nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒05‒04
twenty papers chosen by
Marc Klemp
University of Copenhagen

  1. Islam and Human Capital in Historical Spain By Francesco Cinnirella; Naghavi,k Alireza; Giovanni Prarolo
  2. The scientific revolution and its role in the transition to sustained economic growth By Lehmann-Hasemeyer, Sibylle H.; Prettner, Klaus; Tscheuschner, Paul
  3. A New Measure of Foreign Rule Based on Genetic Distance By Dhammika Dharmapala
  4. Monogamy: exception or rule? By Alger, Ingela
  5. Culture, Institutions and Economic Growth. By Marion Payen; Patrick Rondé
  6. Technological change and inequality in the very long run By Madsen, Jakob Brøchner; Strulik, Holger
  7. Family Types and Political Development By Gutmann, Jerg; Voigt, Stefan
  8. Control theory in infinite dimension for the optimal location of economic activity: The role of social welfare function By Raouf Boucekkine; Giorgio Fabbri; Salvatore Federico; Fausto Gozzi
  9. Immigration, Innovation, and Growth By Konrad B. Burchardi; Thomas Chaney; Tarek A. Hassan; Lisa Tarquinio; Steohen Terry
  10. Chinese dialects, revolutionary war & economic performance By Zhu, Junbing; Grigoriadis, Theocharis
  11. Endogenous Task-Based Technical Change - Factor Scarcity and Factor Prices - By Andreas Irmen
  12. Ethnic Geography: Measurement and Evidence By Roland Hodler; Michele Valsecchi; Alberto Vesperoni
  13. Sudden Influxes of Resource Wealth to the Economy : Avoiding"Dutch Disease" By Mendez Ramos,Fabian
  14. Do the determinants of corruption differ between countries with different levels of corruption? A cross-country quantile regression analysis By Cristian Picón; Frédéric Boehm
  15. Growth and instability in a small open economy with debt By Leonor Modesto; Carine Nourry; Thomas Seegmuller; Alain Venditti
  16. Endogenous Growth and Monetary Policy: How Do Interest-Rate Feedback Rules Shape Nominal and Real Transitional Dynamics? By Gustavo Iglésias; Pedro Mazeda Gil
  17. Innovative Growth Accounting By Peter J. Klenow; Huiyu Li
  18. Technological Revolutions, Structural Change & Catching-Up By Jan Fagerberg; Bart Verspagen
  19. Some Applications of Lie Groups in Theory of Technical Progress By Le Anh Vu; Duong Quang Hoa; Nguyen Minh Tri; Ha Van Hieu
  20. Short-Run and Long-Run Effects of Sizable Child Subsidy: Evidence from Russia By Ilia Sorvachev; Evgeny Yakovlev

  1. By: Francesco Cinnirella; Naghavi,k Alireza; Giovanni Prarolo
    Abstract: This paper studies the impact of Muslim rule on human capital development. Using a unique novel dataset containing yearly data on Muslim presence in the period 711-1492 and literacy rate in 1900 for about 7500 municipalities in Spain, we estimate the local impact of the length of Muslim rule in the medieval period on literacy rate. Our findings reveal a very robust negative relationship between length of Muslim rule and levels of human capital. This result is robust to the inclusion of other possible confounding factors such as the Reconquista and the Inquisition. We argue that the characteristics of Islamic law discouraged the formation of a strong merchant class and subsequently impeded the development of forms of local self-government. This translated into lower levels of human capital for regions longer under Muslim rule. Indeed, panel estimates on a sample of cities provide evidence that locations under Muslim domination missed out on the critical junctures of institutional changes which led to a stagnation in the accumulation of human capital.
    Keywords: muslim rule, education, literacy, self-government, merchant class, Spain
    JEL: H75 I25 N33 O10 O30 Z12
    Date: 2020
  2. By: Lehmann-Hasemeyer, Sibylle H.; Prettner, Klaus; Tscheuschner, Paul
    Abstract: We propose a Unified Growth model that analyzes the role of the Scienti fic Revolution in the takeoff to sustained modern economic growth. Basic scientific knowledge is a necessary input in the production of applied knowledge, which, in turn, fuels productivity growth and leads to rising incomes. Eventually, rising incomes instigate a fertility transition and a takeoff of educational investments and human capital accumulation. In regions where scientific inquiry is severely constrained (for religious reasons or because of oppressive rulers), the takeoff to modern growth is delayed or might not occur at all. The novel mechanism that we propose for the latent transition towards the takeoff could contribute to our understanding of why sustained growth emerged first in Europe.
