nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒08‒17
fifteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Technology Adoption and Productivity Growth: Evidence from Industrialization in France By Réka Juhász; Mara P. Squicciarini; Nico Voigtländer
  2. Trade and Political Fragmentation on the Silk Roads: The Economic Effects of Historical Exchange between China and the Muslim East By Christopher Paik; Lisa Blaydes
  3. Comparative European Institutions and the Little Divergence, 1385-1800 By Henriques, Antonio; Palma, Nuno Pedro G.
  4. Backwardness Advantage and Economic Growth in the Information Age: A Cross-Country Empirical Study By Khuong Vu; Simplice A. Asongu
  5. From Secular Stagnation to Robocalypse? Implications of Demographic and Technological Changes By Basso, Henrique S.; Jimeno, Juan F
  6. "Geography and Regional Economic Growth: The high cost of deviating from nature" By Daniel Albalate; Germà Bel; Ferran A. Mazaira-Font
  7. Inequality, Living Standards and Growth: Two Centuries of Economic Development in Mexico By , Stone Center; Bleynat, Ingrid; Challú, Amílcar; Segal, Paul
  8. The Great Convergence. Skill Accumulation and Mass Education in Africa and Asia, 1870-2010 By Frankema, Ewout; Van Waijenburg, Marlous
  9. ‘Mechanization Takes Command’: Inanimate Power and Labor Productivity in Late Nineteenth Century American Manufacturing By Jeremy Atack; Robert A. Margo; Paul Rhode
  10. Historical European Institutions,Human Capital and Development By Tiago Miguel Guterres Neves Sequeira; Daniel Filipe Videira Murta; Marcelo Serra Santos
  11. Inequality of Opportunity, Inequality of Income and Economic Growth By Shekhar Aiyar; Christian H Ebeke
  12. On the Dynamics of Corruption By Costas Azariadis; Yannis M. Ioannides
  13. Skill-Biased Imports, Human Capital Accumulation, and the Allocation of Talent By Lei Li
  14. Measuring Energy-saving Technological Change: International Trends and Differences By Emiko Inoue; Hiroya Taniguchi; Ken Yamada
  15. Monetary Policy in an Endogenous Growth Model with R&D and Human Capital Accumulation By Tiago Miguel Guterres Neves Sequeira

  1. By: Réka Juhász; Mara P. Squicciarini; Nico Voigtländer
    Abstract: We construct a novel dataset to examine the process of technology adoption during a period of rapid technological change: The diffusion of mechanized cotton spinning during the Industrial Revolution in France. Before mechanization, cotton spinning was performed in households, while production in firms only emerged with the new technology around 1800. This allows us to isolate the firm productivity distribution of new technology adopters. We document several stylized facts that can explain the well-documented puzzle that major technological breakthroughs tend to be adopted slowly across firms and – even after being adopted – take time to be reflected in higher aggregate productivity: The productivity of firms in mechanized cotton spinning was initially highly dispersed. Over the subsequent decades, cotton spinning experienced dramatic productivity growth that was almost entirely driven by a disappearance of firms in the lower tail. In contrast, innovations in other sectors (with gradual technological progress) shifted the whole productivity distribution. We document rich historical and empirical evidence suggesting that the pattern in cotton spinning was driven by the need to re-organize production under the new technology. This process of ‘trial and error’ led to widely dispersed initial productivity draws, low initial average productivity, and – in the subsequent decades – to high productivity growth as new entrants adopted improved methods of production and organization.
    JEL: F63 N23 O14
    Date: 2020–07
  2. By: Christopher Paik; Lisa Blaydes (Division of Social Science)
    Abstract: The Silk Roads stretched across Eurasia, connecting East and West for centuries. At its height, the network of trade routes enabled merchants to travel from China to the Mediterranean Sea, carrying with them high-value commercial goods, the exchange of which encouraged urban growth and prosperity. We examine the extent to which urban centers thrived or withered as a function of shocks to trade routes, particularly political fragmentation along natural travel paths. We find that political fragmentation along the roads to Aleppo and historic Chang'an - major terminus locations for cross-regional trade - damaged city growth. These conclusions contribute to our understanding of how a pre-modern international system operated through an examination of exchange between the two most developed world regions of the medieval and early modern periods, China and the Muslim East.
