nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒07‒13
nineteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Temperature, Disease, and Death in London: Analyzing Weekly Data for the Century from 1866-1965 By W. Walker Hanlon; Casper Worm Hansen; Jake W. Kantor
  2. Modern Library Holdings and Historic City Growth By Chaney, Eric
  3. Borderline Disorder: (De facto) Historical Ethnic Borders and Contemporary Conflict in Africa By Özak, Ömer; Depetris-Chauvin, Emilio
  4. Genetic diversity, disease prevalence and the coronavirus pandemic By Phiri, Andrew
  5. Growth Recurring in Preindustrial Spain: Half A Millennium Perspective By Álvarez-Nogal, Carlos; Prados de la Escosura, Leandro; Santiago-Caballero, Carlos
  6. Men. Roots and Consequences of Masculinity Norms By Baranov, Victoria; de Haas, Ralph; Grosjean, Pauline
  7. Immigrant Inventors and Diversity in the Age of Mass Migration By Francesco Campo; Mariapia Mendola; Andrea Morrison; Gianmarco Ottaviano
  8. Flying or Trapped? By Yunfang Hu; Takuma Kunieda; Kazuo Nishimura; Ping Wang
  9. Innovation and imitation By Jess Benhabib; \'Eric Brunet; Mildred Hager
  10. Longer-run economic consequences of pandemics By Jordá, Óscar; Singh, Sanjay R.; Taylor, Alan M.
  11. Why Is Risk Aversion Essentially Important for Endogenous Economic Growth? By Harashima, Taiji
  12. The existence and uniqueness of the steady equilibrium in the endogenous economic growth model By Guo, Lu; Yang, Wei
  13. Two centuries of economic growth: Norwegian GDP 1816-2020 By Grytten, Ola Honningdal
  14. Fiscal Rules: Historical, Modern, and Sub-National Growth Effects By Klaus Gründler; Niklas Potrafke
  15. Growth and inequality under different hierarchical education regimes By Graziella Magalhaes; David Turchick
  16. Product and Process Innovation, Keynesian Unemployment, and Economic Growth By Sasaki, Hiroaki
  17. Foreign Direct Investment and Growth Convergence in a North-South Framework By Vinicius Curti Cicero; Gilberto Tadeu Lima
  18. Optimal Factor Taxation in A Scale Free Model of Vertical Innovation By Barbara Annicchiarico; Valentina Antonaroli; Alessandra Pelloni
  19. Economics and Politics: A Unifying Framework By Ramón E. López

  1. By: W. Walker Hanlon; Casper Worm Hansen; Jake W. Kantor
    Abstract: Using weekly mortality data for London spanning 1866-1965, we analyze the changing relationship between temperature and mortality as the city developed. Our results show that both warm and cold weeks were associated with elevated mortality in the late 19th-century, but heat effects, due mainly to infant deaths from digestive diseases, largely disappeared after WWI. The resulting change in the temperature-mortality relationship meant that thousands of heat-related deaths–equal to 0.8-1.3 percent of all deaths–were averted. Our findings also indicate that a series of hot years in the 1890s substantially changed the timing of the infant mortality decline in London.
    JEL: I15 N3 Q54
    Date: 2020–06
  2. By: Chaney, Eric
    Abstract: This paper uses more than 30 million records from the union of the world's largest library collections to provide a novel proxy for historic economic activity. Changes in the number of authors affiliated with a city strongly correlate with existing population growth estimates. An empirical Bayes approach exploits this correlation to improve upon current data and provide new growth estimates where none exist. The paper concludes by using the new data to revisit urban growth during the rise of the Atlantic trade.
