nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒08‒10
thirteen papers chosen by
Marc Klemp
University of Copenhagen

  1. The Wheels of Change: Human Capital, Millwrights, and Industrialization in Eighteenth-Century England By Sarid, Assaf; Mokyr, Joel; van der Beek, Karine
  2. Growth, Automation, and the Long-Run Share of Labor By Debraj Ray; Dilip Mookherjee
  3. Religion in Economic History: A Survey By Sascha O. Becker; Jared Rubin; Ludger Woessmann
  4. Inequality in pre-industrial Europe (1260-1850): new evidence from the labour share By Giovanni Federico; Alessandro Nuvolari; Michelangelo Vasta
  5. Age Diversity and Aggregate Productivity By Balazs Zelity
  6. Inequality in Pre-Industrial Europe (1260-1850): New Evidence from the Labour Share By Giovanni Federico; Alessandro Nuvolari; Michelangelo Vasta
  7. An Analytical Theory of Labor Supply in Africa By Van, Germinal
  8. A Liquidity Crunch in an Endogenous Growth Model with Human Capital By Sergio Salas
  9. Optimal Capital Taxation in an Economy with Innovation-Driven Growth By Chen, Ping-ho; Chu, Angus C.; Chu, Hsun; Lai, Ching-Chong
  10. A Mathematical Theory of Economic Growth: The Public Choice Growth Model By Van, Germinal
  11. Urban growth and its aggregate implications By Duranton, Gilles; Puga, Diego
  12. Illuminating Economic Growth By Yingyao Hu; Jiaxiong Yao
  13. Climate warming vs ecological competition for marine tropical biodiversity and fisheries By Helene Gomes; Coralie Kersulec; Luc Doyen; Fabian Blanchard; Abdoul Cisse; Nicolas Sanz

  1. By: Sarid, Assaf; Mokyr, Joel; van der Beek, Karine
    Abstract: Measures of human capital correlate strongly with technological change and economic growth across regions. However, the endogeneity of these measures complicated this interpretation. This paper aims to identify the causal effect of human capital in the context of Britain's industrialization in the eighteenth century, by uncovering the geographical origins of its highly skilled mechanical labor. We achieve this by exploiting the persistent effect of the spatial location of early medieval watermills across England (as registered in Domesday Book in 1086) on the spatial distribution of a specific group of mechanical workmen known as wrights, who specialized in building watermills, and using the exogenous source of cross-district variation in geographical suitability for the construction of watermills in the early medieval period, to instrument for the availability of wrights in the first half of the eighteenth century (1710-50). In the case of England, the mechanical skills that evolved in response to the extensive adoption of watermills for grinding in the early middle ages, were complementary to technological change and turned out to be an important power behind England's leadership in the second half of the eighteenth century.
    Keywords: economic growth; England; Human Capital; Industrialization; mechanical skills; watermill
    JEL: N00 N13 N53 N73 N93 O14 O15 O33
    Date: 2019–11
  2. By: Debraj Ray (New York University); Dilip Mookherjee (Boston University)
    Abstract: We study a model of long run growth and distribution with two key features. First, there is an asymmetry between physical and human capital. Individual claims on the former can be reproduced linearly and indefinitely. Because no similar claim on humans is possible, human capital accumulation instead takes the form of acquiring occupational skills, the returns to which are determined by an endogenous collection of wages. Second, physical capital can take the form of machines that are complementary to human labor, or robots, a substitute for it. Under a self-replication condition on the production of robot services, our theory delivers progressive automation, with the share of labor in national income converging to zero. The displacement of human labor is gradual, and real wages could rise indefinitely. The results extend to endogenous technical change, as well as relaxations of the sharply posited human-physical asymmetry.
