nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒06‒08
twelve papers chosen by
Marc Klemp
University of Copenhagen

  1. Cultural Diversity and Foreign Direct Investment By Wei Feng; Yanrui Wu; Yue Fu
  2. Agricultural Revolution and Industrialization By Chu, Angus C.; Peretto, Pietro; Wang, Xilin
  3. Growth, War, and Pandemics: Europe in the Very Long-run By Leandro Prados de la Escosura; Carlos-Vladimir Rodríguez-Caballero
  4. Retirement, Intergenerational Time Transfers, and Fertility By Peter Eibich; Thomas Siedler
  5. Learning With Friends: A Theoretical Note On The Role of Network Externalities In Human Capital Models For The New Industry By Pena, Paul John; Lim, Dickson
  6. The Accumulation of Human and Market Capital in the United States: The Long View, 1948–2013 By Fraumeni, Barbara M.; Christian, Michael S.; Samuels, Jon D.
  7. Does Entrepreneurial Behaviour Matter for the Strong Porter Hypothesis By Bianco, Dominique
  8. Semi-endogenous versus Schumpeterian growth models: a critical review of the literature and new evidence By Herzer, Dierk
  9. Dynamic Analysis of Education, Automation, and Economic Growth By Kohei Okada
  10. Determinants of Economic Growth in Turkey in the Presence of Structural Breaks By Ketenci, Natalya; Aydoğan, Ebru Tomris
  11. Extractive institutions in non-tradeable industries By Vanino, Enrico; Lee, Stevan
  12. Chocs externes, Institutions démocratiques et Résilience économique By Trabelsi, Mohamed Ali; Ahmed, Salah

  1. By: Wei Feng (School of Management and Economics, Southeast University, China); Yanrui Wu (Economics Discipline, Business School, University of Western Australia); Yue Fu (School of Management and Economics, Southeast University, China)
    Abstract: In this paper, we first propose a theoretical model and derive hypotheses about the relationship between cultural diversity and foreign direct investment (FDI). We then test these hypotheses through regression analysis of a dataset of 230 Chinese cities covering the period of 2000-2014. It is shown that cultural diversity and FDI absorption are negatively correlated. The main mechanism is that cultural diversity impedes human capital development and hence obstructs FDI absorption. However, this negative relationship disappears gradually over time. In addition, it is also shown that there are threshold and spatial spillover effects. This research not only enriches the theory of FDI location, but also has implications for FDI policy-making.
    Keywords: Cultural diversity, FDI absorption, Economic growth, China
    JEL: F21 F41 G18
    Date: 2020
  2. By: Chu, Angus C.; Peretto, Pietro; Wang, Xilin
    Abstract: This study explores how agricultural technology affects the endogenous takeoff of an economy in the Schumpeterian growth model. Due to the subsistence requirement for agricultural consumption, an improvement in agricultural technology leads to a reallocation of labor from the agricultural sector to the industrial sector. Therefore, the agricultural improvement expands the firm size in the industrial sector, which determines the incentives for innovation and triggers an endogenous transition from stagnation to growth. Calibrating the model to US data for a quantitative analysis, we find that without the reallocation of labor from agriculture to the industrial sector in the early 19th century, the takeoff of the US economy would have been delayed by about four decades.
    Keywords: agricultural technology; endogenous takeoff; innovation; economic growth
    JEL: O3 O4
    Date: 2020–05
  3. By: Leandro Prados de la Escosura (Universidad Carlos III, CEPR); Carlos-Vladimir Rodríguez-Caballero (IITAM, Mexico, and CREATES, Aarhus University)
    Abstract: This paper contributes to the debate on the origins of modern economic growth in Europe from a very long-run perspective using econometric techniques that allow for a long-range dependence approach. Different regimes, defined by endogenously estimated structural shocks, coincided with episodes of pandemics and war. The most persistent shocks occurred at the time of the Black Death and the twentieth century’s world wars. Our findings confirm that the Black Death often resulted in higher income levels, but reject the view of a uniform long-term response to the Plague while evidence a negative reaction in non-Malthusian economies. Positive trend growth in output per head and population took place in the North Sea Area (Britain and the Netherlands) since the Plague. A gap between the North Sea Area and the rest of Europe, the Little Divergence, emerged between the early seventeenth century and the Napoleonic Wars lending support to Broadberry-van Zanden’s interpretation.