    Date: 2020–04
  3. By: Özak, Ömer (Southern Methodist University); Depetris-Chauvin, Emilio
    Abstract: We explore the effect of historical ethnic borders on contemporary non-civil conflict in Africa. Exploiting variations across artificial regions (i.e., grids of 50x50km) within an ethnicity's historical homeland, we document that both the intensive and extensive margins of contemporary conflict are concentrated close to historical ethnic borders. Following a theory-based instrumental variable approach, which generates a plausibly exogenous ethno-spatial partition of Africa, we find that grid cells with historical ethnic borders have 27 percentage points higher probability of conflict and 7.9 percentage points higher probability of being the initial location of a conflict. We uncover several key underlying mechanisms: competition for agricultural land, population pressure, cultural similarity and weak property rights.
    Date: 2020–05–15
  4. By: Phiri, Andrew
    Abstract: The COVID-19 disease outbreak is the deadliest viral pandemic our generation has experienced, and much uncertainty exists over the vulnerability of different populations to the virus since a clinically-approved vaccination does not exist. Our study investigates whether evolutionary processes such as genetic diversity and cultural behaviour norms can explain the differences in COVID-19 virus infections and mortalities observed in different countries. Using a sample of 133 countries we find that populations with higher expected genetic heterozygosity and more historical exposure to infectious diseases are associated with lower COVID-19 infections and mortalities. Further investigations reveal two ‘channels’ of transmission. Firstly, a longer migratory distance from the origins of homo sapiens adversely influences expected heterozygosity, which then increases the populations susceptibility to the COVID_19 virus. Secondly, higher disease prevalence leads to higher collectivism (lower individualism) behaviour, which then reduces the populations susceptibility to COVID_19 infections. Our analysis is robust to the inclusion of additional controls and dummies. Policy implications of our findings are discussed.
    Keywords: COVID-19; Expected heterozygosity; Disease prevalence; Collectivism; Individualism; Deep roots.
    JEL: C33 C36 C52 I18 Z1 Z13
    Date: 2020–06–17
  5. By: Álvarez-Nogal, Carlos; Prados de la Escosura, Leandro; Santiago-Caballero, Carlos
    Abstract: Research in economic history has lately challenged the Malthusian depiction of preindustrial European economies, highlighting 'efflorescences', 'Smithian' and 'growth recurring' episodes. Do these defining concepts apply to preindustrial Spain? On the basis of new yearly estimates of output and population for nearly 600 years we show that preindustrial Spain was far from stagnant and phases of per capita growth and shrinkage alternated. Population and output per head evolved along supporting the hypothesis of a frontier economy. After a long phase of sustained and egalitarian growth, a collapse in the 1570s opened a new era of sluggish growth and high inequality. The unintended consequences of imperial ambitions in Europe on economic activity, rather than Malthusian forces, help to explain it.
    Keywords: Black Death; Frontier economy; Growth recurring; Malthusian; Preindustrial Spain
    JEL: E10 N13 O10 O47
    Date: 2020–03
  6. By: Baranov, Victoria; de Haas, Ralph; Grosjean, Pauline
    Abstract: Recent research has uncovered the historical roots of gender norms about women and the persistent impact of such norms on economic behavior. We document similar roots and consequences of masculinity norms: beliefs about the proper conduct of men. We exploit a natural historical experiment in which convict transportation in the 18th and 19th century created a variegated spatial pattern of sex ratios across Australia. We show that areas that were heavily male-biased in the past (though not the present) remain characterized by more violence, higher rates of male suicide and other forms of preventable male mortality, and more male-stereotypical occupational segregation. Further evidence indicates that in these historically male-biased areas, more Australians recently voted against same-sex marriage and that boys-but not girls-are more likely to be bullied in school. We interpret these results as manifestations of masculinity norms that emerged due to intense local male-male competition and that persisted over time through peer socialization in schools.
