nep-gro New Economics Papers
on Economic Growth
Issue of 2020‒09‒21
eleven papers chosen by
Marc Klemp
University of Copenhagen

  1. Endogenous sigma-augmenting technological change: An R&D-based approach By Kemnitz, Alexander; Knoblach, Michael
  2. Income distribution, technical change, and economic growth: A two-sector Kalecki--Kaldor approach By Nishi, Hiroshi
  3. Economic Persistence despite Adverse Policies: Evidence from Kyrgyzstan By Catherine Guirkinger; Gani Aldashev; Alisher Aldashev; Maté Fodor
  4. Artificial Intelligence, Income Distribution and Economic Growth By Gries, Thomas; Naudé, Wim
  5. Investment Rules and Time Invariance under Population Growth By Geir B. Asheim; John M. Hartwick; Tapan Mitra
  6. The effect of corruption on economic growth in the BRICS countries. A panel data analysis By Siphiwo Bitterhout; Beatrice D. Simo-Kengne
  7. Relative impact of domestic and foreign public debt on economic growth in South Africa By Saungweme, Talknice; Odhiambo, Nicholas M
  8. How Does Human Capital Affect Economic Growth in India? An Empirical Analysis By Parika, Ayushi; Singh, Bhanu Pratap
  9. The Wealth of a Nation: Norways Road to Prosperity By Grytten, Ola Honningdal
  10. Population Age Structure, Saving Rate impacts on Economic Growth: Myanmar Case By Lar, Ni; Taguchi, Hiroyuki
  11. Immigrant Inventors and Diversity in the Age of Mass Migration By Francesco Campo; Mariapia Mendola; Andrea Morrison; Gianmarco Ottaviano

  1. By: Kemnitz, Alexander; Knoblach, Michael
    Abstract: There is now increasing evidence that for the U.S. economy, the elasticity of substitution between capital and labor, "sigma", is rising over time. To account for this, we propose a microfounded model, where the evolution of "sigma", and, hence, the shape of the aggregate production function occur endogenously. We develop a Schumpeterian growth model in which firms can undertake R&D activities that stochastically lead to the discovery of production technologies characterized by a higher elasticity of substitution between capital and labor. Improved possibilities for factor substitution mitigate the diminishment of the marginal product of capital and spur capital accumulation. Due to successful innovations, the steady state of the economy entails higher levels of the capital stock and the output good. Moreover, our numerical simulations show that the timing of innovations is important: two economies with the same steady-state elasticity of substitution between capital and labor can differ in terms of their steady-state levels of the capital stock and the output good.
    Keywords: Monopolistic competition,Endogenous elasticity of substitution,Functional normalization,Schumpeterian growth model
    JEL: E24 J24 J31 O33 O41
    Date: 2020
  2. By: Nishi, Hiroshi
    Abstract: This paper presents a two-sector Kalecki--Kaldor model of income distribution, technical change, and economic growth. The model is Kaleckian in the sense that it incorporates mark-up pricing, investment independent of saving, and excess capacity. It is also Kaldorian in that labour productivity growth is led by Kaldor's technical progress function. In other words, productivity growth is endogenously realised through the technology embodied in new capital stock, which differentiates our model from previous two-sector models. Our extension drastically changes the standard Kaleckian implications. We find that although the economic activity levels in the short run are led by the demand and income distribution parameters, economic growth in the long run is realised by supply-side (i.e. technical change and the associated productivity and wage growth) parameters. The important implication of our findings is that a two-sector economy faces a trade-off between a high economic growth rate and the local stability of the steady state.
    Keywords: Two-sector model, Economic growth, Endogenous productivity growth, Technical change, Income distribution
    JEL: D33 E12 O41
    Date: 2020–07–02
  3. By: Catherine Guirkinger; Gani Aldashev; Alisher Aldashev; Maté Fodor
    Abstract: We study the long-run persistence of relative economic well-being in the face of highly adverse government policies using a combination of rich historical and contemporaneous data sources from Kyrgyzstan. Even after controlling for unobservable local effects, the economic well-being (measured by income, expenditures, or assets) of Kyrgyz households in the 2010s strongly correlates with the early 20th-century average wealth of the tribes from which these households descend. The degree of economic inequality at the tribe level in the 2010s correlates with the within-tribe wealth inequality in the early 20th century. In terms of channels of persistence, we find support for the inter-generational transmission of human capital, relative status, political power, and cultural traits. Transmission of material wealth, differences in natural endowments, or geographic sorting cannot explain the observed long-run persistence.
