J16 J24 Z13
    Date: 2020–01
  2. By: Aditya Goenka (University of Birmingham); Lin Liu (University of Liverpool)
    Abstract: Stylized facts show there is a clustering of countries in three balanced growth paths characterized by colorreddiffering income/growth, human capital and incidence of infectious diseases. To explain this, we develop a dynamic general equilibrium model incorporating SIS epidemiology dynamics, where households choose how much to invest in human and physical capital, as well as in controlling the risk of infection. In the decentralized economy households do not internalize the externality of controlling in- fection. There are multiple balanced growth paths where the endogenous prevalence of the disease determines whether human capital is accumulated or not, i.e. whether there is sustained economic growth or a poverty trap. We characterize the optimal public health policy that internalizes the disease externality and the subsidy that decentralizes it. Perversely, for countries in a poverty trap and most afflicted with diseases, the optimal subsidy is lower than for growing economies. We also study the quantitative effects of better control of diseases, and of increasing life expectancy on countries in a poverty trap.
    Keywords: Endogenous Growth; Infectious Diseases; Epidemiology; Poverty Trap; Public Health Policy; Human Capital
    JEL: E19 I10 D90 O11
    Date: 2019–10
  3. By: Karol J. Borowiecki (Department of Business and Economics, University of Southern Denmark, Odense, Denmark)
    Abstract: This research illuminates the historical development of creative activity in the United States. Census data is used to identify creative occupations (i.e., artists, musicians, authors, actors) and data on prominent creatives, as listed in a comprehensive biographical compendium. The analysis rst sheds light on the socio-economic background of creative people and how it has changed since 1850. The results indicate that the proportion of female creatives is relatively high, time constraints can be a hindrance for taking up a creative occupation, racial inequality is present and tends to change only slowly, and education plays a signi cant role for taking up a creative occupation. Second, the study systematically documents and quanti es the geography of creative clusters in the United States and explains how these have evolved over time and across creative domains. Third, it investigates the importance of outstanding talent in a discipline for the local growth of an artistic cluster.
    Keywords: Creativity, artists, geographic clustering, agglomeration economies, urban history
    JEL: R1 N33 Z11
    Date: 2019–03
  4. By: Nakanishi, Noritsugu; Long, Ngo Van
    Abstract: We develop a simple North-South model of quality ladders to show that the virtual mobility of labor across time zones, facilitated by the advance in communication technology, can raise the endogenous growth rate of the world economy. The unique balanced growth rate is increasing in the endowments of skilled labor in both countries and decreasing in the rate of impatience. Moreover, we find that partial R&D offshoring to the South has initially a negative effect on the level of skilled wages in the North, but this is compensated for by its positive effect on the growth rate in both North and South.
    Keywords: R&D offshoring, Virtual labor mobility, Time zone difference, Endogenous growth, North-South trade
    JEL: F43 O41
    Date: 2020–02
  5. By: Raouf Boucekkine (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, IMéRA - Institute for Advanced Studies - Aix-Marseille University); Giorgio Fabbri (GAEL - Laboratoire d'Economie Appliquée de Grenoble - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UGA - Université Grenoble Alpes); Salvatore Federico (DEPS - Dipartimento di Economia Politica e Statistica - UNISI - Università degli Studi di Siena); Fausto Gozzi (LUISS - Libera Università Internazionale degli Studi Sociali Guido Carli [Roma])
    Abstract: In this paper, we consider a spatiotemporal growth model where a social planner chooses the optimal location of economic activity across space by maximization of a spatiotemporal utilitarian social welfare function. Space and time are continuous, and capital law of motion is a parabolic partial differential diffusion equation. The production function is AK. We generalize previous work by considering a continuum of social welfare functions ranging from Benthamite to Millian functions. Using a dynamic programming method in infinite dimension, we can identify a closed-form solution to the induced HJB equation in infinite dimension and recover the optimal control for the original spatiotemporal optimal control problem. Optimal stationary spatial distributions are also obtained analytically. We prove that the Benthamite case is the unique case for which the optimal stationary detrended consumption spatial distribution is uniform. Interestingly enough, we also find that as the social welfare function gets closer to the Millian case, the optimal spatiotemporal dynamics amplify the typical neoclassical dilution population size effect, even in the long-run.