    Date: 2020–06
  3. By: Sascha O. Becker (Monash University; University of Warwick); Jared Rubin (Chapman University); Ludger Woessmann (ifo Institute, University of Munich)
    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: Judaism; Christianity; Islam; Economic development; Education; Persecution;; Political Economy; Finance; Specialization; Trade
    JEL: Z12 N00 J15 I15 I25
    Date: 2020
  4. By: Giovanni Federico; Alessandro Nuvolari; Michelangelo Vasta
    Abstract: The dynamics of economic inequality and its relation with economic growth in the preindustrial world is increasingly attracting the attention of both economic historians and economists. This paper introduces new estimates of the labour share in five major European countries (England, France, Holland, Spain and Portugal) for the period 1250-1850 constructed using an innovative method based on the conversion of real wages in 2011 PPP US$. We find a complex pattern of evolution of the labour share with major fluctuations. We also establish a negative correlation between variations of GDP and variations in the labour share
    JEL: N33 N01
    Date: 2020–07
  5. By: Balazs Zelity (Department of Economics, Wesleyan University)
    Abstract: This research explores theoretically, empirically and quantitatively the role of age diversity in determining aggregate productivity and output. Age diversity has two conflicting effects on output. On the one hand, due to skill complementarity across different cohorts, age diversity may be beneficial. On the other hand, rapid skill-biased technological change makes age diversity costly as up-to-date education tends to be concentrated among younger cohorts. To study this trade-off, I first build an overlapping-generations (OLG) model which, in view of these two opposing forces, predicts a hump-shaped relationship between age diversity and GDP per capita. This prediction is established analytically, and also quantitatively using real-world population data in an extended computational version of the model. The prediction is then tested using country-level panel data with a novel instrument, and regional data from Europe. Moving one standard deviation closer to the optimal level of age diversity is associated with a 1.5% increase in GDP per capita. In addition, consistent with the predictions of the model, the optimal level of age diversity is lower in economies where skill-biased technological change is more prevalent.
    Keywords: age diversity, education, experience, human capital, demographics, skill-biased
    JEL: E24 O40 J24 O15
    Date: 2020–07
  6. By: Giovanni Federico; Alessandro Nuvolari; Michelangelo Vasta (Division of Social Science)
    Abstract: The dynamics of economic inequality and its relation with economic growth in the preindustrial world is increasingly attracting the attention of both economic historians and economists. This paper introduces new estimates of the labour share in five major European countries (England, France, Holland, Spain and Portugal) for the period 1250-1850 constructed using an innovative method based on the conversion of real wages in 2011 PPP US$. We find a complex pattern of evolution of the labour share with major fluctuations. We also establish a negative correlation between variations of GDP and variations in the labour share. JEL Codes:N33, N01
    Date: 2020–07
  7. By: Van, Germinal
    Abstract: The functioning of labor supply in Africa is substantially different from the one in developed countries. Most African economies remain heavily agricultural, which means that their economy is primarily based on the exportation and importation of commodities. However, an economy based on natural resources and the use of commodities generate a stagnated labor supply in the long run. Labor supply, however, expand more consistently in an economy that is based on human resources. This paper has two purposes. The first objective is to theoretically demonstrate how relying on natural resources as the primary basis of economic development could hamper the expansion of labor supply in an economy which is in the midst of structural transformation. The second objective is to substantiate that human resources as the primary basis of economic development, enable the expansion of labor supply whether it is in an open or a close economy.
    Keywords: Labor Supply, Economic Growth, Economic Development, Mathematical Economics, Development Economics, Macroeconomics
    JEL: O1 O11 O13 O41
    Date: 2020–06–07
  8. By: Sergio Salas
    Abstract: There is by now reasonable evidence that supports the notion of a trend break in the US GDP since the Great Recession. To explain this phenomenon, I construct a version of the Lucas endogenous growth model, amplified with financial frictions and financial disruptions in the firms' sector. I then show how a transitory liquidity crunch is capable, at least qualitatively, of producing a similar pattern of a persistent downward shift in the GDP trend as one could infer happened in the US since 2008. The main mechanism by which such a result is found relies on workers' decisions on providing labor to firms versus accumulating human capital. I show that a transitory liquidity crunch reduces the demand of labor. Workers anticipating a phase of depressed wages make the decision of accumulating more human capital in the short run, thereby reducing labor supply to firms. In the long run, however, incentivized by a strong recovery, workers decrease human capital accumulation and increase labor supply. Under plausible parametrizaions of the model, this situation produces a net effect of a decrease in overall productivity that permanently reduces the trend at which the economy was growing prior to the crisis.
    Keywords: endogenous growth, liquidity crises, human capital
    JEL: O4 G01 E44
    Date: 2020–07
  9. By: Chen, Ping-ho; Chu, Angus C.; Chu, Hsun; Lai, Ching-Chong
    Abstract: This paper investigates optimal capital taxation in an innovation-driven growth model. We examine how the optimal capital tax rate varies with externalities associated with R&D and innovation. Our results show that the optimal capital tax rate is higher when (i) the "stepping on toes effect" is smaller, (ii) the "standing on shoulders effect" is stronger, or (iii) the extent of creative destruction is greater. Moreover, the optimal capital tax rate and the monopolistic markup exhibit an inverted-U relationship. By calibrating our model to the US economy, we find that the optimal capital tax rate is positive, at a rate of around 11.9 percent. We also find that a positive optimal capital tax rate is more likely to be the case when there is underinvestment in R&D.
