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

  1. Lineages of Scholars in pre-industrial Europe: Nepotism vs Intergenerational Human Capital Transmission By David de la Croix; Marc Goni
  2. Historical Natural Experiments: Bridging Economics and Economic History By Davide Cantoni; Noam Yuchtman
  3. Migrant Inventors and the Technological Advantage of Nations By Dany Bahar; Hillel Rapoport
  4. Research Effort and Economic Growth By Weshah Razzak
  5. The Principle of Population vs. the Malthusian Trap By Lueger, Tim
  6. Impact of FDI on economic growth: The role of country income levels and institutional strength By Baiashvili, Tamar; Gattini, Luca
  7. Consumers’ Perception of Food Safety Risk From Vegetables: A Rural - Urban Comparison By Weshah Razzak; El Mostafa Bentour
  8. The Population Question in a Neoclassical Growth Model. A Brief Theory of Production per Capita By Lueger, Tim
  9. Nexus between Energy Consumption, Economic Development, and CO2 Emissions: Empirical Evidence from Morocco By Harkat, Tahar
  10. Resources, Conflict, and Economic Development in Africa By Achyuta Adhvaryu; James Fenske; Gaurav Khanna; Anant Nyshadham
  11. Military Expenditure and Economic Growth: The South American Case. By Riveros Gavilanes, John Michael
  12. Optimal location of economic activity and population density: The role of the social welfare function By Raouf Boucekkine; Giorgio Fabbri; Salvatore Federico; Fausto Gozzi
  13. Effects of Monetary Policy in a Model with Cash-in-Advance Constraints on R&D and Capital Accumulation By Daiki Maeda; Yuki Saito
  14. A VAR Evaluation of Classical Growth Theory By Lueger, Tim

  1. By: David de la Croix (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Marc Goni (Department of Economics, University of Vienna)
    Abstract: We propose a new methodology to disentangle two determinants of intergenerational persistence: inherited human capital vs. nepotism. This requires jointly addressing measurement error in human-capital proxies and the selection bias inherent to nepotism. We do so by exploiting standard multi-generation correlations together with distributional differences across generations in the same occupation. These two moments identify the structural parameters of a first-order Markov process of human-capital endowments' transmission, extended to account for nepotism. We apply our method to a newly built database of more than one thousand scholar lineages in higher education institutions over the period 1000-1800. Our results show that 14 percent of scholar's sons were nepotic scholars. Nepotism declined during the Scientific Revolution and the Enlightenment, was more prominent in Catholic than in Protestant institutions, and was higher in law than in sciences. Human-capital endowments were inherited with an intergenerational elasticity of 0.59, higher than suggested by parent-child elasticities in observed outcomes (publications), yet lower than recent estimates in the literature (0.75) which do not account for nepotism.
    Keywords: Intergenerational mobility, human capital transmission, nepotism, university scholars, upper-tail human capital, pre-industrial Europe
    JEL: C31 E24 J1
    Date: 2020–02–24
  2. By: Davide Cantoni; Noam Yuchtman
    Abstract: The analysis of historical natural experiments has profoundly impacted economics research across fields. We trace the development and increasing application of the methodology, both from the perspective of economic historians and from the perspective of economists in other subdisciplines. We argue that the historical natural experiment represents a methodological bridge between economic history and other fields: historians are able to use the cutting edge identification strategies emphasized by applied microeconomists; economists across subfields are able to scour history for useful identifying variation; development and growth economists are able to trace the historical roots of contemporary outcomes. Differences in fields suggest differences in scholars' aims of studying historical natural experiments. We propose a taxonomy of three primary motives that reflect priorities in different fields: historians aim to understand causal processes within specific settings. Economists across fields aim to identify "clean" historical events (in whatever context) to test hypotheses of theoretical interest or estimate causal parameters. And, growth and development economists aim to identify past variation that can be causally linked to contemporary outcomes of interest. We summarize important contributions made by research in each category. Finally, we close with a brief discussion of challenges facing each category of work.
    JEL: B00 N00 N01 N10 O10
    Date: 2020–02
  3. By: Dany Bahar (Center for International Development at Harvard University); Hillel Rapoport
    Abstract: We investigate the relationship between the presence of migrant inventors and the dynamics of innovation in the migrants’ receiving countries. We find that countries are 25 to 60 percent more likely to gain advantage in patenting in certain technologies given a twofold increase in the number of foreign inventors from other nations that specialize in those same technologies. For the average country in our sample, this number corresponds to only 25 inventors and a standard deviation of 135. We deal with endogeneity concerns by using historical migration networks to instrument for stocks of migrant inventors. Our results generalize the evidence of previous studies that show how migrant inventors "import" knowledge from their home countries, which translates into higher patenting in the receiving countries. We interpret these results as tangible evidence of migrants facilitating the technology-specific diffusion of knowledge across nations.
