nep-gro New Economics Papers
on Economic Growth
Issue of 2021‒01‒25
fourteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Celestial enlightenment: eclipses, curiosity and economic development among pre-modern ethnic groups By Anastasia Litina; Èric Roca Fernández
  2. Silk Roads to Riches: Persistence Along an Ancient Trade Network By Ahmad, Zofia; Chicoine, Luke
  3. Gender Inequality and Economic Growth: Evidence from Industry-Level Data By Ata Can Bertay; Ljubica Dordevic; Can Sever
  4. The Role of temperature, Precipitation and CO2 emissions on Countries’ Economic Growth and Productivity By Rigas, Nikos; Kounetas, Konstantinos
  5. The Legacy of the Missing Men: The Long-Run Impact of World War I on Female Labor Force Participation By Gay, Victor
  6. R&D-based Economic Growth in a Supermultiplier Model By Nomaler, Önder; Spinola, Danilo; Verspagen, Bart
  7. Revisiting India’s Growth Transitions By Deepankar Basu
  8. A critique of modern theories of trade By Uddin, Godwin
  9. Backwardness Advantage and Economic Growth in the Information Age: A Cross-Country Empirical Study By Khuong Vu; Simplice A. Asongu
  10. Europe's migration experience and its effects on economic inequality By Guzi, Martin; Kahanec, Martin; Ulceluse, Magdalena M.
  11. The Role of Historical Malaria in Institutions and Contemporary Economic Development By Elizabeth Gooch; Jorge Martinez-Vazquez; Bauyrzhan Yedgenov
  12. What to Make of the Kaldor-Verdoorn Law? By Deepankar Basu; Manya Budhiraja
  13. The Causal Relationship between Private Sector Credit Growth and Economic Growth in Bangladesh: Use of Toda-Yamamoto Granger Causality test in VAR Model By Paul, Uttam Chandra
  14. Intangible Investment and Low Inflation: A Framework and Some Evidence By Subir Lall; Li Zeng

  1. By: Anastasia Litina (University of Macedonia [Thessaloniki]); Èric Roca Fernández (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université)
    Abstract: This paper revisits the role of human capital for economic growth among pre-modern ethnic groups. We hypothesise that exposure to rare natural events drives curiosity and prompts thinking in an attempt to comprehend and explain the phenomenon, thus raising human capital and, ultimately, pre-modern growth. We focus on solar eclipses as one particular trigger of curiosity and empirically establish a robust relationship between their number and several proxies for economic prosperity: social complexity, technological level and population density. Variation in solar eclipse exposure is exogenous as their local incidence is randomly and sparsely distributed all over the globe. Additionally, eclipses' non-destructive character makes them outperform other uncanny natural events, such as volcano eruptions or earthquakes, which have direct negative economic effects. We also offer evidence compatible with the human capital increase we postulate, finding a more intricate thinking process in ethnic groups more exposed to solar eclipses. In particular, we study the development of written language, the playing of strategy games and the accuracy of the folkloric reasoning for eclipses.
    Keywords: eclipses,human capital,development,curiosity
    Date: 2020–12–01
  2. By: Ahmad, Zofia; Chicoine, Luke
    Abstract: The Silk Roads were a decentralized network of trade routes that connected ancient cities across Eurasia. Goods, ideas, people, and technology moved along the roads for over 1,500 years. Using a detailed georeferenced map of the entire trade network, this paper finds that areas within 50 KM of the historic location of the Silk Roads have higher levels of economic activity today. The persistent effect of proximity to the ancient trade network is associated with increased access to modern transportation infrastructure and the historical diffusion of technology along the routes but cannot be explained by differences in contemporary or historical levels of population density. This analysis is complemented by individual-level data from 22 countries; we find that districts with populations closest to the Silk Roads have higher rates of inter-group marriage, suggesting a weakening of social boundaries between groups that might possess differential technological knowledge.
    Keywords: ancient trade network; nighttime light intensity; modern transportation infrastructure; technological diffusion; cultural persistence
    JEL: N75 O18 O33 R11 R12
    Date: 2021–01
  3. By: Ata Can Bertay; Ljubica Dordevic; Can Sever
    Abstract: We study whether higher gender equality facilitates economic growth by enabling better allocation of a valuable resource: female labor. By allocating female labor to its more productive use, we hypothesize that reducing gender inequality should disproportionately benefit industries with typically higher female share in their employment relative to other industries. Specifically, we exploit within-country variation across industries to test whether those that typically employ more women grow relatively faster in countries with ex-ante lower gender inequality. The test allows us to identify the causal effect of gender inequality on industry growth in value-added and labor productivity. Our findings show that gender inequality affects real economic outcomes.