    Keywords: Scientific Revolution,Industrial Revolution,Basic Science,Applied Science,Takeoff to Sustained Growth,Unified Growth Theory
    JEL: O11 O31 O33 O41
    Date: 2020
  3. By: Dhammika Dharmapala
    Abstract: The consequences for countries of past foreign rule are the subject of a vast literature across history and the social sciences. This paper constructs a novel measure of past foreign (or minority) rule - the genetic distance of a country’s ruling elite in the year 1900 from the country’s ethnic majority - by mapping historical information on these groups to existing data on bilateral genetic distances between countries and populations. This generates an “elite-population genetic distance” in 1900 (EPGD_1900) for each of 228 present-day countries and territories. While this continuous measure is positively correlated with existing dichotomous measures of foreign rule, it captures an additional dimension of variation absent from the existing measures. The paper documents robust conditional correlations between EPGD_1900 and current income levels, and between EPGD_1900 and current fiscal capacity (controlling for various relevant country characteristics, existing measures of foreign rule, the genetic distance of a country’s ethnic majority from that of the UK, and continent fixed effects). In particular, both current GDP per capita and tax revenue as a percentage of GDP are substantially lower for countries and territories with higher EPGD_1900. While these relationships may be attributable to unobserved and persistent variation in state-building capabilities across societies, the results are robust to controlling for a widely-used index of state antiquity that measures the history of state-building capacity.
    Keywords: foreign rule, fiscal capacity, economic development
    JEL: O10 H20
    Date: 2020
  4. By: Alger, Ingela
    Abstract: Why are some societies monogamous and others polygynous? Most theories of polygyny in-voke male heterogeneity as an explanation. Arguing that such heterogeneity depends on men’swillingness to compete against each other in the first place, I propose an evolutionary gameto model the evolution of this trait. Lack of competitiveness (and the associated monogamousunions) is shown to be compatible with evolution if male reproductive success decreases withthe number of wives. In a model where the man and his spouse(s) make fertility and child carechoices that aim at maximizing reproductive success, I show that, due to men’s involvement inchild care and female agency over her fertility, male reproductive success is decreasing in thenumber of wives under certain conditions and increasing in others. The model thus sheds lighton the variation in polygyny rates across space and time in human societies.
    JEL: D73 C73
    Date: 2020–04
  5. By: Marion Payen; Patrick Rondé
    Abstract: Are formal and informal institutions complementary or substitutable ? In this article, we argue that formal and informal institutions have a complementary relationship rather than a substitutable one. We study the possible complementarity between formal institutions, measured by Institutional Profiles Database (IPD), and informal institutions, measured by the World Value Survey (WVS), by including both into a growth model. Our main result shows that the interaction effect between informal and formal institutions in a country positively impacts growth, which support the hypothesis of a complementary between both of them.
    Keywords: economic growth, formal institutions, informal institutions.
    JEL: O11 O43
    Date: 2020
  6. By: Madsen, Jakob Brøchner; Strulik, Holger
    Abstract: In this paper we investigate the impact of technological change on inequalityin the presence of a landed elite using a standard unified growth model. We measure inequality by the ratio between land rent and wages and show that, before the onset of the fertility transition, technological progress increased inequality directly through land-biased technological change and indirectly through increasing population growth. Thefertility transition and the child quantity-quality trade-off eventually disabled the Malthusian mechanism, and technological progress triggered education and benefited workers. If the elasticity of substitution between land and labor is sufficiently high, the rent-wage ratio declines such that inequality is hump-shaped in the very long run. We use the publication of new farming book titles as a measure of technological progress in agriculture, and provide evidence for technology-driven inequality in Britain between 1525 and 1895. We confirm these results for a panel of European countries over the period 1265-1850 using agricultural productivity as a measure of technology. Finally, using patents in the period 1800-1980, we find a technology-driven inequality reversal around the onset of the fertility transition.
