nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒05‒18
seven papers chosen by
Marc Klemp
University of Copenhagen

  1. Status-Seeking Culture and Development of Capitalism By Chu, Angus C.; Wang, Xilin
  2. Education policy and R&D based growth in an overlapping generations model By Kohei Okada
  3. Wage Inequality and Lobbying: a directed technical change approach By Tiago Sequeira; Óscar Afonso
  4. Growth Empirics: A Bayesian Semiparametric Model with Random Coefficients for a Panel of OECD Countries By Badi Baltagi; Georges Bresson; Jean-Michel Etienne
  5. Demographic transition and Economic development : the role of child costs By Aso, Hiroki
  6. On Green Growth with Sustainable Capital By Basu, Parantap; Jamasb, Tooraj
  7. Quantifying Goodwin Growth Cycles with Minimum Wage Shares By Sasaki, Hiroaki; Asada, Yasukuni

  1. By: Chu, Angus C.; Wang, Xilin
    Abstract: According to Werner Sombart's classic text Luxury and Capitalism, the status-seeking behavior of individuals may facilitate the development of capitalism and give rise to an early industrialization. In this study, we develop a growth-theoretic framework to formalize this hypothesis by introducing a status-seeking preference into the Schumpeterian growth model of endogenous takeoff. Then, we use the model to explore how this cultural preference affects the transition of an economy from pre-industrial stagnation to modern economic growth. We find that a stronger preference for status seeking causes an earlier takeoff and a positive effect on economic growth in the short run but an overall ambiguous effect on growth in the long run. We also calibrate the model to data to perform a quantitative analysis and find that a stronger status-seeking preference reduces the steady-state equilibrium growth rate under reasonable parameter values. Therefore, the effects of status-seeking behaviors evolve across different stages of economic development.
    Keywords: status seeking; endogenous takeoff; innovation
    JEL: O3 O4
    Date: 2020–04
  2. By: Kohei Okada (Graduate School of Economics, Osaka University)
    Abstract: Employing an overlapping-generations model of R&D-based growth with endogenous education decision-making and government's education policy,we examine how government'seducation policy and human capital accumulation influence R&D activity. We show that an increase in government's public education expenditure has an inverted U-shaped effect on the growth rate at the steady state.We examine how increased public education expenditure affects welfare and show that an increase in the public education expenditure has an inverted U-shaped effect on the steady state level of welfare.
    Keywords: Educationexpenditure,Humancapitalaccumulation,R&D
    JEL: H52 I25 J24 O30
  3. By: Tiago Sequeira (Centre for Business and Economics CeBER and Faculty of Economics, University of Coimbra); Óscar Afonso (CEF-UP, and Faculty of Economics of University of Porto)
    Abstract: We devise a generalized Directed Technical Change growth model in which firms spend resources in lobbying activity. As expected, the presence of lobbying distorts the skill premium and economic growth. Lobbying also contributes to a lower technological-knowledge bias toward the skill-sector and constitutes a possible explanation for the diverging empirical evidence on the relationship between the skill premium and the relative supply of skills. An increase in the relative lobbying power of the skilled intensive intermediate goods firms can lead to an increase or decrease in the skill premium, depending on the elasticity of substitution between the skilled and unskilled sectors. Lobbying also introduces possibility of a dual economy, with two different steady states, one characterized by low growth and another by high growth, depending on a threshold level of the lobbying power and on the elasticity of substitution. Quantitative exercises show that lobbying can indeed be quite important in distorting the skill premium and the economic growth.
    Keywords: Directed technical change; lobbying power; ineciency; economic growth; wage inequality; quantitative implications.; Directed technical change; lobbying power; ineciency; economic growth; wage inequality; quantitative implications.
    JEL: J31 P16 O30 O41
    Date: 2020–04
  4. By: Badi Baltagi (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244); Georges Bresson (Department of Economics, Université Paris II, France); Jean-Michel Etienne (Department of Economics, Université Paris-Stud 11)