    Keywords: Spatiotemporal growth models,Benthamite vs Millian social welfare functions,imperfect altruism,diffusion,dynamic programming in infinite dimension
    Date: 2020–02–07
  6. By: Paula Eugenia Gobbi; Marc Goñi
    Abstract: We provide new evidence on the two-way link between fertility decisions on the extensive margin and inheritance. We focus on settlements, a popular inheritance scheme among British aristocrats that combined primogeniture and a one-generation entail of the family estates. Using peerage records (1650-1882), we find that settlements affected the extensive margin of fertility: they reduced childlessness rates by 14.7 pp. ensuring the survival of aristocratic dynasties. Since settlements were signed only if the family head survived until his heir's wedding, we establish causality by exploiting variation in the heirs birth order. Next, we show that the extensive margin of fertility can shape inheritance rules. We build a model with inter-generational hyperbolic discounting where inheritance rules affect fertility and, in turn, schemes restricting successors (e.g. settlements or trusts) emerge endogenously in response to concerns over the dynasty's survival. These results highlight the importance of fertility decisions for the analysis of inheritance.
    Keywords: Childlessness, Elites, Fertility, Inheritance, Inter-generational discounting, Settlement
    Date: 2020–01
  7. By: Jean-Claude Berthélemy (FERDI - Fondation pour les Etudes et Recherches sur le Développement International, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We propose a simple theoretical dual economy model to study the dynamics of an economy in which individuals move out of a poverty trap. These dynamics are characterized by growth acceleration. This model implies that poverty reduction could, under some circumstances, cause growth, rather than the other way around. We define a measurement of the growth impulse that could be triggered by independent exits from poverty and correlate it with observed growth accelerations. This correlation is both positive and significant, and it passes various robustness checks. .
    Keywords: Growth acceleration,poverty trap,poverty reduction
    Date: 2018–09–25
  8. By: Lueger, Tim
    Abstract: Throughout the history of economic thought, there have been numerous attempts to model an early era of "Malthusian" economic stagnation as well as the transition to an era of economic development in one coherent framework, or, in other words, a unified growth theory. In recent years, unified growth models have attracted a large readership among economists, challenging the conventional exogenous neoclassical growth theory. However, in most of these models, an important effect suggested by Malthus has been frequently omitted. By including what he had called "the great preventive check" in the conventional Malthusian trap model, which is based on the principle of population, the principle of diminishing returns and the principle of labor division, the transition can be modeled in a very simple dynamic macroeconomic framework. The correspondingly advanced theory suggests that increasing life expectancy tends to create a demographic structure that is much less prone to overpopulation. This new interpretation of the classical growth model is suggested to be capable of integrating the mechanisms of economic stagnation and economic development. Although the "vaguer intuitions" of the classical economists provided deeper and more profound insights than those of most modern unified growth theorists, the verbal form of their arguments has at the same time tended to be more favorable to misinterpretations. It is the intention of this work to identify these misinterpretations and to restore the main ideas of classical economics by building a basic classical unified growth model.
    Date: 2019–12
  9. By: Daniele Tavani (Colorado State University (US)); Luca Zamparelli
    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, and 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, Employment.
    JEL: E32 O33
    Date: 2020–02
  10. By: Gabriele Cappelli (University of Siena); Michelangelo Vesta (University of Siena)
    Abstract: This paper explores the evolution of the human capital gender gap in Liberal Italy (1871 – 1921). First, we show that Italy lagged some 50 years behind more advanced countries like France, Prussia and the UK, and that the regional divide in gendered literacy was unparalleled in the rest of Europe. Next, we test whether the shift to primary-school centralization in 1911 (the Daneo-Credaro Reform) brought about a decisive improvement in female literacy. We rely on a brand-new, cross-section micro (municipal) dataset of literacy rates in 1911 and 1921, as well as their potential determinants around 1911. Such data, combined with Propensity Score Matching to improve identification, shows that primary-school centralization increased the average annual growth of female literacy by 0.78 percentage points. Thus, even though the Reform did not aim at girls specifically, it brought about the unintended consequences of more rapid human capital accumulation for women and – ceteris paribus – a reduced educational gender gap. We briefly discuss why this “Silent Revolution” likely had important implications for Italy’s economic history.