    Date: 2019–12
  3. By: Henriques, Antonio; Palma, Nuno Pedro G.
    Abstract: Why did the countries which first benefited from access to the New World -- Castile and Portugal -- decline relative to their followers, especially England and the Netherlands? The dominant narrative is that worse initial institutions at the time of the opening of Atlantic trade explain Iberian divergence. In this paper, we build a new dataset which allows for a comparison of institutional quality over time. We consider the frequency and nature of parliamentary meetings, the frequency and intensity of extraordinary taxation and coin debasement, and real interest spreads for public debt. We find no evidence that the political institutions of Iberia were worse until at least the English Civil War.
    Keywords: Atlantic Traders; New Institutional Economics; the Little Divergence
    JEL: N13 N23 O10 P14 P16
    Date: 2019–11
  4. By: Khuong Vu (National University of Singapore, Singapore); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: This paper seeks to gain insights into whether developing countries benefit more from the backwardness advantage for economic growth in the Information Age. The paper examines this concern through three complementary approaches. First, it derives theoretical grounds from the existing economic models to support the hypothesis that the internet, inter alia, enables developing countries to reap greater growth gains from technology acquisition and catch-up. Second, the paper uses descriptive evidence to show that the growth landscape has indeed shifted decisively in favor of developing countries in the Internet Age in comparison to the pre-internet period. Third, using rigorous econometric techniques with data of 163 countries over a 20-year period, 1996-2016, the paper evidences that developing countries on average reap significantly greater growth gains from internet adoption in comparison to the average advanced country. The paper discusses policy implications from the paper’s findings.
    Keywords: backwardness advantage; developing countries; internet; technology catch-up; GMM
    JEL: O40
    Date: 2020–01
  5. By: Basso, Henrique S.; Jimeno, Juan F
    Abstract: Demographic changes and a new wave of innovation and automation are two main structural trends shaping the macroeconomy in the next decades. We present a general equilibrium model with a tractable life-cycle structure that allows the investigation of the main transmission mechanisms by which demography and technology affect economic growth. Due to a trade-off between innovation and automation, lower fertility and population ageing lead to a reduction in GDP per capita growth and the labour income share. Assuming different labour market configurations and scenarios for the integration of robots in economic activity only partially compensate for these effects.
    Keywords: automation; Innovation; Population Ageing
    JEL: J11 O31 O40
    Date: 2019–11
  6. By: Daniel Albalate (Department of Econometrics, Statistics and Applied Economics (Public Policy Unit). Universitat de Barcelona. John Keynes 1-11, 08034 Barcelona. Spain); Germà Bel (Department of Econometrics, Statistics and Applied Economics (Public Policy Unit). Universitat de Barcelona. John Keynes 1-11, 08034 Barcelona. Spain); Ferran A. Mazaira-Font (Department of Econometrics, Statistics and Applied Economics (Public Policy Unit). Universitat de Barcelona. John Keynes 1-11, 08034 Barcelona. Spain)
    Abstract: We analyze the role of nature and geography in determining economic and social outcomes. We propose a theoretical model relating geography and nature to economic growth, and examine that model using data from NUTS 2 European regions. By doing this, we identify the predictive power of first-nature variables to explain regional population distribution. Then we analyze the effects of misadjustment between the actual and predicted distribution of populations on economic performance. Our results indicate that deviating from first-nature outcomes has a significant negative effect on economic growth. Furthermore, we find that departing from natural endowment has a negative effect on social cohesion. The main policy implication emerging from our analysis is that strategies that harmonize with nature and geography yield better social welfare and human well-being than those policies that conflict with them.
    Keywords: Geography, Population, Growth, Conditional convergence, Inequality. JEL classification: O43, O44, Q57, R11, R12.
