nep-gro New Economics Papers
on Economic Growth
Issue of 2021‒02‒08
thirteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Nomadic Pastoralism, Climate Change, and Conflict in Africa By Eoin F. McGuirk; Nathan Nunn
  2. Human Capital Distribution and the Transition from Stagnation to Growth By Mario F. Carillo
  3. Urbanisation and the onset of modern economic growth By Liam Brunt; Cecilia García-Peñalosa
  4. Automation Technology, Economic Growth, and Income Distribution in an Economy with Dynasties and Overlapping Generations By Sasaki, Hiroaki
  5. The Role of Human Capital in Structural Change and Growth in an Open Economy: Innovative and Absorptive Capacity Effects By Brita Bye; Taran Faehn
  6. Labour-augmenting technical change data for alternative elasticities of substitution, growth, slowdown, and distribution dynamics By Ziesemer, Thomas
  7. The Education Sector and Economic Growth: A First Study of the Uzawa Model By Kazuyuki Sasakura
  8. Rent-Seeking Government and Endogenous Takeoff in a Schumpeterian Economy By Chu, Angus C.
  9. The difficult task of changing while growing By Marwil J. Dávila-Fernández; Serena Sordi
  10. Does the Introduction of Stock Exchange Markets BoostEconomic Growth in African Countries? By António Afonso; Max Reimers
  11. Long-Term Effects of Equal Sharing: Evidence from Inheritance Rules for Land By Charlotte Bartels; Simon Jäger; Natalie Obergruber
  12. On the Theory of Knowledge Resource Inequality: Role of Knowledge Capital in Social Transformation By Chatterjee, Sidharta
  13. Interaction matrix selection in spatial econometrics with an application to growth theory By Nicolas Debarsy; Cem Ertur

  1. By: Eoin F. McGuirk; Nathan Nunn
    Abstract: Arid regions of Africa are expanding by thousands of square kilometers a year, potentially disturbing pastoral routes that have been forged over a long period of time. This disturbance is often said to explain why “herder-farmer” conflicts have erupted in recent years, as pastoralists and agriculturalists compete for increasingly scarce resources. We examine this hypothesis by combining ecological and ethnographic data on the location of pastoral ethnic groups with grid-cell level data on violent conflict in Africa from 1989 to 2018. First, using ecological data, (i) we confirm that areas suited to both agriculture and pastoralism are particularly prone to conflict relative to either agricultural or pastoral areas alone; and (ii) we find that the effect of precipitation shocks on conflict in these agro-pastoral zones is negative at the country-level, but not at the cell-level. To explain this pattern, we compile data on the historical location of borders between both types of ethnic groups. We find that droughts in pastoral areas lead to conflict in neighboring agricultural areas. This spillover mechanism appears to explain much of the negative overall relationship between precipitation and conflict in the sample. It implies that agro-pastoral conflict is caused by the displacement of pastoral groups due to low precipitation in their homelands. This finding establishes one mechanism through which climate change can lead to more conflict in agro-pastoral zones.
    JEL: N10 Q54 Z1
    Date: 2020–12
  2. By: Mario F. Carillo (Università di Napoli Federico II and CSEF)
    Abstract: This research argues that differences in the distribution of human capital across countries and their impact on the advancement and the adoption of technology contributed to the differential timing of the transition from the Malthusian stagnation to modern growth and the persistent differences in income per capita across the globe. Polarization in the distribution of human capital within an economy implied a trade-off between innovation and adoption of technologies that determined the transition from stagnation to growth. Despite the contribution of the upper tail of the human capital distribution to technological innovation, the absence of wide group of educated individuals among the working population delayed technology adoption and the transition from stagnation to growth.
    Keywords: Economic Growth; Human Capital Distribution; Demographic Transition; Long-run Development.
    JEL: I24 J13 J24 O30 O40
    Date: 2021–01–26
  3. By: Liam Brunt (Norwegian School of Economics and CEPR); Cecilia García-Peñalosa (Aix-Marseille University, CNRS, EHESS, AMSE and CEPR)
    Abstract: A large literature characterizes urbanisation as the result of productivity growth attracting rural workers to cities. We incorporate economic geography elements into a growth model and suggest that causation runs the other way: when rural workers move to cities, the resulting urbanisation produces technological change and productivity growth. Urban density leads to knowledge exchange and innovation, thus creating a positive feedback loop between city size and productivity that sets off sustained economic growth. The model is consistent with the fact that urbanisation rates in Western Europe, and notably in England, reached unprecedented levels by the mid-18 th century, the eve of the Industrial Revolution.