    Keywords: Wealth distribution; long-run persistence; inter-generational transmission; traditional institutions; tribe; clan; Kyrgyzstan
    JEL: D31 O15 O17 N35
    Date: 2020–09
  4. By: Gries, Thomas; Naudé, Wim
    Abstract: The economic impact of Artificial Intelligence (AI) is studied using a (semi) endogenous growth model with two novel features. First, the task approach from labor economics is reformulated and integrated into a growth model. Second, the standard represen- tative household assumption is rejected, so that aggregate demand restrictions can be introduced. With these novel features it is shown that (i) AI automation can decrease the share of labor income no matter the size of the elasticity of substitution between AI and labor, and (ii) when this elasticity is high, AI will unambiguously reduce aggre- gate demand and slow down GDP growth, even in the face of the positive technology shock that AI entails. If the elasticity of substitution is low, then GDP, productivity and wage growth may however still slow down, because the economy will then fail to benefit from the supply-side driven capacity expansion potential that AI can deliver. The model can thus explain why advanced countries tend to experience, despite much AI hype, the simultaneous existence of rather high employment with stagnating wages, productivity, and GDP.
    Keywords: Technology,artificial intelligence,productivity,labor demand,income distribution,growth theory
    JEL: O47 O33 J24 E21 E25
    Date: 2020
  5. By: Geir B. Asheim; John M. Hartwick; Tapan Mitra
    Abstract: We propose an adaptation of Hartwick’s investment rule to models with population growth and show that following Hartwick’s rule is equivalent to a time-invariant real per capita net national product. In the so-called DHSS model of capital accumulation and resource depletion the proposed Hartwick’s rule equates the accumulation of per capita capital, net of the capital dilution effect of population growth, to the value of the depletion of the resource, gross of the capital dilution effect. We investigate why this asymmetry arises by analyzing a general model with multiple capital goods, in which we obtain a formulation of Hartwick’s investment rule where capital gains play a role if population growth is positive. Since capital gains accrue only to the resource but not to capital, we get the apparent asymmetry in the DHSS model. In both models we obtain as a corollary that keeping the value of net investments equal to zero leads to constant consumption if population is constant.
    Keywords: sustainable development, population growth, intergenerational equity
    JEL: D63 O41 Q01
    Date: 2020
  6. By: Siphiwo Bitterhout; Beatrice D. Simo-Kengne (College of Business and Economics, University of Johannesburg)
    Abstract: This paper examines the effect of corruption on economic growth in the BRICS countries using panel dataset spanning the period 1996 to 2014. Empirical results indicate that controlling for only heterogeneity (fixed effect) leads to a negative association between output growth and corruption index. However, when heterogeneity and endogeneity are accounted for (GMM specifications), the corruption index exhibits a positive and significant effect on economic growth. While this result is contrary to a large body of empirical evidence, bar a few, which has found corruption to have a detrimental impact on economic growth, the growth impact of corruption does indeed decreases with the level of corruption. This suggests a possible corruption level from which, the relation might lead to opposite effects.
    Keywords: Corruption, Economic Growth and Panel Data
    JEL: C23 D73 O40
    Date: 2020
  7. By: Saungweme, Talknice; Odhiambo, Nicholas M
    Abstract: This paper investigates the debt-growth nexus by testing both the impact of aggregate public debt on economic growth, and the relative impact of domestic and foreign public debt on economic growth using South Africa as the case study ? from 1970 to 2017. Based on the autoregressive distributed lag (ARDL) technique, the findings reveal that the impact of aggregated public debt on economic growth in South Africa is statistically significant and negative, both in the short run and in the long run. The results further reveal that domestic public debt and economic growth have a statistically significant and positive relationship in the short run only. Furthermore, foreign public debt has a statistically significant and negative relationship with economic growth but only in the long run. Therefore, the study recommends the government to manage effectively its debt and to finance long-term high returning productive investments that should translate into economic growth. Finally, the study cautions the country against growing public debt, predominantly foreign debt, to finance its increasing recurrent expenditure needs.