    Date: 2020–07
  7. By: , Stone Center (The Graduate Center/CUNY); Bleynat, Ingrid; Challú, Amílcar; Segal, Paul
    Abstract: Historical wage and incomes data are informative both as normative measures of living standards, and as indicators of patterns of economic development. We show that, given limited historical data, median incomes are most appropriate for measuring welfare and inequality, while urban unskilled wages can be used to test dualist models of development. We present a new dataset including both series in Mexico from 1800 to 2015 and find that both have historically failed to keep up with aggregate growth: per worker GDP is now over eight times higher than in the nineteenth century, while unskilled urban real wages are only 2.2 times higher, and median incomes only 2.0 times. From the perspective of inequality and social welfare, our findings confirm that there is no automatic positive relationship between economic growth and rising living standards for the majority. From the perspective of development, we argue that these findings are consistent with a dual economy model incorporating Lewis’s assumption of a reserve army of labour, and explain why Kuznets’s predicted decline in inequality has not occurred. (Stone Center Working Paper Series)
    Date: 2020–06–24
  8. By: Frankema, Ewout; Van Waijenburg, Marlous
    Abstract: While human capital has gained prominence in new vintages of growth theory, economists have struggled to find the positive externalities of mass education in developing economies. We shed new light on the economic significance of the global 'schooling revolution' by looking at a different indicator of human capital accumulation - the relative price of skilled labor -, and placing it in a long-term global perspective. Based on a new wage dataset we constructed for various blue- and white-collar occupations in 50 African and Asian countries between 1870-2010, we reveal that skill-premiums have fallen dramatically everywhere in the course of the 20th century, and that they have now converged with levels that dominated in the West already for centuries. While such a 'great convergence' in skill-premiums is not a sufficient condition for Schumpeterian growth by itself, the growing availability of affordable skills is a necessary condition. Our findings, therefore, shed a more optimistic light on the long-term economic gains of mass education in the global South than standard growth regressions have hitherto done.
    Keywords: Africa; Asia; History; mass education; skill premium
    JEL: J24 J31 N30
    Date: 2019–11
  9. By: Jeremy Atack; Robert A. Margo; Paul Rhode
    Abstract: During the nineteenth century, the US manufacturing sector shifted away from the “hand labor” mode of production, characteristic of artisan shops, to the “machine labor” of the factory. This was the focus of an extremely detailed but extraordinarily complex study by the Commissioner of Labor published in 1899 that has until now defied systematic analysis. Here, we explore the overall productivity gains associated with these changes in production methods and the specific, causal role of inanimate power. Under the machine labor mode, the time necessary to complete production tasks declined by 85 percent, a remarkable gain in labor productivity. We also present OLS and IV estimates of the effects of using inanimate power, such as steam, at the production operation level Our IV is based on the gerunds describing the various production activities. Treating our IV estimates as causal, about one-third of the higher productivity of machine labor is attributed to greater use of inanimate power per se.
    JEL: N61 O14 O33
    Date: 2020–06
  10. By: Tiago Miguel Guterres Neves Sequeira (University of Coimbra, Centre for Business and Economics Research, CeBER andFaculty of Economics); Daniel Filipe Videira Murta (University of Coimbra, Centre for Business and Economics,CeBER, Faculty of Economics); Marcelo Serra Santos (CeBER)
    Abstract: The literature on development has pointed out some deeply-rooted determinants of current economic development. Most research on the field has been devoted to developing countries or specific to single countries. We focus on deeply-rooted determinants of development of European regions, in particular on the influence of human capital. Following an identification strategy using instrumental variables, we approach the historical links between current human capital and the presence of universities and trade guilds in medieval times. We show that human capital is an important determinant of income disparities across European regions, and that trade guilds and universities at 1500 are good instruments to track the exogenous influence of the current levels of human capital. This finding shows robustness to several econometric specifications.
    Keywords: Development, regions, historical determinants of development.
    JEL: I25 P16 O10
    Date: 2020–07
  11. By: Shekhar Aiyar; Christian H Ebeke
    Abstract: We posit that the relationship between income inequality and economic growth is mediated by the level of equality of opportunity, which we identify with intergenerational mobility. In economies characterized by intergenerational rigidities, an increase in income inequality has persistent effects—for example by hindering human capital accumulation— thereby retarding future growth disproportionately. We use several recently developed internationally comparable measures of intergenerational mobility to confirm that the negative impact of income inequality on growth is higher the lower is intergenerational mobility. Our results suggest that omitting intergenerational mobility leads to misspecification, shedding light on why the empirical literature on income inequality and growth has been so inconclusive.