    Keywords: nequality,Malthus,Unified Growth Theory,Agriculture,Human Capital
    JEL: O40 O30 N30 N50 J10 I25
    Date: 2020
  7. By: Gutmann, Jerg; Voigt, Stefan
    Abstract: Many years ago, Emmanuel Todd argued that differences in family organization - specifically the rules of inheritance, the number of generations living under one roof, and endogamous marriage - are reflected in the organization of the state. He also argued that different family types lead to different paths of economic development. Economists have long ignored these sweeping claims, but with increasing interest in the deep causes of economic development, family types have caught the attention of some economists. Here, we try to take Todd seriously and evaluate his predictions empirically. Relying on a parsimonious model with exogenous covariates, we find mixed results. On the one hand, countries in which authoritarian family types dominate have much higher levels of the rule of law and innovation than predicted by Todd. On the other, countries in which the communitarian family types dominate are characterized by racism, low levels of the rule of law, few checks on government, and late industrialization. Countries in which endogamy is frequently practiced display a high level of state fragility and have weak civil society organizations.
    Keywords: Family types,family systems,family structures,ideology,state formation,constitutional structure,economic development
    JEL: D10 H11 J12 K36 N30 O17 Z12
    Date: 2020
  8. 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 - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - CNRS - Centre National de la Recherche Scientifique - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology); 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 an abstract optimal control problem with state constraint. The methodology relies on the employment of the classical dynamic programming tool considered in the infinite dimensional context. We are able to identify a closed-form solution to the induced Hamilton-Jacobi-Bellman (HJB) equation in infinite dimension and to prove a verification theorem, also providing the optimal control in closed loop form. The abstract problem can be seen an abstract formulation of a PDE optimal control problem and is motivated by an economic application in the context of continuous spatiotemporal growth models with capital di usion, where a social planner chooses the optimal location of economic activity across space by maximization of an utilitarian social welfare function. From the economic point of view, we generalize previous works by considering a continuum of social welfare functions ranging from Benthamite to Millian functions. 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.
    Date: 2020–04
  9. By: Konrad B. Burchardi (Institute for International Economic Studies); Thomas Chaney (Sciences Po); Tarek A. Hassan (Boston University, NBER, and CEPR); Lisa Tarquinio (Boston University); Steohen Terry (Boston University)
    Abstract: We show a causal impact of immigration on innovation and dynamism in US counties. To identify the causal impact of immigration, we use 130 years of detailed data on migrations from foreign countries to US counties to isolate quasi-random variation in the ancestry composition of US counties that results purely from the interaction of two historical forces: (i) changes over time in the relative attractiveness of different destinations within the US to the average migrant arriving at the time and (ii) the staggered timing of the arrival of migrants from different origin countries. We then use this plausibly exogenous variation in ancestry composition to predict the total number of migrants flowing into each US county in recent decades. We show four main results. First, immigration has a positive impact on innovation, measured by the patenting of local firms. Second, immigration has a positive impact on measures of local economic dynamism. Third, the positive impact of immigration on innovation percolates over space, but spatial spillovers quickly die out with distance. Fourth, the impact of immigration on innovation is stronger for more educated migrants.
    Keywords: migrations, innovation, patents, endogenous growth, dynamism
    JEL: J61 O31 O40
    Date: 2020–04
  10. By: Zhu, Junbing; Grigoriadis, Theocharis
    Abstract: In this paper, we explore the effects of dialectal diversity on economic performance by drawing evidence from Chinese prefecture-level cities. Our dataset is a panel of 5-year average data over the period from 2001 to 2015 including 274 cities. We compute five indices of Chinese dialectal diversity: 1. Dialectal fractionalization; 2. Adjusted dialectal fractionalization; 3. Dialectal polarization; 4. Adjusted dialectal polarization and 5. Periphery heterogeneity. We find that dialectal fractionalization and dialectal polarization as well as periphery heterogeneity have a positive effect on both income per capita and economic growth. Adjusted dialectal fractionalization exhibits a positive effect only on the change in economic growth over time. However, adjusted dialectal polarization does not show any robust effects. Furthermore, the experience of being governed by the Chinese Communist Party during the revolutionary war inhibits the negative effects of dialectal diversity in eastern China, while it has persistent negative effects in central and north-eastern regions of the country.