    Keywords: Cultural persistence; identity; Masculinity; Natural Experiment; Sex ratio
    JEL: I31 J12 J16 N37 Z13
    Date: 2020–03
  7. By: Francesco Campo; Mariapia Mendola; Andrea Morrison; Gianmarco Ottaviano
    Abstract: A possible unintended but damaging consequence of anti-immigrant rhetoric, and the policies it inspires, is that they may put high-skilled immigrants off more than low-skilled ones at times when countries and businesses intensify their competition for global talent. We investigate this argument following the location choices of thousands of immigrant inventors across US counties during the Age of Mass Migration. To do so we combine a unique USPTO historical patent dataset with Census data and exploit exogenous variation in both immigration flows and diversity induced by former settlements, WWI and the 1920s Immigration Acts. We find that co-ethnic networks play an important role in attracting immigrant inventors. However, we also find that immigrant diversity acts as an additional significant pull factor. This is mainly due to externalities that foster immigrant inventors’ innovativeness. These findings are relevant for today’s advanced economies that have become major receivers of migrant flows and, in a long-term perspective, have started thinking about immigration in terms of not only level but also composition.
    Keywords: International Migration, Cultural Diversity, Innovation
    JEL: F22 J61 O31
    Date: 2020–06
  8. By: Yunfang Hu; Takuma Kunieda; Kazuo Nishimura; Ping Wang
    Abstract: We develop a unified theory with endogenous technology choice in human/knowledge capital accumulation to establish a rich array of equilibrium development paradigms, including poverty trap, middle income trap and flying geese growth. We then generalize the baseline structure and establish conditions for different development paradigms to arise. By calibrating the general model to fit the data from several representative economies with different income and growth patterns, we identify various prolonged flying geese episodes and middle income traps. By performing growth accounting, we find that improving human capital accumulation efficacy and mitigating barriers to human capital accumulation are most rewarding for advancing the economy and avoiding the middle income trap.
    JEL: D2 E2 O4
    Date: 2020–05
  9. By: Jess Benhabib; \'Eric Brunet; Mildred Hager
    Abstract: We study several models of growth driven by innovation and imitation by a continuum of firms, focusing on the interaction between the two. We first investigate a model on a technology ladder where innovation and imitation combine to generate a balanced growth path (BGP) with compact support, and with productivity distributions for firms that are truncated power-laws. We start with a simple model where firms can adopt technologies of other firms with higher productivities according to exogenous probabilities. We then study the case where the adoption probabilities depend on the probability distribution of productivities at each time. We finally consider models with a finite number of firms, which by construction have firm productivity distributions with bounded support. Stochastic imitation and innovation can make the distance of the productivity frontier to the lowest productivity level fluctuate, and this distance can occasionally become large. Alternatively, if we fix the length of the support of the productivity distribution because firms too far from the frontier cannot survive, the number of firms can fluctuate randomly.
    Date: 2020–06
  10. By: Jordá, Óscar; Singh, Sanjay R.; Taylor, Alan M.
    Abstract: How do major pandemics affect economic activity in the medium to longer term? Is it consistent with what economic theory prescribes? Since these are rare events, historical evidence over many centuries is required. We study rates of return on assets using a dataset stretching back to the 14th century, focusing on 12 major pandemics where more than 100,000 people died. In addition, we include major armed conflicts resulting in a similarly large death toll. Significant macroeconomic after-effects of the pandemics persist for about 40 years, with real rates of return substantially depressed. In contrast, we find that wars have no such effect, indeed the opposite. This is consistent with the destruction of capital that happens in wars, but not in pandemics. Using more sparse data, we find real wages somewhat elevated following pandemics. The findings are consistent with pandemics inducing labor scarcity and/or a shift to greater precautionary savings.
    Keywords: depressions; local projections; Natural rate; Pandemics; Real interest rate; wars
    JEL: E43 F41 N10 N30 N40
    Date: 2020–03
  11. By: Harashima, Taiji
    Abstract: The familiar condition for a balanced growth path indicates that a household’s attitude toward risk plays a significantly important role for endogenous economic growth, but the mechanism behind this importance has not been sufficiently examined. In this paper, I show that in the process of endogenous growth, the decreasing rate of marginal utility is kept constant and the household’s quickness of response to new technologies determines the growth rate. Quickness of response to new technology and degree of risk aversion are quite similar. Given a constant decreasing rate of marginal utility, if on average households in a country are more cautious and respond less quickly to new technologies, firms in that country will invest less in new technologies. As a result, the endogenous economic growth rate of the country will be lower than that of others. If people respond more quickly, the growth rate will be higher.
