nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒05‒11
nine papers chosen by
Marc Klemp
University of Copenhagen

  1. Persistence through Revolutions By Alberto F. Alesina; Marlon Seror; David Y. Yang; Yang You; Weihong Zeng
  2. Testing unified growth theory: Technological progress and the child quantity-quality tradeoff By Madsen, Jakob Brøchner; Strulik, Holger
  3. Endogenous Education and Long-Run Factor Shares By Gene M. Grossman; Elhanan Helpman; Ezra Oberfield; Thomas Sampson
  4. Hinterlands, city formation and growth: evidence from the U.S. westward expansion By David Krisztián Nagy
  5. A Lipsetian theory of voluntary power handover By Raouf Boucekkine; Paolo Piacquadio; Fabien Prieur
  6. Automation and Demographic Change By Abeliansky, Ana Lucia; Prettner, Klaus
  7. Growth models and the footprint of transnational capital By Kaczmarczyk, Patrick
  8. Climate change and "growth traps" By Golub, Alexander (Голуб, Александр)
  9. Financial development, remittances and economic growth: A threshold analysis By Peprah, James Atta; Ofori, Isaac Kwesi; Nyarko-Asomani, Abel

  1. By: Alberto F. Alesina; Marlon Seror; David Y. Yang; Yang You; Weihong Zeng
    Abstract: The Chinese Communist Revolution in the 1950s and Cultural Revolution from 1966 to 1976 aimed to eradicate inequality in wealth and education, to shut off intergenerational transmission, and to eliminate cultural differences in the population. Using newly digitized archival data and linked contemporary household surveys and census, we show that the revolutions were effective in homogenizing the population economically and culturally in the short run. However, the pattern of inequality that characterized the pre-revolution generation re-emerges today. Grandchildren of the pre-revolution elites earn 17 percent more than those from non-elite households. In addition, the grandchildren of pre-revolution elites differ in their cultural values: they are less averse to inequality, more individualistic, more pro-market, more pro-education, and more likely to see hard work as critical to success. Through intergenerational transmission, socioeconomic conditions and cultural traits thus survived one of the most aggressive attempts to eliminate differences in the population and to foster mobility.
    JEL: N15 Z1
    Date: 2020–04
  2. By: Madsen, Jakob Brøchner; Strulik, Holger
    Abstract: A core mechanism of unified growth theory is that accelerating technologicalprogress induces mass education and, in interaction with child quantity-quality substitution, a decline in fertility. Using unique new data for 21 OECD countries over theperiod 1750-2000, we test, for the first time, the validity of this core mechanism of unified growth theory. We measure a country's technological progress as patents per capita, genetic-distance weighted foreign patents, and investment in machinery, equipment and intellectual property products. Controlling for other confounders like income, mortality, thegender wage gap, indicators for child labor, compulsory schooling, and time- and country-fixed effects, we establish a strong positive impact of technological progress on investmentsin education and a strongly negative one on fertility. Using two-stage regressions, we assess the child quantity-quality substitution that can be motivated by technological change. We estimate that a 10 percent increase of enrollment in primary and secondary school isassociated with a decline of the general fertility rate by 3 to 4 percent.
    Keywords: technological progress,fertility,education,quantity-quality trade-off,unifiedgrowth theory
    JEL: O40 O30 N30 J10 I25
    Date: 2020
  3. By: Gene M. Grossman; Elhanan Helpman; Ezra Oberfield; Thomas Sampson
    Abstract: We study the determinants of factor shares in a neoclassical environment with capital- skill complementarity and endogenous education. When more physical capital raises the marginal product of skills relative to that of raw labor, an increase in a broad measure of embodied human capital raises the capital share in national income for any given rental rate. When education is chosen optimally, a dynamic equilibrium is characterized by an inverse relationship between the level of human capital and both the rental rate on capital and the difference between the interest rate and the growth rate of wages. As a consequence, estimates of the elasticity of substitution that fail to account for levels of human capital will be biased upward. We develop a model with overlapping generations, ongoing increases in educational attainment, and technology-driven neoclassical growth, and show that for a class of production functions with capital-skill complementarity, a balanced growth path exists and is characterized by an inverse relationship between the rates of capital- and labor-augmenting technological progress and the capital share in national income.
    JEL: E25
    Date: 2020–04
  4. By: David 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