    Keywords: innovation, migration, patent, technology, knowledge
    JEL: O31 O33 F22
    Date: 2020–02
  4. By: Weshah Razzak (School of Economics and Finance, Massey University, Palmerston North)
    Abstract: Total factor productivity growth (TFP) is positively related to the growth rate in effective research efforts. At the macro level, research effort is the nonlinear product of human capital and the number of people engaged in research activity. The rate of return on human capital is positive across the G7 countries. However, the rate of return on the number of researcher is negative in all countries except the U.S. thus; there is a decreasing return to scale in the production of new ideas.
    Keywords: TFP Growth, Research Efforts, Education, Human Capital, Useful Knowledge
    JEL: O40 O47
    Date: 2020
  5. By: Lueger, Tim
    Abstract: In spite of two centuries of extensive debate, a consistent framework of the classical theory of population on which economists can universally agree has not been established. This means that either the theory lacks consistency or it has been misunderstood in important ways. This paper attempts to settle this issue by arguing that the latter was the case, revealing prevailing misconceptions. Since a large amount of these misconceptions most probably arose from the lack of a consistent nomenclature, the paper intends to clarify the classical theory of population by employing unambiguous definitions of the principle of population, the Malthusian trap, positive checks and preventive checks to population. The classical theory of population can then be applied to analyze the transition from economic stagnation to economic growth. As a result, numerous current theories trying to explain the transition to growth that are based on an increase of pro- duction will prove secondary when compared to the great preventive check.
    Date: 2018–04–06
  6. By: Baiashvili, Tamar; Gattini, Luca
    Abstract: Foreign direct investment (FDI) is generally considered a driving factor to economic growth. Nevertheless, empirical evidence is rather mixed, reporting a positive, neutral, or even negative relationship of FDI with growth. Our investigation concentrates on the impact of FDI inflows on growth and their effect mediated by income levels and the quality of the institutional environment. Specifically, we focus the interaction between country income levels - including low-, middle- and high-income countries - and FDI. This was not analysed thoroughly in earlier studies. Moreover, we deploy a new perspective to look into the FDI effects on growth mediated by institutional quality whereby we make use of country income levels as the key elements to peer-reference countries. Our study is based on 111 countries, stretching from developed economies to developing and emerging markets starting in 1980. Our estimations make use of panel GMM techniques robust to sample size, instrument proliferation and endogeneity concerns. We find that FDI benefits do not accrue mechanically and evenly across countries. We detect an inverted-U shaped relationship between countries' income levels and the size of FDI impact on growth. Moving from low to middle-income countries the effect gets larger. On the other hand, it diminishes again transitioning to high income countries. Finally yet importantly, we find that absorptive capacity matters in channelling FDI effects. Institutional factors have a mediating positive effect on FDI within country income groups, whereby countries with better-developed institutions relative to their income group peers show a positive impact of FDI on growth.
    Keywords: Foreign Direct Investment (FDI),growth,income levels,institutions,absorptive capacity,global panel,Economics
    JEL: C33 F21 E02 O43 O47
    Date: 2020
  7. By: Weshah Razzak (School of Economics and Finance, Massey University, Palmerston North); El Mostafa Bentour (University of Grenoble Alpes, France)
    Abstract: We depart from the empirical literature on testing the finance led growth. Instead of regression analysis, we use a semi-endogenous growth model, which identifies two productivity growth paths: a steady state and a transitional path. Steady state growth is anchored by populationgrowth. In the transitional dynamic, productivity growth depends on the typical factors growth rates, and excess knowledge, which is the deviation of TFP in the financial sector from steady state growth. TFP is endogenous. It is an increasing function of global research efforts, which is driven by the proportion of population in developed countries that is engaged in research in finance, and the stock of human capital. We find positive evidence for this theory of TFP in the data of ten developed European countries and the United States. We also found some evidence for finance-led-growth, albeit weaker after the past Global Financial Crisis.
    Keywords: Semi endogenous growth, finance, productivity growth
    JEL: O40 E10
    Date: 2020
  8. By: Lueger, Tim
    Abstract: This work seeks to answer the "population question," i.e. the effect of population growth on production per capita. This question has lingered in economic thought for centuries and to this day two general lines of thought can be identified, which might be marked as the "optimist" and the "pessimist" view. While the optimists claim that an increase in population will - chiefly owed to concomitant specialization and technological progress - raise average production per capita, the pessimists maintain that the latter would decline as a result of resources becoming relatively more scarce. Integrating both approaches and using a neoclassical framework, this work intends to show that sustainably increasing productivity is predominantly the result of reducing too high fertility toward a lower level such that diminishing returns are outweighed by the benefits from labor division. The paper argues that the historical reduction of fertility can almost completely explain long-run development.