    Keywords: Optimal capital taxation; R&D externalities; innovation
    JEL: E62 O31 O41
    Date: 2019–02
  10. By: Van, Germinal
    Abstract: The purpose of this paper is to offer a new theoretical framework in the field of development economics. This new theoretical framework has not yet been explored in development economics. Most economic theories seek to predict an outcome. The particularity of this theory that is being proposed in this paper, is not to predict a specific outcome about an economy. It is rather a methodology to explain an economic outcome. This new theory being introduced in the field of development economics is called the Public Choice Growth Model (PCGM), which is an economic theory that combines the principles of public choice theory and that of the Solow Growth Model. The goal of this theory though, is to demonstrate that our model is the adequate model to be used in a developing country in order to determine long-term economic growth.
    Keywords: Economic Growth, Economic Development, Public Choice Theory, Economic Analysis, Neoclassical Economics, Mathematical Analysis
    JEL: C20 O11 O40 P16
    Date: 2020–04
  11. By: Duranton, Gilles; Puga, Diego
    Abstract: We develop an urban growth model where human capital spillovers foster entrepreneurship and learning in heterogenous cities. Incumbent residents limit city expansion through planning regulations so that commuting and housing costs do not outweigh productivity gains. The model builds on strong microfoundations, matches key regularities at the city and economy-wide levels, and generates novel predictions for which we provide evidence. It can be quantified relying on few parameters, provides a basis to estimate the main ones, and remains transparent regarding its mechanisms. We examine various counterfactuals to assess quantitatively the effect of cities on economic growth and aggregate income.
    Keywords: agglomeration economies; city size distributions; planning regulations; Urban costs; urban growth
    JEL: C52 D24 R12
    Date: 2019–12
  12. By: Yingyao Hu; Jiaxiong Yao
    Abstract: This paper seeks to illuminate the uncertainty in official GDP per capita measures using auxiliary data. Using satellite-recorded nighttime lights as an additional measurement of true GDP per capita, we provide a statistical framework, in which the error in official GDP per capita may depend on the country’s statistical capacity and the relationship between nighttime lights and true GDP per capita can be nonlinear and vary with geographic location. This paper uses recently developed results for measurement error models to identify and estimate the nonlinear relationship between nighttime lights and true GDP per capita and the nonparametric distribution of errors in official GDP per capita data. We then construct more precise and robust measures of GDP per capita using nighttime lights, official national accounts data, statistical capacity, and geographic locations. We find that GDP per capita measures are less precise for middle and low income countries and nighttime lights can play a bigger role in improving such measures.
    Keywords: Low income countries;Economic growth;Development;Emerging markets;Technological innovation;Nighttime lights,measurement error,GDP per capita.,real GDP,optimal weight,income country,official measure,middle income country
    Date: 2019–04–09
  13. By: Helene Gomes; Coralie Kersulec; Luc Doyen; Fabian Blanchard; Abdoul Cisse; Nicolas Sanz
    Abstract: Marine ecosystems, biodiversity and fisheries are under pressure worldwide because of global changes including climate warming and demographic pressure. In that regard, many scientists and stakeholders advocate the use of an ecosystem approach for fisheries integrating the numerous ecological and economic complexities at play, instead of focusing on the management of isolated target species. However, the way to operationalize such an ecosystem approach remains challenging, especially from the bioeconomic viewpoint. To achieve this, here we propose a model of intermediate complexity (MICE) relying on multi-species and multi-fleets dynamics. The model also takes into account climate change through a model of envelope for the biological growth of the fish species depending on the sea surface temperature. The model is calibrated for the small-scale fishery in French Guiana using time series of fishing landings and efforts from 2006 to 2018. From the calibrated model, we consider the business as usual (BAU) fishing intensity projection along with RCP climate scenarios derived from IPCC at the horizon 2100 in order to explore the impact of climate change on the ecosystem dynamics and on the fishery production. The results point out the detrimental impact in the long run of both climate change and ecological competition on fish biodiversity. The situation is particularly catastrophic in the pessimistic climate scenario as the results suggest the collapse of both biodiversity and fishing activities by 2100.
    Keywords: Marine biodiversity; Multi-species; Multi-fleet fishery; Models of Intermediate Complexity (MICE); Climate change; Exclusion principle
    JEL: Q22
    Date: 2020

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