  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 - Institut d'Etudes Avancées - AMU - Aix Marseille Université); Paolo Piacquadio (UiO - University of Oslo); Fabien Prieur (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We consider an autocracy where the ruling elite control both the resource wealth and ed- ucation policies. Education prompts economic growth and enriches the budget of the elite. However, education also increases the "awareness of citizens"–capturing their reluctance to accept a dictatorship and their labor market aspirations –and forces the elite to ex- pand redistribution or handover the power. A power handover leads to a more democratic regime, where the elite retains (at least partially) its economic power. This trade-offis the backbone of our Lipsetian theory of voluntary power handover. This theory provides new insights on the positive relationship between economic development, education, and de- mocratization, and on the negative relationship between inequality and democratization. Finally, we revisit the resources-curse hypothesis within our setting
    Keywords: Institutional change,Human capital,Lipset’s theory,Resource curse
    Date: 2019
  6. By: Abeliansky, Ana Lucia; Prettner, Klaus
    Abstract: We analyze the effects of declining population growth on automation. Theoretical considerations imply that countries with lower population growth introduce automation technologies faster. We test the theoretical implication on panel data for 60 countries over the time span 1993-2013. Regression estimates support the theoretical implication, suggesting that a 1% increase in population growth is associated with an approximately 2% reduction in the growth rate of robot density. Our results are robust to the inclusion of standard control variables, different estimation methods, dynamic specifications, and changes with respect to the measurement of the stock of robots.
    Keywords: Automation,Industrial Robots,Demographic Change,Declining Fertility
    JEL: J11 O33 O40
    Date: 2020
  7. By: Kaczmarczyk, Patrick
    Abstract: The definition of various growth models is the latest innovation of comparative capitalism (CC) research. Yet, the literature has its weaknesses in explaining the dynamics within and the interdependencies between different growth models. I argue that this weakness stems inter alia from an inadequate conceptualization of transnational corporations (TNCs). I provide empirical evidence on the footprint of international capital in the global economy and outline how including TNCs as a unit of analysis can help us to better understand economic outcomes. This leads to several implications for the growth models literature, which I conclude my argument with.
    Keywords: institutions and the macroeconomy,international business,multinational firms,political economy
    Date: 2020
  8. By: Golub, Alexander (Голуб, Александр) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: Reliance of the Russian economy on carbon dependent sectors may induce a long-term stagnation and convergence of the economy into the development trap. A theoretical model of economic growth model presents the Russian economy as a combination of two sectors: dominating carbon-dependent industries and emerging knowledge-based sectors. Exposure of carbon-dependent industries to the emerging global and regional climate policies and to climate change itself determine elevated investment risks and high risk-adjusted cost of capital. The reliance of Russia on resource and energy-intensive sectors will increase investment risks and the cost of capital for the Russian economy. For the theoretical analysis, we apply the Ramsey economic growth model with a convex-concave production function. For the analysis of investment risks, we use the real options analysis.
    Keywords: development trap; investment risks; climate policy: concave-convex production function
    Date: 2020–03
  9. By: Peprah, James Atta; Ofori, Isaac Kwesi; Nyarko-Asomani, Abel
    Abstract: Sources of economic growth in Ghana have not been clear. Several studies have contributed to the finance and growth literature with little attention on remittances and the joint effect of financial sector development and remittances. This paper uses macrodata to examine the linkages between financial development, remittances and economic growth in Ghana. We estimate a dynamic heterogeneous Autoregressive Distributed Lag (ARDL) model to show that financial booms are not, in general, growth-enhancing, and a certain level of financial development can drag down economic growth in the long term and the combined effect of financial development and remittances should be of concern to policymakers.
    Keywords: Financial development; remittances; economic growth; Ghana
    JEL: F4 O1 O11 O4 O43 O47
    Date: 2019–07–10

This nep-gro issue is ©2020 by Marc Klemp. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.