    Keywords: dialectal diversity,local economic performance,communist governance
    JEL: O10 O40 P51 Z19
    Date: 2020
  11. By: Andreas Irmen
    Abstract: This paper develops a static model of endogenous task-based technical progress to study how factor scarcity induces technological progress and changes in factor prices. The equilibrium technology is multi-dimensional and not strongly factor-saving in the sense of Acemoglu (2010). Nevertheless, labor scarcity induces labor productivity growth. There is a weak but no strong absolute equilibrium bias. This model provides a plausible interpretation of the famous contention of Hicks (1932) about the role of factor prices and factor endowments for induced innovations. It may serve as a micro-foundation for canonical macro-economic models. Moreover, it accommodates features like endogenous factor supplies and a binding minimum wage.
    Keywords: economic growth, endogenous technical change, direction of technical change, biased technology
    JEL: O31 D92 O33 O41
    Date: 2020
  12. By: Roland Hodler (Department of Economics, University of St.Gallen; CEPR, London; CESifo, Munich); Michele Valsecchi (New Economic School, Moscow); Alberto Vesperoni (Department of Economics, Alpen-Adria University Klagenfurt)
    Abstract: The effects of ethnic geography, i.e., the distribution of ethnic groups across space, on economic, political and social outcomes are not well understood. We develop a novel index of ethnic segregation that takes both ethnic and spatial distances between individuals into account. Importantly, we can decompose this index into indices of spatial dispersion, generalized ethnic fractionalization, and the alignment of spatial and ethnic distances. We use ethnographic maps, spatially disaggregated population data, and language trees to compute these four indices for around 160 countries. We apply these indices to study the relation between ethnic geography and current economic, political and social outcomes. We document that country level quality of government, income and trust increase with the alignment component of segregation, i.e., with the ratio between the country’s actual segregation and the segregation it would have if ethnic groups were represented in each location with population shares identical to their country-level population share. Hence, all else equal, countries where ethnically diverse individuals live farther apart tend to perform better.
    Keywords: Ethnic diversity; ethnic geography; segregation; fractionalization; quality of government; economic development
    JEL: C43 D63 O10 Z13
    Date: 2019–06–03
  13. By: Mendez Ramos,Fabian
    Abstract: Dutch Disease is a condition in which a sudden increase of resource wealth from an extractive sector (such as oil, gas, coal, or mining) undermines other areas of the economy (such as agriculture, manufacturing, or tradeable services), shrinking them while spurring an appreciation in the real exchange rate. Although this may have some positive effects in the short run, Dutch Disease episodes can potentially lead to sectoral concentration and lower economic growth in the long run. This policy brief takes a systematic look at this macroeconomic phenomenon, collects evidence for 83 countries from 1998 to 2017, and summarizes policies that aim to prevent or mitigate Dutch Disease and some of its effects. A long-term perspective to prevent excessive dependence on natural resources and promote broad-based growth should include improvements in institutional governance of natural resource wealth, development of the financial sector to provide risk management products, and diversification of the economy through selective taxes and provision of public goods.
    Keywords: Economic Development,Energy Demand,Energy and Mining,Energy and Environment,Global Environment,Economic Growth,Economic Theory&Research,Industrial Economics,Coastal and Marine Resources,Energy and Natural Resources
    Date: 2020–04–01
  14. By: Cristian Picón; Frédéric Boehm
    Abstract: This contribution responds to a research question posed by (Billger & Goel, 2009). Are there different determinants of corruption in highly corrupt countries in comparison with less corrupt countries? To answer this question, we estimate a cross-country quantile regression model adding new explicative variables. We address some problems of specification we found in the work of (Billger & Goel, 2009) and use the broadest and most recent data set used until now in such type of research (170 countries with data from 2018). We find that the variable of the size of government and the share of protestant population are good predictors of the level of corruption only for specific levels of corruption, while other variables such as the level of democracy, economic freedom, and income levels are strongly significant for all levels of corruption. In contrast to most of the studies in this area, we do not find the British colonial heritage to be relevant in explaining the current corruption level of a country.
    Keywords: Corruption, quantile regression, determinants of corruption
    Date: 2019–06–21
  15. By: Leonor Modesto (UCP, Catolica Lisbon School of Business and Economics & IZA); Carine Nourry (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE); Thomas Seegmuller (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE); Alain Venditti (Aix-Marseille Univ, CNRS, EHESS, Ecole Centrale, AMSE & EDHEC Business School)
    Abstract: The relationship between public debt, growth and volatility is investigated in a Barro-type (1990) endogenous growth model, with three main features: we consider a small open economy, international borrowing is constrained and households have taste for domestic public debt. Therefore, capital, public debt and the international asset are not perfect substitutes and the economy is characterized by an investment multiplier. Whatever the level of the debt-output ratio, the existing BGP features expectation-driven fluctuations. If the debt-output ratio is low enough, there is also a second BGP with a lower growth rate. Hence, lower debt does not stabilize the economy with credit market imperfections. However, a high enough taste for domestic public debt may rule out the BGP with lower growth. This means that if the share of public debt hold by domestic households is high enough, global indeterminacy does not occur.
