nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒06‒29
fifteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Linguistic Traits and Human Capital Formation By Galor, Oded; Özak, Ömer; Sarid, Assaf
  2. Pre-Colonial Warfare and Long-Run Development in India By Dincecco, Mark; Fenske, James; Menon, Anil; Mukherjee, Shivaji
  3. Endogenous Task-Based Technical Change - Factor Scarcity and Factor Prices By Andreas Irmen
  4. Religion in Economic History: A Survey By Becker, Sascha O.; Rubin, Jared; Woessmann, Ludger
  5. Weber revisited: A literature review on the possible Link between Protestantism, Entrepreneurship and Economic Growth By Grytten, Ola Honningdal
  6. Internal Borders and Population Geography in the Unification of Italy By A'Hearn, Brian; Rueda, Valeria
  7. Are ideas getting harder to find? By Bloom, Nicholas; Jones, Charles I; Van Reenen, John; Webb, Michael
  8. Innovate to Lead or Innovate to Prevail: When do Monopolistic Rents Induce Growth? By Piazza, Roberto; Zheng, Yu
  9. The Supply of Hours Worked and Endogenous Growth Cycles By Ka-Kit Iong; Andreas Irmen
  10. Assessing the Role of Institutions in Limiting the Environmental Externalities of Economic Growth By Stéphane Dees
  11. Italy and the Industrial Revolution: Evidence from Stable Employment in Rural Areas By Rota, Mauro; Weisdorf, Jacob
  12. Automation, Growth, an Factor Shares in the Era of Population Aging By Andreas Irmen
  13. Accounting for U.S. post-war economic growth By del Río, Fernando; Lores, Francisco-Xavier
  14. Financial Deepening, Credit Crises, Human Capital and Growth By Sergio Salas; Kathleen Odell
  15. On Green Growth with Sustainable Capital By Basu, P.; Jamasb, T.

  1. By: Galor, Oded; Özak, Ömer; Sarid, Assaf
    Abstract: This research establishes empirically that existing cross-language variations in the structure of the future tense and the presence of grammatical gender affected human capital accumulation. Exploiting variations in the dominant languages among migrants from the same countries of origin, the study explores the impact of these traits on the educational attainment of second generation migrants in the US. The results suggest that college attendance among individuals with identical ancestry is (i) higher if the dominating language at home has a periphrastic future tense, and (ii) lower for women exposed predominantly to sex-based grammatical gender.
    Keywords: Comparative Development,Human Capital,Education,Language Structure,Future Tense,Grammatical Gender,Cultural Evolution,Gender Bias,Long-term Orientation
    JEL: I20 J16 Z10 Z13
    Date: 2020
  2. By: Dincecco, Mark (University of Michigan); Fenske, James (University of Warwick); Menon, Anil (University of Michigan); Mukherjee, Shivaji (University of Toronto)
    Abstract: We analyze the relationship between pre-colonial warfare and long-run development patterns in India. We construct a new geocoded database of historical interstate conflicts on the Indian subcontinent, from which we compute measures of local exposure to pre-colonial warfare. We document a positive and significant relationship between pre-colonial conflict exposure and local economic development across India today. This result is robust to numerous checks, including controls for geographic endowments, initial state capacity, colonial-era institutions, ethnic and religious fractionalization, and colonial and post-colonial conflict, and an instrumental variables strategy that exploits variation in pre-colonial conflict exposure driven by cost distance to the Khyber Pass. Drawing on rich archival and secondary data, we show that districts that were more exposed to pre-colonial conflict experienced greater local pre-colonial and colonial-era state-making, and less political violence and higher infrastructre investments in the long term. We argue that reductions in local levels of violence and greater investments in physical capital were at least in part a function of more powerful local government institutions.
    Keywords: Warfare ; Economic Development ; State Capacity ; Public Goods ; India ; History JEL codes: N45 ; O11 ; P48 ; H11
    Date: 2020
  3. By: Andreas Irmen (Department of Economics and Management, Université du Luxembourg)
    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
  4. By: Becker, Sascha O. (Monash University); Rubin, Jared (Chapman University); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: This chapter surveys the recent social science literature on religion in economic history, covering both socioeconomic causes and consequences of religion. Following the rapidly growing literature, it focuses on the three main monotheisms—Judaism, Christianity, and Islam—and on the period up to WWII. Works on Judaism address Jewish occupational specialization, human capital, emancipation, and the causes and consequences of Jewish persecution. One set of papers on Christianity studies the role of the Catholic Church in European economic history since the medieval period. Taking advantage of newly digitized data and advanced econometric techniques, the voluminous literature on the Protestant Reformation studies its socioeconomic causes as well as its consequences for human capital, secularization, political change, technology diffusion, and social outcomes. Works on missionaries show that early access to Christian missions still has political, educational, and economic consequences in present-day Africa, Asia, and Latin America. Much of the economics of Islam focuses on the role that Islam and Islamic institutions played in political-economy outcomes and in the "long divergence" between the Middle East and Western Europe. Finally, cross-country analyses seek to understand the broader determinants of religious practice and its various effects across the world. We highlight three general insights that emerge from this literature. First, the monotheistic character of the Abrahamic religions facilitated a close historical interconnection of religion with political power and conflict. Second, human capital often played a leading role in the interconnection between religion and economic history. Third, many socioeconomic factors matter in the historical development of religions.