    Keywords: industrialization, urbanisation, innovation, long-run growth
    JEL: N13 O14 O41
    Date: 2021–01
  4. By: Sasaki, Hiroaki
    Abstract: This study presents a growth model with automation technology that considers two classes (workers and capitalists) who conduct dynamic optimization in different manners. In addition to two production factors, labor and traditional capital, automation capital is included as the third production factor. Long-run dynamics of input ratios of production factors, income distribution, and per capita output growth are investigated. Regardless of the size of workers' discount factor, workers' own traditional capital has no transitional dynamics and stays constant. When capitalists' discount factor is large, in the long run, the growth rate of per capita output is positive and constant: endogenous growth is obtained. In this case, income gap between workers and capitalists continues to increase through time. When capitalists discount factor is small, two different cases appear. First, when the initial value of traditional capital is large, both capitalists' own traditional capital and automation capital converges to constant values. In this case, income gap between workers and capitalists converges to a constant value. Second, when the initial value of traditional capital is small, capitalists' own traditional capital converges to a constant value while capitalists' own automation capital approaches zero. In this case, income gap between workers and capitalists converges to a constant value. When automation capital becomes zero, after then, the dynamical system switches to a dynamical system without automation capital.
    Keywords: automation technology; endogenous growth; income distribution
    JEL: E25 O11 O33 O41
    Date: 2021–01–21
  5. By: Brita Bye; Taran Faehn
    Abstract: Since the financial crisis in 2008, slow growth has riddled Europe and the Covid-19 pandemic is amplifying the challenge. Promoting economic growth and transforming to a more knowledge-based industrial structure will be high on the agenda for the coming decades. We study how more and better human capital can contribute to knowledge accumulation and structural change by means of a dynamic endogenous growth model, with Norway as a numerical case. Human capital has two main roles in productivity growth: to increase the innovative capacity by participating in research and development (R&D), and to increase the absorptive capacity in sectors that trade and can learn from abroad. We find that in a small, open economy sectors where human capital, R&D and trade interact, and enable absorption, tend to grow fastest.
    Keywords: absorptive capacity, computable general equilibrium model, endogenous growth, human capital, innovation, research and development
    JEL: C68 F43 O30 O41
    Date: 2021
  6. By: Ziesemer, Thomas (UNU-MERIT, Maastricht University)
    Abstract: We solve the standard production function with constant elasticity of substitution (CES) for its labour augmenting technology term. We make capital stock data and insert them together with data from Penn World Tables (PWT9.1). This provides labour augmenting technology levels and growth rates for alternative elasticities of substitution for 70 countries, 1950-2017. The percentage growth rates of labour-augmenting technical change (LATC) are shown to fall over time (productivity slowdown) for all elasticity values in a panel data analysis. They converge to a panel average of 2.67% and 1% depending on the inclusion of human capital and the elasticity of substitution assumed. The standard growth result of a GDP growth rate equal to that of LATC and labour input holds only for LATC based on low elasticities of substitution indicating that the economies are not in steady-states. The correlation of LATC growth rates with total factor productivity growth from PWT9.1 is strongest (0.893) for LATC data based on an elasticity of substitution of 0.8. Matching the labour/capital share ratios from CES functions with those of PWT9.1 reveals a range of elasticities of substitution for each country, mostly between 0.8 and 1.2 or somewhat lower for developing countries. If the MPL-to-wage ratio is 1.6, the elasticities of substitution vary around 0.8. Using the human-capital corrected LATC growth with CES = 0.8, 13 of 69 countries have a productivity slowdown defined as growth rate below mean in the long run; the USA is not among them indicating that the US productivity slowdown is mainly one of human capital. Dynamics of coefficient of variation and kernel density distributions for LATC growth rates shows that there is neither technological convergence nor divergence.
    Keywords: technical change, growth, productivity slowdown, convergence
    JEL: O33 O47
    Date: 2021–01–21
  7. By: Kazuyuki Sasakura (Faculty of Political Science and Economics, Waseda University)
    Abstract: The Uzawa-Lucas model is a benchmark model in endogenous growth theory. But Lucas (1988) is so influential that the Uzawa-Lucas model is virtually the Lucas model. This paper distinguishes between the Uzawa (1965) model and the Lucas model, and examines the Uzawa model in detail. It is certain that the two models have much in common. However, there are also important differences. Economically the Uzawa model assumes full employment, whereas the Lucas model admits unemployment. Mathematically the maximum growth rate must be smaller than the rate of time preference in the former, whereas the opposite must hold in the latter.
