nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒04‒20
ten papers chosen by
Marc Klemp
University of Copenhagen

  1. The deep imprint of Roman sandals: Evidence of long-lasting effects of Roman rule on personality, economic performance, and well-being in Germany By Fritsch, Michael; Obschonka, Martin; Wahl, Fabian; Wyrwich, Michael
  2. Longer-run Economic Consequences of Pandemics By Òscar Jordà; Sanjay R. Singh; Alan M. Taylor
  3. Technological revolutions, structural change & catching-up By Fagerberg, Jan; Verspagen, Bart
  4. Rising longevity, increasing the retirement age, and the consequences for knowledge-based long-run growth By Kuhn, Michael; Prettner, Klaus
  5. The Middle-Income Trap 2.0: The Increasing Role of Human Capital in the Age of Automation and Implications for Developing Asia By Wagner, Helmut; Glawe, Linda
  6. Wealth inequality and aggregate demand By Ederer, Stefan; Rehm, Miriam
  7. Hinterlands, City Formation and Growth: Evidence from the U.S. Westward Expansion By Dávid Krisztián Nagy
  8. Long-Term Vision and Economic Development By Kodila-Tedika, Oasis; Khalifa, Sherif
  9. Total factor productivity and the measurement of neutral technology By Moura, Alban
  10. Three Facts About Night Lights Data By John Gibson; Geua Boe-Gibson