    Keywords: Long-run Growth, Little Divergence, War, Pandemics, Malthusian
    JEL: E01 N10 N30 N40 O10 O47
    Date: 2020–05
  4. By: Peter Eibich; Thomas Siedler
    Abstract: Retired parents might invest time into their adult children by providing childcare. Such intergenerational time transfers can have important implications for family decisions. This paper estimates the effects of parental retirement on adult children’s fertility. We use representative panel data from Germany to link observations on parents and adult children. We exploit eligibility ages for early retirement for identification in a regression discontinuity design. The results show that parent’s early retirement significantly increases the probability of childbirth for adult children. However, parental retirement affects only the timing of adult children’s fertility, without having an effect on total fertility.
    Keywords: Retirement, fertility, intergenerational transfer, time use
    JEL: J13 J14 J22 J26
    Date: 2020
  5. By: Pena, Paul John; Lim, Dickson
    Abstract: Contemporary literature on how individuals learn in the 21st-century reveal critical differences from learning patterns in the mid-20th century–a period in which celebrated, pioneering works of Mincer, Becker and Ben-Porath on human capital were developed. Education and learning theories have evolved, but the prevailing human capital theories have not. Given continued technological progress, and the rise in available knowledge through the Internet, learning in networks is a distinct feature of the 21st-century industry. The connectivist theory of learning in the digital age is explored and substantiated. Using optimal control theory and dynamic optimisation, we define optimal conditions for knowledge generation and growth of learning networks. We find that knowledge per learner grows exponentially when the obsolescence rate of knowledge is less than the departure rate of learners from the learning network. We also find that a learning network will continue to grow as long as learners are sufficiently impatient and that technology sufficiently becoming obsolete faster. Furthermore, we show a positive relationship between the size of the network and wealth on knowledge. That is, as long as the remaining wealth on knowledge is increasing, the learning network will continue to grow over time. We present insights for policy consideration that address the necessary and sufficient conditions for sustained knowledge generation and the growth of the learning network.
    Keywords: human capital, learning, industry 4.0, networks
    JEL: J24 M53 O15
    Date: 2019–06
  6. By: Fraumeni, Barbara M. (Central University of Finance and Economics); Christian, Michael S. (Education Analytics, Madison); Samuels, Jon D. (U.S. Department of Commerce)
    Abstract: Over the 1948–2013 period, many factors significantly impacted on human capital, which in turn affected economic growth in the United States. This chapter analyzes these factors within a complete national income accounting system which integrates Jorgenson-Fraumeni human capital into the accounts. By including human capital, a fresh perspective on economic growth across time and within specific subperiods is revealed, notably regarding the 1995–2000 and 2007–2009 periods. During the 1995–2000 period, the reduction in human capital investment significantly reduced apparent economic growth. In the 2007–2009 period, the increase in human capital investment tempered the negative impact of the Great Recession. Over the longer time period, first the post-World War baby boom and then the substantial increase in education led to higher economic growth than otherwise expected. As the pace of increase in education slowed and the workforce aged toward the end of the period, human capital induced growth was reduced.
    Keywords: human capital, integrated economic accounts, U.S. post-war sources of growth, education, labor force participation
    JEL: E01 E24 J24 I21 J21
    Date: 2020–05
  7. By: Bianco, Dominique
    Abstract: The traditional economic argument states that compliance with environmental policy diverts resources from innovation. In his engaging paper, Porter (1991) argues counterintuitively that more stringent environmental policies induce innovations the benefits of which exceed the costs. We build a Schumpeterian endogenous growth model that takes account of both arguments by including satisficing and profit-maximizing managers. Our theoretical results enable us to determine the validity condition of the strong Porter hypothesis which is consistent with empirical results.
    Keywords: Endogenous growth, Environmental Porter hypothesis, Environmental policy, Entrepreneurial Behaviours.