    Abstract: This paper proposes semiparametric estimation of the relationship between growth rate of GDP per capita, growth rates of physical and human capital, labor as well as other covariates and common trends for a panel of 23 OECD countries observed over the period 1971-2015. The observed differentiated behaviors by country reveal strong heterogeneity. This is the motivation behind using a mixed fixedand random-coefficients model to estimate this relationship. In particular, this paper uses a semiparametric specification with random intercepts and slopes coefficients. Motivated by Lee and Wand (2016), we estimate a mean field variational Bayes semiparametric model with random coefficients for this panel of countries. Results reveal nonparametric specifications for the common trends. The use of this flexible methodology may enrich the empirical growth literature underlining a large diversity of responses across variables and countries.
    Keywords: GDP Per Capita, Growth Empirics, Mean Field Variational Bayes Approximation, Panel Data, Random Coefficients, Semiparametric Model
    JEL: C11 C14 C23 O47
    Date: 2020–05
  5. By: Aso, Hiroki
    Abstract: Abstract This paper analyzes the interactions between demographic transition and economic development, focusing on two child costs: time child-rearing cost and physical child-rearing cost. To analyze the interactions, we construct two overlapping generations model: human capital accumulation model and physical capital accumulation model. The two child costs, in particular, physical child cost plays crucial role in appearing non-monotonous fertility dynamics since it generates income effect. In both growth models, increase in physical child cost decreases the fertility, while it promotes economic development by dilution effect. Since increase in physical child cost encourages to start investing in human capital, it facilitates more rapid the timing of demographic transition in human capital accumulation model and therefore it gets the economy out of development trap. In contrast, it slows down the timing in physical capital accumulation model due to increase in income effect.
    Keywords: Demographic transition, Economic development, Child costs, Overlapping generations model.
    JEL: I25 J11 J13 O11
    Date: 2020–04–20
  6. By: Basu, Parantap (Durham University Business School, Durham University); Jamasb, Tooraj (Department of Economics, Copenhagen Business School)
    Abstract: We develop an endogenous growth model to address a long standing question whether sustainable green growth is feasible by re-allocating resource use between green (natural) and man-made (carbon intensive) capital. Although the model is general we relate it to the UK’s green growth policy objective. In our model, final output is produced with two reproducible inputs, green and man-made capital. The growth of man-made capital causes depreciation of green capital via carbon emissions and related externalities which the private sector does not internalize. A benevolent government uses carbon taxes to encourage firms to substitute man-made capital with green capital in so far the production technology allows. Doing so, the damage to natural capital by emissions can be partly reversed through a lower socially optimal long run growth. The trade-off between environmental quality and long-run growth can be overcome by a pollution abatement technology intervention. However, if the source of pollution is consumption, the optimal carbon tax is zero and there is no trade-off between environment policy and growth. A corrective consumption tax is then needed to finance a public investment programme for replenishing the green capital destroyed by consumption based emissions.
    Keywords: Green growth; Sustainability; Carbon tax; Clean growth; Resource substitution
    JEL: E10 O30 O40 Q20
    Date: 2020–05–01
  7. By: Sasaki, Hiroaki; Asada, Yasukuni
    Abstract: This study extends Goodwin's (1967) growth cycle model to consider two types of workers, low- and high-skilled workers. Using Japanese data from 1989 to 2018, we theoretically and empirically investigate how the introduction of the minimum wage share affects the wage shares and employment rates. Introducing the minimum wage share diminishes the amplitude of fluctuations of both the wage shares and the employment rates, and in this sense, it has a stabilizing effect. Reducing the wage gap between low- and high-skilled workers increases the amplitude of fluctuations of the wage shares and employment rates.
    Keywords: growth cycles; low-skilled and high-skilled workers; minimum wage share
    JEL: E11 E24 E25 E32 J31
    Date: 2020–04–28

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