  1. By: Fritsch, Michael; Obschonka, Martin; Wahl, Fabian; Wyrwich, Michael
    Abstract: We investigate whether the Roman presence in the southern part of Germany nearly 2,000 years ago had a deep imprinting effect with long run consequences on a broad spectrum of measures ranging from present-day personality profiles to a number of socioeconomic outcomes and why. Today's populations living in the former Roman part of Germany score indeed higher on certain personality traits, have higher life and health satisfaction, longer life expectancy, generate more inventions and behave in a more entrepreneurial way. These findings help explain that regions under Roman rule have higher present-day levels of economic development in terms of GDP per capita. The effects hold when controlling for other potential historical influences. When addressing potential channels of a long term effect of Roman rule the data indicates that the Roman road network plays an important role as a mechanism in the imprinting that is still perceptible today.
    Keywords: Romans,personality traits,culture,well-being,regional performance,Limes
    JEL: N9 O1 I31
    Date: 2020
  2. By: Òscar Jordà; Sanjay R. Singh; Alan M. Taylor
    Abstract: How do major pandemics affect economic activity in the medium to longer term? Is it consistent with what economic theory prescribes? Since these are rare events, historical evidence over many centuries is required. We study rates of return on assets using a dataset stretching back to the 14th century, focusing on 15 major pandemics where more than 100,000 people died. In addition, we include major armed conflicts resulting in a similarly large death toll. Significant macroeconomic after-effects of the pandemics persist for about 40 years, with real rates of return substantially depressed. In contrast, we find that wars have no such effect, indeed the opposite. This is consistent with the destruction of capital that happens in wars, but not in pandemics. Using more sparse data, we find real wages somewhat elevated following pandemics. The findings are consistent with pandemics inducing labor scarcity and/or a shift to greater precautionary savings.
    JEL: E43 F41 N10 N30 N40
    Date: 2020–04
  3. By: Fagerberg, Jan (TIK, University of Oslo); Verspagen, Bart (UNU-MERIT, Maastricht University)
    Abstract: Technological revolutions, i.e., clusters of technologies that collectively have a transformational impact on the global economy, are rare events that dramatically influence the opportunities facing countries at different levels of development. A central suggestion in the relevant literature is that countries that manage to adopt the new technologies associated with a specific technological revolution benefit economically from it. This is also assumed to go together with a changing specialisation pattern in international trade. The paper considers the empirical merits of these suggestions, drawing on GDP and trade data for a large number of countries on different levels of development from the post-second-world-war period. The empirical analysis reveals a major divide in the global economy between a group of modern, industrialised countries, specialised in technology-based production, and another group of countries, specialised in commodities and resource-based products, and lagging behind both in terms of technology and income. More to the future, the paper also discusses the extent to which a new green technological revolution, with renewable energy as a central element, is currently emerging, and what impact this possibly might have for catching-up, structural change and economic growth for countries at different levels of development, e.g., China.
    Keywords: Technological revolutions, catching up, specialisation, renewable energy, China
    JEL: O10 O14 O30 O33
    Date: 2020–03–30
  4. By: Kuhn, Michael; Prettner, Klaus
    Abstract: We assess the long-run growth effects of rising longevity and increasing the retirement age when growth is driven by purposeful research and development. In contrast to economies in which growth depends on learning-by-doing spillovers, raising the retirement age fosters economic growth. How economic growth changes in response to rising life expectancy depends on the retirement response. Employing numerical analysis we find that the requirement for experiencing a growth stimulus from rising longevity is fulfilled for the United States, nearly met for the average OECD economy, but missed by the EU and by Japan.
    Keywords: Demographic Change,Rising Life Expectancy,Pension Reforms,Long-Run Economic Growth,R&D,Innovation
    JEL: J10 J26 O30 O41
    Date: 2020
  5. By: Wagner, Helmut; Glawe, Linda
    Abstract: We modify the concept of the middle-income trap (MIT) against the background of the Fourth Industrial Revolution and the (future) challenges of automation (creating the concept of the "MIT 2.0") and discuss the implications for developing Asia. In particular, we analyze the impacts of automation, artificial intelligence, and digitalization on the growth drivers of emerging market economies and the MIT mechanism. Our findings suggest that improving human capital accumulation, particularly the upgrading of skills needed with the rapid advance of automation, will be key success factors for overcoming the MIT 2.0.
    Keywords: automation,AI,human capital,middle-income trap,developing Asia,economic development,economic growth,employment
    JEL: J24 O10 O11 O15 O33 O47 O53
    Date: 2020
  6. By: Ederer, Stefan; Rehm, Miriam
    Abstract: The paper investigates how including the distribution of wealth changes the demand effects of redistributing functional income. It develops a model with an endogenous wealth distribution and shows that the endogenous rise in wealth inequality resulting from a redistribution towards profits weakens the growth effects of this redistribution. Consequently, a wage-led regime becomes more strongly wage-led. A profit-led regime on the other hand becomes less profit-led and there may even be a regime switch - in this case the short-run profit-led economy becomes wage-led in the long run due to the endogenous effects of wealth inequality. The paper thereby provides a possible explanation for the instability of demand regimes over time.
    Keywords: Wealth,Distribution,Aggregate Demand
    JEL: D31 D33 E12 E21 E25 E64
    Date: 2019
  7. By: Dávid Krisztián Nagy
    Abstract: I study how geography shaped city formation and aggregate development in the United States prior to the Civil War. To guide my analysis, I first present a conjecture that cities' farm hinterlands fostered both city development and aggregate growth: the hinterland hypothesis. The hinterland hypothesis has rich implications on how various elements of U.S. geography -railroads, changes in U.S. political borders, increasing U.S. population, and international trade - affected city formation and U.S. growth. To quantitatively evaluate the hinterland hypothesis and its implications, I assemble a novel historical dataset on population, trading routes and agricultural productivity at a high spatial resolution, and combine it with a dynamic quantitative model of economic geography. I find evidence for the hinterland hypothesis by showing that the model can quantitatively replicate the key patterns of U.S. urbanization and city formation. Finally, I conduct a series of counterfactuals in the model to quantify the effect of geography on cities and growth, guided by the implications of the hinterland hypothesis. Results indicate that railroads were responsible for 8.2% of urban population in 1860 and for 27% of real GDP growth between 1830 and 1860. The effect of international trade was similar in magnitude, while population growth slowed down urbanization and GDP growth. The effect of political border changes was small during the period.
    Keywords: quantitative economic geography, economic growth and development, city formation, transport infrastructure
    JEL: O14 O18 O51 R12 R13
    Date: 2020–02
  8. By: Kodila-Tedika, Oasis; Khalifa, Sherif
    Abstract: This paper examines the effect on economic development of whether a country's policy makers adopt a long-term vision. We use a novel institutional variable that indicates whether policy makers have a long-term strategic vision. However, the difficulty in estimating a causal effect is that long-term vision is endogenous to economic development. Therefore, we use the future-time reference language variables introduced in Chen (2013) as instrumental variables for long-term vision. To account for endogeneity, the paper conducts two stage least squares estimations where the language instruments are used in the first stage to find an exogenous source of variation in long-term vision. The results show that long-term vision, instrumented by futuretime reference, explains cross country variations in economic development. These results are robust even after the inclusion of control variables and after the exclusion of outliers.
    Keywords: institutions, culture, development
    JEL: H10 O10
    Date: 2020–04–02
  9. By: Moura, Alban
    Abstract: TFP measures constructed from chain-aggregated output, such as those published by the Bureau of Labor Statistics or Fernald (2014), confound contributions from neutral and sector-specific technology. Therefore, they should not be used to infer the path of neutral technology in presence of investment-specific technical change. Two theory-consistent, utilization-adjusted measures of neutral technology at the quarterly frequency are proposed for the US business sector. Both indicate that neutral technology progress declined dramatically after the mid-1970s. In particular, its contribution to US growth fell from more than 85% before 1973 to less than 25% afterward. The associated welfare loss is enormous: if neutral technology had continued on its pre-1970s trend, 2017 US output would have been 70% higher.
    Keywords: total factor productivity, neutral technology, investment-specific technology, sources of growth
    JEL: E22 E23 E32 O41 O47
    Date: 2020–03
  10. By: John Gibson (University of Waikato); Geua Boe-Gibson (University of Waikato)
    Abstract: The DMSP night lights data used in economics are old and not very accurate. Newer VIIRS night lights data have 60 percent higher predictive power for state-level GDP in the United States. Predictive accuracy is far higher in the cross section than for time series changes, either annually or quarterly. Night lights predict more weakly for agriculture than for manufacturing and other industries. These three facts suggest a need for caution in using night lights data, which may be unsuitable for many economics research purposes in many places.
    Keywords: DMSP; GDP; night lights; VIIRS; United States
    JEL: E23 R12
    Date: 2020–03–12

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