    JEL: D40 H23 L21 O33 O44 Q58
    Date: 2020–05–04
  8. By: Herzer, Dierk
    Abstract: Several studies have tested semi-endogenous versus Schumpeterian growth models using different methodological approaches. This paper critically reviews these studies including their approaches and provides new evidence on this issue, by analyzing both time-series data from the United States and panel data from 19 OECD countries over the period 1980-2014. The review finds much support for Schumpeterian growth theory, but shows that all studies reviewed have several limitations, including conceptual problems associated with the use of the number/stock of patents as a measure of the flow/stock of knowledge, the possibility of spurious regressions due to non-stationary data, potential mismeasurement of R&D inputs due to possible interpolation and deflation errors, misspecification problems that can arise in difference models when variables are cointegrated, and potential spurious rejections of the unit root hypothesis for R&D intensity when the lag length in unit root tests is too small. The present study avoids these limitations and finds strong evidence in favor of semi-endogenous growth.
    Keywords: semi-endogenous growth models, Schumpeterian growth models, R&D, TFP, unit roots, cointegration
    JEL: O30 O40
    Date: 2020–05
  9. By: Kohei Okada (Graduate School of Economics, Osaka University)
    Abstract: Ever since the onset of the Industrial Revolution,automation has had signicant impacts on economic growth,labor,the education decision-making of individuals,and education policy. In this study,we aim to examine the complex relationship between education,automation,and economic growth. We employ an overlapping-generations model with endogenous education decision-making and automation. Our fndings show that an economy converges to a steady state where automation occurs and per capita output is high if productivity is high.On the other hand,we show that an economy converges to a steady state where automation does not occur and per capita output is low if productivity is low. In addition,we examine how education subsidy policy affects the economy when productivity is low. If the efficiency of education is high,the government can steer an economy away from a steady state without automation by investing more resources in education.If the efficiency of education is low,there can exist multiple steady states where automation occurs in one but not in the other.
    Keywords: Education,Automation,Economicgrowth
    JEL: E22 J24 O10 O30
  10. By: Ketenci, Natalya; Aydoğan, Ebru Tomris
    Abstract: Sustainable economic growth is a continuous increase in environmentally adjusted net domestic product (Bartelmus, 1994). This study investigates the role of natural gas consumption and trade openness in the economic growth of Turkey for the period 1977-2017. Turkey underwent several political and economic shocks during this period. Therefore, the paper employs the Kejriwal and Perron (2010) structural break test to investigate the relationship between economic growth and its determinants in the presence of structural shifts. The outcomes underline the importance of breaks consideration in estimations since they provide detailed impacts of variables on economic growth through sub regimes.
    Keywords: Economic growth, natural gas consumption, energy use, cointegration, structural breaks, Turkey.
    JEL: O11 O47
    Date: 2019–09–15
  11. By: Vanino, Enrico; Lee, Stevan
    Abstract: We are interested in the hypothesis that in order to promote export competitiveness and create jobs, it is necessary to address major distortions to prices in the non-tradeable sector. Exports drive growth in developing countries, yet most employment growth is generated in non-tradeable sectors. We contribute to the previous literature by explaining how non-tradeable sectors are particularly vulnerable to distortions arising from extractive and poor quality institutions. We estimate an IV-GMM model on a sample of low-middle income countries, finding evidence of a strong relationship between the growth of non-tradeable prices and the quality of local institutions. Overlooking the distortions in non-tradeable sectors could limit the analysis of constraints to economic growth and transformation in developing countries.
    Keywords: Non-tradeable; Institutional quality; Extractive institutions; Economic development
    JEL: D2 D4 H1 L1 L5 L8 O1
    Date: 2018–09–01
  12. By: Trabelsi, Mohamed Ali; Ahmed, Salah
    Abstract: This paper examines the role of democracy in strengthening the resilience of developing economies in the face of exogenous external shocks. Our study uses the duration model to estimate how external shocks and democracy determine the probable duration of a spell of economic growth. Examining a panel of 96 developing countries observed over the 1965-2015 period, we found that democracy is a resilience factor, insofar as it helps to support growth spells in the event of negative external shocks.
    Keywords: Resilience; Economic growth; Developing countries; Democracy; Survival models.
    JEL: E32 E60 F43 O11
    Date: 2020

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