    Keywords: small open economy, public debt, credit constraint, indeterminacy
    JEL: E32 F43 H63
    Date: 2020–04
  16. By: Gustavo Iglésias; Pedro Mazeda Gil
    Abstract: Monetary authorities have followed interest-rate feedback rules in apparently different ways over time and across countries. The literature distinguishes, in particular, between active and passive monetary policies in this regard. We address the nominal and real transitional-dynamics implications of these different types of monetary policy, in the context of a monetary growth model of R&D and physical capital accumulation. In this setup, well-behaved transitional dynamics occurs under both active and passive monetary policies. We carry out our study from three perspectives: the convergence behaviour of catching-up economies; a structural monetary-policy shock (i.e., a change in the long-run inflation target); and real industrialpolicy shocks (i.e., a change in R&D subsidies or in manufacturing subsidies). We uncover a new channel through which institutional factors (the characteristics of the monetary-policy rule) influence the economies’ convergence behaviour and through which monetary authorities may leverage (transitional) growth triggered by structural shocks.
    JEL: E41 O31 O41
    Date: 2020
  17. By: Peter J. Klenow; Huiyu Li
    Abstract: Recent work highlights a falling entry rate of new firms and a rising market share of large firms in the United States. To understand how these changing firm demographics have affected growth, we decompose productivity growth into the firms doing the innovating. We trace how much each firm innovates by the rate at which it opens and closes plants, the market share of those plants, and how fast its surviving plants grow. Using data on all nonfarm businesses from 1982–2013, we find that new and young firms (ages 0 to 5 years) account for almost one-half of growth – three times their share of employment. Large established firms contribute only one-tenth of growth despite representing one-fourth of employment. Older firms do explain most of the speedup and slowdown during the middle of our sample. Finally, most growth takes the form of incumbents improving their own products, as opposed to creative destruction or new varieties.
    JEL: O3 O4 O5
    Date: 2020–04
  18. By: Jan Fagerberg (TIK, University of Oslo & UNU-MERIT); Bart Verspagen (UNU-MERIT)
    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 specialization 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, industrialized countries, specialized in technology-based production, and another group of countries, specialized 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.
    Date: 2020–04
  19. By: Le Anh Vu; Duong Quang Hoa; Nguyen Minh Tri; Ha Van Hieu
    Abstract: In recent decades, we have known some interesting applications of Lie theory in the theory of technological progress. Firstly, we will discuss some results of R. Saito in \cite{rS1980} and \cite{rS1981} about the application modeling of Lie groups in the theory of technical progress. Next, we will describe the result on Romanian economy of G. Zaman and Z. Goschin in \cite{ZG2010}. Finally, by using Sato's results and applying the method of G. Zaman and Z. Goschin, we give an estimation of the GDP function of Viet Nam for the 1995-2018 period and give several important observations about the impact of technical progress on economic growth of Viet Nam.
    Date: 2020–03
  20. By: Ilia Sorvachev (Department of Economics, University of Wisconsin-Madison); Evgeny Yakovlev (New Economic School)
    Abstract: This paper utilizes a large-scale natural experiment aimed to increase fertility in Russia. Motivated by a decade-long decrease in fertility and population, the Russian government introduced a sequence of sizable child subsidies (called Maternity Capitals) in 2007 and 2012. We find that the Maternity Capital resulted in a significant increase in fertility both in the short run (by 8%) and in the long run (by 20%), and has already resulted in an increase in completed cohort fertility for a large cohort of Russian women. The subsidy is conditional and can be used mainly to buy housing. We find that fertility grew faster in regions with a shortage of housing and with a higher ratio of subsidy to housing prices. We also find that the subsidy has a substantial general equilibrium effect. It affected the housing market and family stability. Finally, we show that this government intervention comes at substantial costs: the government’s willingness to pay for an additional birth induced by the program equals approximately 50,000 dollars.
    Date: 2019–07–08

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