    Keywords: religion, economic history, Judaism, Christianity, Islam, economic development, education, persecution, political economy, finance, specialization, trade
    JEL: Z12 N00 J15 I15 I25
    Date: 2020–06
  5. By: Grytten, Ola Honningdal (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: The present paper looks at the Weber-Tawney thesis on the positive link between Protestant ethic and economic growth. Both scholars observed that Protestant areas in the Western world seemed to gain faster and more wealth than areas with less Protestants, and largely explained this by a special mentality fostering entrepreneurship in Protestant thinking. By conducting a literature study of research in the area, the paper concludes that despite wide debate, there is a significant acceptance that there is a statistical link between religious affiliation and growth. However, scholars tend to disagree on the causal relationships. Still, the bulk of the literature seems to agree that the Reformation paved way for entrepreneurship and economic growth in one way or another. The paper seeks to map the most important explanations and the arguments behind them.
    Keywords: Weber; Reformation; Protestantism; Entrepreneurship; Economic Growth
    JEL: B15 B25 N10 N30 N90 O10 O40 O47 P10 P30 P41 P47 P50
    Date: 2020–06–04
  6. By: A'Hearn, Brian; Rueda, Valeria
    Abstract: We examine the economic impact of Italian unification from a micro-geographical perspective, asking whether the abolition of internal borders caused a redistribution of economic activity towards the former border zones, which now enjoyed improved market access. We construct a new geocoded dataset of municipal (comune) populations from the pre-unification period through to 1871. Using a difference-in-differences approach and controlling for a variety of geographic correlates including elevation and distances to ports, railway lines, and large cities, we find robust evidence of a relative acceleration in population growth â?? our proxy for economic activity â?? in comuni near the former internal borders, consistent with our market access hypothesis.
    Keywords: 19th century; Border effects; economic history; economic integration; Italy; Political Unification; spatial inequality
    JEL: J6 N33 N93 R12 R23
    Date: 2020–04
  7. By: Bloom, Nicholas; Jones, Charles I; Van Reenen, John; Webb, Michael
    Abstract: Long-run growth in many models is the product of two terms: the effective number of researchers and their research productivity. We present evidence from various industries, products, and firms showing that research effort is rising substantially while research productivity is declining sharply. A good example is Moore's Law. The number of researchers required today to achieve the famous doubling of computer chip density is more than 18 times larger than the number required in the early 1970s. More generally, everywhere we look we find that ideas, and the exponential growth they imply, are getting harder to find.
    JEL: D24 E23 O31 O47
    Date: 2020–04–01
  8. By: Piazza, Roberto; Zheng, Yu
    Abstract: This paper extends the standard Schumpeterian model of creative destruction by allowing the cost of innovation for followers to increase in their technological distance from the leader. This assumption is motivated by the observation that the more technologically advanced the leader is, the harder it is for a follower to leapfrog without incurring extra cost for using leader's patented knowledge. Under this R&D cost structure, leaders have an incentive to play an "endpoint strategy": they increase their technological advantage, counting on the fact that followers will eventually stop innovating â?? allowing leadership to prevail. We find that several results in the standard model now fail to hold. In addition to the High Growth steady state in which only followers innovate, there now exist two other steady states: a Medium Growth (a source) and a Low Growth (a saddle) steady state, that feature both leaders and followers innovating. An increase in monopolistic rents or an extension of patent duration increases the likelihood that over time the economy converges to a low growth steady state.
    Keywords: Endogenous growth theory; Innovation; Persistent monopoly
    JEL: L16 O31 O34 O41
    Date: 2020–04
  9. By: Ka-Kit Iong (Department of Economics and Management, Université du Luxembourg); Andreas Irmen (Department of Economics and Management, Université du Luxembourg)
    Abstract: We show that declining hours of work per worker in conjunction with a growing work force may give rise to growth cycles. This is accomplished in an overlapping generations model where individuals are endowed with Boppart-Krusell preferences (Boppart and Krusell (2020)), i. e., the wage elasticity of their supply of hours worked is negative. On the supply side, economic growth is due to the expansion of consumption-good varieties through endogenous research. We show that a sufficiently negative equilibrium elasticity of the individual supply of hours worked to an expansion in the set of consumption-good varieties opens up the possibility of growth cycles where the economy fluctuates between two regimes, one with and the other without an active research sector. We identify period-2 and period-3 cycles, conclude with Li and Yorke (1975) that cycles of any periodicity exists, and generalize our findings to period-n cycles. We show that the possibility of cycles occurs under empirically plausible conditions. Throughout, we emphasize that the economics of cycles is linked to the intergenerational trade of shares and their pricing in the asset market
    Keywords: Endogenous Cycles, Technological Change, Endogenous Labor Supply, OLG-Model.