    Keywords: Public debt, domestic public debt, foreign public debt, economic growth, South Africa
    Date: 2020–07
  8. By: Parika, Ayushi; Singh, Bhanu Pratap
    Abstract: The study attempts to examine the relationship between human capital and economic growth in India. The study utilizes annual time series data for the period 1980 to 2017. Real Gross Domestic Product is used as a proxy for economic prosperity and the Human Capital Index is taken as a proxy for the level of human capital. Conventional sources of growth are controlled by physical capital, trade openness and inflation. Johansen Cointegration and Fully Modified Ordinary Least Square (FMOLS) techniques are applied to look into a long-run equilibrium relationship. Toda and Yamamoto (1995) Granger's causality test is used as a short-run diagnostic test for the long-run equilibrium relationship. The major findings of the study suggest human and physical capital is the major determinant of economic development in the long-run, whereas in the short-run the level of economic prosperity determines the level of human and physical capital, the volume of trade and fiscal space of the government.
    Keywords: Human Capital, Economic Growth, India, FMOLS
    JEL: I25 I28 O1 O15
    Date: 2020–08–15
  9. By: Grytten, Ola Honningdal (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: The present paper discusses Norway’s way to prosperity during the two last centuries. The main reason for its wealth seems to have been the ability to meet international demand by utilizing its rich natural resources, adopting efficient technology, and draw on a skilled labor force in order to gain high productivity and profitability. Historical national accounts reveal that Norway’s wealth was close to the western European average in the early nineteenth century. From the 1840s to the mid 1870s, Norwegian growth rates were very high, due to significant growth in foreign trade. This period was followed by relative stagnation until the 1890s, from when the country saw rapid industrialization on the basis of hydroelectricity. After the two world wars Norway adopted a social democratic rule, with a high degree of economic planning, called the Nordic model. This has contributed to a large public sector and evenly distributed wealth and resources. The discovery of oil and gas on the Norwegian continental shelf marked a new era, when Norway experienced higher growth rates than most western economies. This has made it the country with the highest score in the United Nations Human Development Index (HDI) during the two first decades of the 21st century.
    Keywords: Economic history; economic growth; economic development; Norway
    JEL: N00 N13 N14
    Date: 2020–09–11
  10. By: Lar, Ni; Taguchi, Hiroyuki
    Abstract: This paper is trying to examine the impacts of the dependency rate on per capita GDP growth of Myanmar for the period of 1970-2018. Under VAR model framework, the impacts of population age structure (young and old dependency ratio) and saving rate (% of GDP) on economic growth of Myanmar has been searched. Any short run relationship among variables cannot be shown by Granger causality test. In the long run, VEC model has proved that population age structure and saving rate have negatively and positively on per capita GDP growth of Myanmar economy during study period. But its negative age structure effect is bigger than positive saving rate and therefore, Myanmar saving policy should be associated with age structure change. However, Myanmar has still a population bonus needed to utilize efficiently before it ends so that Myanmar could not face the problem of unemployment, and rural poverty
    Keywords: Myanmar , Dependency Ratio , Saving Rate , Per Capita GDP growth ,Unit Roots , Cointegration , VAR
    JEL: J10 J11 O40
    Date: 2020–08–12
  11. By: Francesco Campo (University of Milano Bicocca); Mariapia Mendola (University of Milano Bicocca, IZA, LdA and CefES); Andrea Morrison (ICRIOS-Bocconi University and Utrecht University); Gianmarco Ottaviano (Bocconi University, BAFFI-CAREFIN, IGIER, CEP, CEPR and IZA)
    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 coethnic 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.

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