    Keywords: Gender, primary schooling, Liberal Age, Italy
    JEL: I25 J16 N3
    Date: 2020–02
  11. By: Katja Kalkschmied (University of Graz, Austria)
    Abstract: This study investigates the joint effects of legal property rights and contracting institutions on economic development. In a two-step panel estimation procedure that uses data of 130 countries over the period 2005-2015, I find that the long-term income effects of legal property rights institutions depend on the quality of legal contracting institutions. This supports the hypothesis that the two different types of institutions provide interrelated incentives and constraints on economic decisions and productive activities. According to the estimates, the marginal effects of increasing executive constraints are significantly higher in countries with a legal system that efficiently enforces private contracts. Further decomposing the interaction effect for groups of countries with different quality combinations reveals that the first of the two types of legal institutions matters for the size and direction of the interaction effect. In poor countries with absent or bad legal institutions, reforms considering only one single type can backfire.
    Keywords: legal institutions; property rights; contracting; interrelated incentives; joint effects; economic development
    JEL: C23 H13 O11 P51
    Date: 2020–02
  12. By: Cécile Couharde (Université Paris Nanterre); Olivier Damette (Université de Lorraine and Climate Economic Chair Paris associate); Rémi Generoso (Université de Lille); Kamiar Mohaddes (4 Judge Business School, University of Cambridge)
    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 Niño 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 Niño) and cold (La Niña) 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
    Date: 2019–11–20
  13. By: Taniya Ghosh (Indira Gandhi Institute of Development Research); Prashant Mehul Parab (Indira Gandhi Institute of Development Research); Sohini Sahu (Indian Institute of Technology Kanpur)
    Abstract: The paper analyzes how the citizens' attitude towards future, obtained using big data, affects the relationship between the nation's financial development and economic growth. All financial development indicators, except for one, show significant negative growth effects. We find that individual's attitude towards future as captured by future orientation index (FOI) plays a significant role in affecting this relation. In particular, FOI interacts with financial development, and weakens the negative effect of financial development on nation's economic growth.
    Keywords: Developing countries, Developed countries, Economic growth, Financial development, Future Orientation Index
    JEL: G2 O16 O47
    Date: 2019–11
  14. By: Karimu Suale
    Abstract: This paper examines the connections of structural change and economic openness to labour productivity growth using a panel data set of 41 countries in sub-Saharan Africa for the period 1991–2015.A dynamic panel model of cross-country productivity growth is estimated using the least squares with dummy variables approach.The results suggest that growth of labour productivity is negatively related to initial levels of labour productivity. Labour productivity growth is also positively related to the shares of labour in industry and services.However, the share of labour in agriculture has no statistically significant relationship with labour productivity growth. Economic openness also appears to have a weak relationship with labour productivity growth.
    Keywords: Economic openness,Labour productivity,Structural transformation,Sub-Saharan Africa
    Date: 2019
  15. By: Takumi Naito
    Abstract: Can the optimal tariff be zero for a growing large country? To pursue the possibility, we extend the Rivera-Batiz--Romer lab-equipment model of endogenous technological change to include asymmetric countries, import tariffs, and either homogeneous or heterogeneous firms. Each country's domestic revenue share is a sufficient statistic for its long-run growth rate, but it is not for its long-run welfare. A unilateral tariff reduction by either country always increases the balanced growth rate. A zero tariff is locally optimal for a country under a mild condition, which is automatically satisfied at a symmetric balanced growth path with the zero tariff.
    Date: 2020–01

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