    Keywords: Decreasing rate of marginal utility; Endogenous economic growth; Risk aversion
    JEL: D81 O40
    Date: 2020–06–10
  12. By: Guo, Lu; Yang, Wei
    Abstract: Without the assumption on the factor linear growth equation and keeping other assumptions in the endogenous growth theory, we prove the growth rate and interest rate endogenous, and then we give general conditions for the existence and uniqueness of the growth rate. Under the condition of the constant returns to scale, the growth rate of every variable and interest rate are constant in the steady state. In addition, we give primary analyses on the stochastic economy with growth.
    Keywords: Endogenous Growth, Existence, Uniqueness, equilibrium
    JEL: C62 O41
    Date: 2020–05
  13. By: Grytten, Ola Honningdal (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: Existing historical GDP series for Norway do not always coincide with our historical knowledge of the economic development. This is to a large extent a result of lack of calculations from the production side and in addition to insufficient data sets upon which these series rest. The present paper offers new knowledge of historical national accounting in Norway in several ways. Firstly, a new and novel set of annual gross domestic product series by industry are presented for the period 1816-2019. Secondly, the new estimations suggest revision of the long-run GDP series. Thirdly, this implies it is necessary to revise our understanding of parts of Norwegian economic history.
    Keywords: Historical national accounting; national accounts; industrial development; Norwegian economic history
    JEL: N13 N14 O11 O14 O16
    Date: 2020–06–22
  14. By: Klaus Gründler; Niklas Potrafke
    Abstract: We examine how fiscal rules influence economic growth. The results show that constitutional fiscal rules promoted growth from the Industrial Revolution until World War II (1789-1950) and also increased modern economic growth (1985-2015). To address selection on unobservables, we conduct a large-scale international survey among 1,224 economic experts in 109 countries. We exploit cross-country differences in expert preferences as an instrumental variable for the adoption of constitutional fiscal rules. The results show that the cumulative long-run effect of permanently adopting constitutional fiscal rules on real per capita GDP is 18%. As a complementary strategy to tackle unobservables, we examine sub-national fiscal rules, employing a newly collected dataset of 206 regional governments from 10 federal states (1992-2012). The results show that fiscal rules also increased economic growth at the sub-national level.
    Keywords: fiscal rules, economic growth, constitutions, historical public finance
    JEL: O11 O12 D74
    Date: 2020
  15. By: Graziella Magalhaes; David Turchick
    Abstract: We study the impacts of different educational regimes on growth and income inequality using a twostage human capital model with heterogeneous agents that takes the hierarchical nature of education into account. The differentiation of educational stages sheds new light on the impacts of human capital accumulation on growth and inequality. Both at the basic (elementary and secondary) and the advanced (higher) educational stages, the school system may be either public or private. Our analysis shows that the educational regime with the highest growth rate has private basic education. The completely public (private) regime is the one in which inequality vanishes the fastest (slowest), albeit leading to the lowest (highest) growth. If the government is to fund only one educational stage, such a decision will hinge on elasticities of the human capital production function and on the interest rate.