    JEL: E32 J22 O33 O41
    Date: 2020
  10. By: Stéphane Dees
    Abstract: Emissions of pollutants tend to be procyclical as they generally increase with economic growth. However, as government policy has a role to play in the mitigation of the environmental consequences of economic activity, the quality of institutions may influence the procyclicality of pollution and reduce the environmental cost of economic growth. Based on the assumption that changes in emissions are stronger at earlier stages of development, we develop a non-linear framework and confirm first the presence of income-related threshold effects in the relationship between pollution (CO2 and greenhouse gas emissions) and growth, for a panel of 142 countries over a period spanning from 1960 to 2017. We also find that institutional quality influences this relationship, lowering both the value of the threshold and the degree of procyclicality of emissions. These results bring therefore evidence that higher institutional quality can attenuate the environmental externalities of economic growth.
    Keywords: CO2 Emissions, GHG Emissions, Economic Growth, Institutions .
    JEL: C33 O44 Q56 Q58
    Date: 2020
  11. By: Rota, Mauro; Weisdorf, Jacob
    Abstract: We provide a first-ever long-run index of wages of stable rural workers in early-modern Tuscany. These wages speak to two longstanding debates. The first concerns whether Italy's early-modern downturn was an urban phenomenon only or an all-embracing one. Our data lend support to the former, since we do not detect any downturn in our early-modern rural wages. The second debate concerns whether high-waged workers prompted the Industrial Revolution. Earlier studies in this debate have been criticised for comparing urban wages when early factories emerged in rural areas. By comparing rural wages, we find that English labour cost only 10 per cent more than their Italian counterparts in 1650, but a staggering 150 per cent more in 1800. The revised timing of the divergence between England and Italy, and its overlap with England's early mechanisation, raise a significant identification problem. Did high wages encourage mechanisation, or did mechanisation boost wages?
    Keywords: economic growth; Great Divergence; industrial revolution; living standards; prices; Stable Employment; Wage premia; wages
    JEL: I3 J3 J4 J8 N33
    Date: 2020–04
  12. By: Andreas Irmen (Department of Economics and Management, Université du Luxembourg)
    Abstract: How does population aging affect economic growth and factor shares in times of increasingly automatable production processes? The present paper addresses this question in a new macroeconomic model of automation where competitive firms perform tasks to produce output. Tasks require labor and machines as inputs. New machines embody superior technological knowledge and substitute for labor in the performance of tasks. The incentive to automate is stronger if wages are higher. Automation is shown to boost the aggregate demand for labor if and only if the incentives to automate are strong enough and to reduce the labor share. These predictions obtain even though automation is labor-augmenting in the reduced-form production function. Population aging due to a higher longevity or a decline in fertility may strengthen or weaken the incentives to automate. Irrespective of its source, population aging is predicted to increase the growth rate of per-capita GDP in the short and in the long run. The short-run effect of higher longevity on the labor share is positive whereas the effect of a declining fertility is negative. In the long run, population aging reduces the labor share.
    Keywords: Population Aging, Automation, Factor Shares, Endogenous Technical Change, Endogenous Labor Supply.
    JEL: E22 J11 J22 J23 O33 O41
    Date: 2020
  13. By: del Río, Fernando; Lores, Francisco-Xavier
    Abstract: We apply the Chari et al. (2002, 2007) methodology to develop a growth accounting exercise for the U.S. economy during 1954--2017. Unlike them, we focus on perfect foresight models. We obtain three primary findings. First, the efficiency wedges in the entire period accurately account for the evolution of U.S. productivity and labor share. Second, the labor wedge was the main force driving the recovery of output and worked hours per capita in the eighties and nineties as well as after the Great Recession. Finally, if we replace the Cobb-Douglas assumption with a production function, which allows the factor shares to adjust competitively, the forces driving the U.S. Great Recession might not be very different from those in other OECD economies, and the forces driving the 1982 recession in the United States.
    Keywords: Growth Accounting, Capital-Efficiency Wedge, Labor-Efficiency Wedge, Labor Wedge, Investment Wedge, Resource Constraint Wedge, Productivity, Labor Share, Worked Hours.
    JEL: E1 E3 O4
    Date: 2020–05–27
  14. By: Sergio Salas; Kathleen Odell
    Abstract: In spite of extensive research exploring the implications of financial matters for economic growth, a general equilibrium macroeconomic model of financial frictions with human capital as an engine of growth is lacking in the literature. This paper helps to fill this gap, proposing a model that includes endogenous growth, human capital, and financial constraints. We derive short-term and long-term predictions from the model. From a long run perspective, we explore the relationship between financial depth and growth, and predict that this relationship is non-monotonic. Higher financial depth is initially associated with higher growth, but at diminishing rates. Further increases in financial depth become growth detrimental. From a short-run perspective, we analyze the role of transitory financial disruptions in producing persistent economic changes, a phenomenon that arguably happened during the Great Recession and the years that followed. We propose an explanation for these persistent effects based on human capital.
    Keywords: endogenous growth, financial depth, credit crunch, human capital, heterogeneous agents, fiscal policy
    JEL: O4 E44
    Date: 2020–06
  15. By: Basu, P.; Jamasb, T.
    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: E1 O3 O4 Q2
    Date: 2020–05–21

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