    Keywords: Gender inequality;Women;Gender;Labor;Employment;WP,female share,gender composition,benchmark country,country-industry observation
    Date: 2020–07–03
  4. By: Rigas, Nikos; Kounetas, Konstantinos
    Abstract: The world's climate has already changed measurably in response to accumulated greenhouse gases emissions. These changes, as well as projected future disruptions, such as increase of temperature, have prompted intense research. A significant body of literature on climate change and economic growth signifies a negative relationship between the two. However, considerable uncertainty surrounds the effect of increasing temperatures combined with releases of anthropogenic emissions to the atmosphere. By applying detailed country level data in the 1961-2013 period this paper documents the relationship between weather variables, CO2emissions, share of renewable energy sources, gross domestic product and total factor productivity in a standard Cobb-Douglas production function by using an instrumental variable approach. Our findings suggest that economic growth has been positively affected by temperature and CO2emissions, while climate vulnerability varies significantly between rich-poor countries. Furthermore, as soon as we take into account renewable sources as an instrument, the negative effect on CO2 emissions demonstrates its impact for optimal environmental policies design. Finally, our results also provide evidence for the existence of an inverted U-shaped relationship for temperature and emissions.
    Keywords: Climate Change, Countries' TFP, CO2 emissions, Renewable Energy Sources, Temperature.
    JEL: C26 Q40 Q54
    Date: 2021
  5. By: Gay, Victor
    Abstract: This paper explores the pathways that underlie the diffusion of women's participation in the labor force across generations. I exploit a severe exogenous shock to the sex ratio, World War I in France, which generated a large inflow of women in the labor force after the war. I show that this shock to female labor transmitted to subsequent generations until today. Three mechanisms of intergenerational transmission account for this result: parental transmission, transmission through marriage, and transmission through local social interactions. Beyond behaviors, the war also permanently altered beliefs toward the role of women in the labor force.
    Keywords: Female labor force participation; World War I; Sex ratio; Intergenerational transmission; Gender norms
    JEL: J16 J22 N34 Z13
    Date: 2021–01–07
  6. By: Nomaler, Önder; Spinola, Danilo; Verspagen, Bart
    Abstract: We investigate how economic growth in a demand-led economy with semi-endogenous productivity growth can be compatible with a stable employment path. Our model uses a Sraffian supermultiplier (SSM), and we endogenize the growth rate of autonomous demand, and semi-endogenize productivity growth. The basic model has a steady state that is consistent with a stable employment rate. Consumption smoothing (between periods of high and low employment) by workers is the mechanism that keeps the growing economy stable. We also introduce a version of the model where the burden for stabilization falls upon government fiscal policy. This also yields a stable growth path, although the parameter restrictions for stability are more demanding in this case.
    Keywords: Economic growth model; Sraffian supermultiplier; Research and Development (R&D)
    Date: 2021–01–12
  7. By: Deepankar Basu (Department of Economics, University of Massachusetts Amherst)
    Abstract: This paper reconsiders two questions relating to India’s economic growth: structural breaks in growth and the impact of equipment investment on aggregate economic growth. First, statistical tests of structural change show that economic growth in post-independence India has witnessed four structural breaks: in 1964-65, in 1978-79, in 1990-91, and in 2004-05. However, substantial growth accelerations, i.e. increase of more than 1.0% per annum in the growth rate of per capita real GDP, occurred only at two points: 1978-79 and 2004-05. Second, to analyze the impact of equipment investment on growth, I use an ARDL bounds testing methodology. I find a positive and statistically significant long run positive impact of private investment in equipment and machinery on the growth rate of real GDP.
    Keywords: India, economic growth, structural change, ARDL bounds testing.
    JEL: O11 O47 O53
    Date: 2020
  8. By: Uddin, Godwin
    Abstract: This article recapitulates some of the trade theories reputed to be of the twentieth century. Here, the Heckscher-Ohlin theory (with some of its variants), endogenous growth theory, product cycle theory, and new trade theory were considered. This review thereof, amidst others, highlight some of the assumptions of these theories and thus present some critique of the same theories.
    Keywords: Trade; Critique; Heckscher-Ohlin theory; endogenous growth theory; product cycle theory; new trade theory
    JEL: F0 F00 F1 F10
    Date: 2021–01–07
  9. 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
  10. By: Guzi, Martin; Kahanec, Martin; Ulceluse, Magdalena M.
    Abstract: This chapter provides the historical context for the past half-century in Europe focusing specifically on the link between migration and economic development and inequality. The literature review suggests that there are several channels through which migration affects economic inequality between countries in one or the other direction. The net effects are an open empirical question and are likely to depend on the economic, demographic and institutional and policy contexts; sources, types and selectivity of migration, as well as responses of the receiving societies as well as migrants themselves. We undertake an empirical analysis and find that immigration has contributed to reducing inequality within the 25 EU countries over the 2003-2017 period. As the EU attracted relatively highly qualified immigrants throughout this period, our results are consistent with the ameliorating effect of skilled migration on within-country inequality, as predicted by theory.