    Keywords: Human capital; growth; inequality; educational regime; hierarchical education
    JEL: O40 O15 I24
    Date: 2020–06–19
  16. By: Sasaki, Hiroaki
    Abstract: In economic growth theory, product innovation and process innovation are important factors behind technological progress. This study builds an economic growth model that considers product and process innovation and theoretically investigates how these two types of innovation affect the economic growth rate and unemployment rate. Our model, based on that developed by Zagler (2004), allows us to make the following three main findings. We find that (1) an increase in the efficiency of product innovation increases both the economic growth rate and the unemployment rate; (2) an increase in the efficiency of process innovation increases the economic growth rate and does not affect the unemployment rate; and (3) in the R\&D sector, a decrease in the labor allocation to product innovation and an increase in the labor allocation to process innovation increase the economic growth rate and decrease the unemployment rate depending on the conditions. These findings suggest that to both raise employment and increase economic growth, we need not only a policy for fostering product innovation but also another policy to improve employment.
    Keywords: effective demand; notional demand; unemployment; economic growth; product and process innovation; monopolistic competition
    JEL: E12 O31 O41
    Date: 2020–06–10
  17. By: Vinicius Curti Cicero; Gilberto Tadeu Lima
    Abstract: This paper develops a general extended version of the balance-of-payments constrained growth model that takes into consideration some often ignored aspects of growth in open economies - namely, the importance of capital flows in the long run, terms of trade changes and trade and payments interdependence among regions. Furthermore, this paper incorporates Thirlwall's analysis into a North-South model that takes into account four intrinsically connected channels through which FDI inflows can affect the productive structure of Southern region - capital accumulation, balance-of-payments components, technological change and income distribution - finding that it still explains uneven development, although reducing the distance between regions by easing the external restriction, that is indicate a more even development path. In addition, this article presents an empirical exercise that, although not conclusive when considering the income elasticities of import ratio, points to a quite relevant result: the non-consideration of income distribution effects in the import functions represents not only the omission of a relevant variable on econometric estimations but, mainly, the omission of an important theoretical channel to understand growth in open economies.
    Keywords: Foreign direct investment; Economic growth; Uneven development; North-South relations; Balance-of-Payments constraint; Functional distribution of income
    JEL: F21 E12 O11 F14
    Date: 2020–06–18
  18. By: Barbara Annicchiarico (Department of Economics and Finance, University of Rome “Tor Vergata”, Italy); Valentina Antonaroli (Department of Economics and Finance, University of Rome “Tor Vergata”, Italy); Alessandra Pelloni (Department of Economics and Finance, University of Rome “Tor Vergata”, Italy; Rimini Centre for Economic Analysis)
    Abstract: The objective of the paper is to study how the tax burden arising from an exogenous stream of public expenditures and transfers should be distributed between labor and capital in a scale-less endogenous growth model, where the engine of growth are successful innovations. Our laboratory is a prototypical quality ladder model with a labor/leisure choice where R&D productivity is decreasing in the size of the economy. This decreasing productivity removes scale effects, which are a controversial prediction of first-generation endogenous growth models. Our contribution is to show that even when labor supply has no effects on growth in the long run, it will still be optimal to tax capital, for reasonable parametrizations of the model. This is true even if the long-run growth rate decreases, with respect to the initial situation in which capital income is not taxed.
    Keywords: Endogenous growth, Scale effects, Capital Income Taxation, Welfare effect
    JEL: O41 E62 H21
    Date: 2020–06
  19. By: Ramón E. López
    Abstract: This paper deals with economic growth, distribution and politics. The principal feature of this paper, which distinguishes itself from most existing literature, is that it integrates economic growth and political equilibria into a unifying framework. We study the distribution of power between the owners of capital (“the capitalists†) and the owners of human capital (“the workers†) and its relationship with the fundamental economic variables including capital market imperfections, economic growth, and inequality. We then develop a new model of politico-economic equilibrium in which economic power constitutes a key linkage between politics and economics. We show that all the fundamental economic variables, including economic power distribution, are in fact dependent on political conditions. We show that the performance of the economy is likely to be cyclical because of cyclical behavior of political conditions and vice versa, political cycles are in part originating in economic cycles. The model provides unique testable predictions, some of which we illustrate using US political and economic data for the period 1885-2016.
    Date: 2020–06

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