    Keywords: Income inequality;Economic growth;Income distribution;Income shocks;Human capital;Intergenerational Mobility,Growth,Gini,inequality,elasticity,unequal access,Brueckner
    Date: 2019–02–15
  12. By: Costas Azariadis; Yannis M. Ioannides
    Abstract: To examine the joint evolution of corruption and per capita GDP, we augment the standard lifecycle model of capital accumulation by three endogenous state variables that describe institutions and culture, and by three fixed parameters that proxy for personal morality and social interactions. Institutions that regulate economic incentives are decided by majority vote over a binary agenda that pits “strong” against ‘weak” property rights. Culture consists of slow changing social conventions which generate behavioral norms in the public and private sectors. Norms spread consumption externalities that impact the occupational opportunities of current households, and become in turn a reflection of past household choices. Our main theoretical finding is that societies with collectivist cultures and corruptiontolerant norms behave very differently from the individualistic ones of neoclassical growth theory. Collectivist society features include: (a) highly nonlinear GDP and corruption dynamics; (b) dominant roles for culture and social norms as engines of institutional quality, corruption and growth; and (c) majorities that favor diluted property rights, thus splitting the world economy into individualistic and collectivist convergence clubs with two distinct stable long-run states. These hypotheses receive a fair amount of support from international data. Variations in social norms, culture and human capital typically explain more than half of the variance in per capita GDP across countries and time. Many alternative measures of culture seem to be highly significant determinants of corruption and institutional quality. The fact that we control for culture in many alternative ways supports our confidence in the largely favorable tests of our main hypotheses.
    Keywords: growth, institutions, corruption, social norms, culture, voting, social interactions.
    JEL: F43 O11 O43 O47 D70 Z10
    Date: 2020
  13. By: Lei Li
    Abstract: This paper proposes that imported capital goods, which embody skill-complementary technologies, can lead to an increase in the supply of skill in developing countries like China. By exploiting the cross-prefecture variation in imported capital goods, I show that the surge in imported capital goods encourages human capital accumulation and migration in China. To tackle causality, I instrument a prefecture's import growth of capital goods with that in other regions. There are three main findings. Firstly, the regional difference in imported capital goods can explain 27 percent of the regional difference in college share between 2000 and 2010. A prefecture with a $100 increase in imported capital goods per capita had a 1.4 percentage points increase in college share. Secondly, this paper quantifies the importance of the three channels, namely skill acquisition of local stayers, immigration of skilled workers, and emigration of skilled workers, through which imported capital goods increase college share. I find that the first channel is the most important. Thirdly, I trace out the responses of skill supply to the demand shift. I find that imported capital goods increase college wage premium and the effect attenuates over time with the increase in skill supply. with model: it is fine to mention that K import first increase the demand for for skill by moving the demand curve, and then increase the supply by moving the supply curve?
    Keywords: Imported Capital Goods, Demand for Skill, Supply of Skill, Human Capital Accumulation, Migration
    JEL: F14 F16 F66 J24 J61
    Date: 2020–06
  14. By: Emiko Inoue; Hiroya Taniguchi; Ken Yamada
    Abstract: Technological change is essential for balancing economic growth and environmental sustainability. This study measures and documents energy-saving technological change to understand its trends in advanced countries over recent decades. We estimate aggregate production functions with factor-augmenting technology using cross-country panel data and shift-share instruments, thereby measuring and documenting energy-saving technological change. Our results show how energy-saving technological change varies across countries over time and the extent to which it contributes to economic growth in 12 OECD countries from the years 1978 to 2005.
    Date: 2020–08
  15. By: Tiago Miguel Guterres Neves Sequeira (University of Coimbra, Centre for Business and Economics Research, CeBER andFaculty of Economics)
    Abstract: Despite some recent evidence according to which different inflation rates have effects on long run growth, endogenous growth theory had advanced little on explaining the mechanics of monetary influence on economic growth. We follow the increasing interest in the issue offering a new explanation for the influence of monetary policy on growth in both long and short run: the cash requirements for households expenditures in education. Quantitatively, the model replicates both the small influence of monetary policy on growth while also highlighting the effects it can have on welfare and allocations of resources throughout different sectors in the economy.
    Keywords: endogenous economic growth, inflation, interest rate, monetary policy, cash-in-advance (CIA).
    JEL: O30 O40 E13 E17 E61
    Date: 2020–07

This nep-gro issue is ©2020 by Marc Klemp. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.