    Keywords: immigration,inequality,labour mobility,income distribution,EU enlargement
    JEL: D31 D60 O15
    Date: 2021
  11. By: Elizabeth Gooch (Naval Postgraduate School, Monterey, CA, USA); Jorge Martinez-Vazquez (International Center for Public Policy, Georgia State University, USA); Bauyrzhan Yedgenov (International Center for Public Policy, Georgia State University, USA)
    Abstract: This research examines the causal impact of institutional quality on economic development from a novel perspective. At the country level, we exploit variation in the malaria prevalence in 1900, just before vector-control methods were developed, to instrument for institutional quality using a two-stage least squares instrumental variables framework. Our instrument is a population-weighted average of malaria endemicity estimates for the year 1900 developed by the WHO in the 1960s. We argue that this measure of historical malaria offers more expansive geographic information about the disease environment than other metrics, and our baseline IV estimates reveal that greater institutional quality causes greater contemporaneous economic growth. Next, we investigate the robustness of these baseline results to alternative explanations, including the role of geography and early colonizers’ experiences, as the causal link between the early disease environmental, institutional quality and contemporary growth. As an additional test of the explanatory power of malaria endemicity, we replace our instrument for settler mortality and replicate the core results from the seminal study on the colonial origins of comparative development by Acemoglu et al. (2001). In summary, we propose that malaria endemicity, estimated for 1900, holistically explains the legacy of early disease on institutional quality development and contemporary economic development.
    Date: 2021–01
  12. By: Deepankar Basu (Department of Economics, University of Massachusetts Amherst); Manya Budhiraja (Department of Economics, University of Massachusetts Amherst)
    Abstract: The Kaldor-Verdoorn law refers to a positive but less than one-for-one relationship between the growth rates of output and labor productivity, with causality running from the former to the latter. Empirical research has affirmed such a relationship and have found that the Kaldor-Verdoorn coefficient lies between 0 and 1. But the interpretation of this finding remains unclear. In this paper, we present a model to derive the Kaldor-Verdoorn law. Our results show that the Kaldor-Verdoorn coefficient is jointly determined by the elasticity of factor substitution, labor supply elasticity, the profit share and the increasing returns to scale (or demand-induced technical change) parameter. Hence, estimated Kaldor-Verdoorn coefficients cannot be used, on their own, to infer the presence of aggregate increasing returns to scale - other than in very special cases. We also show that, perhaps surprisingly, an economy without aggregate increasing returns to scale (or without any demand-induced technical progress) can generate a Kaldor-Verdoorn coefficient that lies between 0 and 1.
    Keywords: Aggregate productivity, Kaldor-Verdoorn coefficient, labor supply elasticity, CES production function.
    JEL: E12 O4
    Date: 2020
  13. By: Paul, Uttam Chandra
    Abstract: This paper examines the causal relationship between private sector credit growth and economic growth in Bangladesh by using annual time series data over the period of 1976-2017. To investigate this relationship, the Autoregressive Distributed Lag (ARDL) Approach has been used. In addition, this paper examines the direction of causality by adopting the Toda-Yamamoto procedure of Granger Causality test in the VAR model. The empirical results show that the annual growth rate of private sector credit (PC) and industrial production index (IPI) have a positive and significant effect on annual growth rate of GDP in both long-run and short-run. But there is only a short-run positive effect of export (X) and a negative effect of broad money (BM) on GDP growth rate. Finally, the results of the Toda-Yamamoto Granger Causality test show that there is unidirectional causality from GDP growth rate to private sector credit growth rate.
    Keywords: Bangladesh, GDP growth, Private sector credit growth, Autoregressive Distributed Lag (ARDL) Approach, Toda-Yamamoto Granger Causality test.
    JEL: C22 E51 O47
    Date: 2020–12–02
  14. By: Subir Lall; Li Zeng
    Abstract: Intangible investment is growing as a share of economic activity. We present a simple framework incorporating its distinguishing characteristic of generally greater scalability and lower marginal costs than tangible investment. We show evidence that this may have contributed to more elastic aggregate supply in recent years, which is consistent with lower inflation and a flattening of the Phillips curve. This framework also highlights the channels through which technological change, a large constituent of intangible investment, may be leading to wage stagnation and greater market concentration.
    Keywords: Intangible capital;Inflation;Inflation targeting;Output gap;Labor;WP,intangible investment,investment,economy
    Date: 2020–09–18

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