    Date: 2019–03
  9. By: Harkat, Tahar
    Abstract: Existing literature that assesses the nexus between economic development, primary energy consumption, and CO2 emissions has been a point of interest for many scholars. Yet, there is no such existing literature that targets assessing such relationship for the case of Morocco. The following contribution determines the long run relationship between these variables using an autoregressive distributive lag model (ARDL) bound test that is developed by Pesaran et al. (2001). Findings indicate that there is a significant co-integration between the variables of interest, meaning that the long run relationship between them exists. Findings also show that energy consumption has direct positive effect on economic growth but it may have larger negative effect on economic growth indirectly through higher carbon dioxide emissions.
    Keywords: GDP, Energy consumption, CO2 emissions, Long run relationship, ARDL Bound test, Co-integration, Morocco
    JEL: O13 P28 P48 Q43
    Date: 2020–02–03
  10. By: Achyuta Adhvaryu (University of Michigan & NBER); James Fenske (University of Warwick); Gaurav Khanna (University of California – San Diego); Anant Nyshadham (Boston College & NBER)
    Abstract: Evidence suggests that natural resources drive both conflict and underdevelopment in modern Africa. We show that this relationship exists primarily when neighboring regions are resource- rich. When neighbors are poor, resources have modest impacts on conflict, and instead drive economic growth. To highlight the role played by neighbors, we simultaneously incorporate multiple mechanisms in a model of strategic interaction between parties engaged in potential conflict over such resources. The likelihood of conflict depends on both the absolute and relative resource endowments of neighboring parties, as resources fuel conflict by raising the gains from expropriation and by increasing fighting strength. Economic prosperity, as a result, is a function of equilibrium conflict prevalence determined not just by a region’s own resources but also by the resources of its neighbors. Using high-resolution spatial data on resources, conflicts, and nighttime illumination across the whole of sub- Saharan Africa, we find evidence confirming each of the model’s predictions. Structural estimates of the model reveal that conflict equilibria are more prevalent where institutional quality (measured by, e.g., risk of expropriation, property rights, voice and accountability) is worse.
    Keywords: conflict, resource curse, institutions, nighttime lights, Africa JEL Classification: D74, O13, Q34
    Date: 2018–07
  11. By: Riveros Gavilanes, John Michael
    Abstract: The present article establishes an empirical approximation related to the influence of the military expenditure in the economic growth for the case of the countries of South America. The main theoretical framework is based in the approximation of the Augmented Solow model considering the effect of the share of military spending in the factor productivity as it was proposed by Knight et al. (1996). The methodology follows the estimation of a panel vector autoregressive model for the period of 1977-2016, considering all the variables as endogenous, within this, it is provided the Granger-causality tests among the equations. The results determinate that military expenditure is not statistically significant to explain the variation in the output of the economy, meanwhile it existed a causality relation between the savings of the economy and the military expenditure for this continent.
    Keywords: E23; E22; E60; F43; O54
    JEL: E22 E23 E60 F43 O54
    Date: 2020–02–05
  12. By: Raouf Boucekkine (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, IMERA & AMSE, Marseille, France); Giorgio Fabbri (Univ. Grenoble Alpes, CNRS, INRA, Grenoble INP, GAEL, 38000 Grenoble); Salvatore Federico (Universita degli Studi di Siena, Dipartimento di Economia Politica e Statistica, Siena, Italy); Fausto Gozzi (Dipartimento di Economia e Finanza, LUISS Guido Carli, Rome, Italy)
    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
    JEL: R1 O4 C61
    Date: 2020–02
  13. By: Daiki Maeda; Yuki Saito
    Abstract: To examine the effect of monetary policy on economic growth, we formulate an endogenous growth model with cash-in-advance constraints on R&D and capital accumulation as endogenous growth engines. Within this framework, we show that the relationship between economic growth and the nominal interest rate can be an inverted-U shape. Moreover, we demonstrate that the welfare-maximizing level of the nominal interest rate is larger than the growth rate-maximizing level of the nominal interest rate.
    Date: 2020–02
  14. By: Lueger, Tim
    Abstract: Over the past two decades, there have been numerous attempts in economic theory to model the historical regime of a Malthusian trap as well as the transition to growth in one coherent framework, or in other words, a unified 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 traditional Malthusian model which is based on the principle of population, the principle of diminishing returns and the principle of labor division, the transition can be modelled in a very simple dynamic macroeconomic framework. The aim of this paper is to first construct and calibrate the suggested classical model and to eventually employ a conventional VAR-Method to provide evidence of the above principles using country-specific annual historical data on crude birth rate, crude death rate and GDP per capita growth rate. As a result, it is argued that emerging economies follow a universal macroeconomic pattern of development. A decreasing death rate is succeeded by a decreasing birth rate which at the same time induces GDP per capita to rise sustainably. The correspondingly advanced microeconomic theory suggests that increasing life expectancy tends to create a demographic structure that is much less prone to overpopulation.
    Date: 2018–03–28

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