    Keywords: Education Sector; Economic Growth; Uzawa-Lucas Model
    JEL: E13 O41 O43
    Date: 2020–09
  8. By: Chu, Angus C.
    Abstract: This study explores how the rent-seeking behavior of the government may impede economic development and delay industrialization. Introducing a rent-seeking government to the Schumpeterian growth model with endogenous takeoff, we find that a more self-interested government engages more in rent-seeking taxation, which delays the transition of the economy from pre-industrial stagnation to modern economic growth. Quantitatively, a completely self-interested government delays industrialization, relative to a benevolent government, by eight decades.
    Keywords: rent-seeking government; endogenous takeoff; industrialization
    JEL: O3 O4
    Date: 2020–12
  9. By: Marwil J. Dávila-Fernández; Serena Sordi
    Abstract: This article develops a small-scale agent-based model to investigate the interplay between heterogeneous agents, institutions and technological change. By acknowledging the concept of behavioural dispositions, we di¤erentiate between changers, neutrals, and deniers. Our research question is further motivated using data from the last two waves of the World Values Survey. The composition of the population is endogenously determined taking into account that reasoning is context-dependent. As we increase the degree of interaction between agents, a bi-modal distribution with two different basins of attraction emerges: one around an equilibrium with the majority of the population supporting innovative change, and another with most agents being suspicious of innovation. Neutral agents play an important role as an element of resilience. Conditional on their share in equilibrium, an increase in the response of the respective probability functions to growth results in a super-critical Hopf-bifurcation, followed by the emergence of persistent fluctuations. Numerical experiments on the basin of attraction also reveal the birth of a periodic hidden attractor. The long-run cycles we obtain indicate that economies are more likely to be path-dependent than what conventional approaches usually admit. As the productive structure evolves, the institutional framework is transformed and reinforces technological change in a cumulative way.
    JEL: O11 O33 P11
    Date: 2021–01
  10. By: António Afonso; Max Reimers
    Abstract: We assess whether the introduction of private equity capital markets effects economic growth in African countries. We address this issue by focussing on stock exchange markets as the predominant type of new equity markets,using a Diff-in-Diffregressionmethod.The analysis uses a panel data set from48 Sub-Saharan countries over the time range of 1970-2018.23 countries are part of the “treated” group–which introduced international stock exchanges–and 25 “untreated” countries serve as the control group. Our results show that when compared with the time period priortothe introduction of stock exchange markets, GDP per capita rises by the amount of 532US$ (around 40% of the Sub-Saharan average) after theintroduction of equity capital markets inthe treated countries.Overthe tenyears post introduction, the effect is hump-shaped, with effects becoming statistically significant from the first year after implementation, with a peak in Year 5, and it then becomes statistically insignificant from then onwards.
    JEL: C32 G15 N17
    Date: 2021–01
  11. By: Charlotte Bartels; Simon Jäger; Natalie Obergruber
    Abstract: What are the long-term economic effects of a more equal distribution of wealth? We exploit variation in historical inheritance rules for land traversing political, linguistic, geological, and religious borders in Germany. In some German areas, inherited land was to be shared or divided equally among children, while in others land was ruled to be indivisible. Using a geographic regression discontinuity design, we show that equal division of land led to a more equal distribution of land; other potential drivers of growth are smooth at the boundary and equal division areas were not historically more developed. Today, equal division areas feature higher average incomes and a right-shifted skill, income, and wealth distribution. Higher top incomes and top wealth in equal division areas coincide with higher education, and higher labor productivity. We show evidence consistent with the more even distribution of land leading to more innovative industrial by-employment during Germany’s transition from an agrarian to an industrial economy and, in the long-run, more entrepreneurship.
    JEL: E02 H24 J24 J43 N13 N14 N23 N24 N33 N34 N53 N54 N93 N94 O3 P42 R52
    Date: 2020–12
  12. By: Chatterjee, Sidharta
    Abstract: Inequality is an effect of much concern for economists and policy makers. Inequality gives rise to poverty, a phenomenon still troubling the world economy characterized by a gap–wherein the standard deviation between the rich and the poor is too high. Various factors attribute to growing inequality, but one which is often overlooked is–misallocation of knowledge resources. In this paper, we reinforce the concept of knowledge as being a capital resource. Following this, by using a simple model, we attempt to explain inequality born out of its heterogeneous allocation and its discrete nature of distribution as a capital resource. The effect being that, lack of access to quality education for those who need it most creates a phenomenon which we call knowledge resource inequality (KRI).
    Keywords: Allocation, Capital Resource Inequality (CRI), education, Knowledge resource inequality (KRI), economic planning
    JEL: H4 O1 O15
    Date: 2021–01–07
  13. By: Nicolas Debarsy (CNRS - Centre National de la Recherche Scientifique); Cem Ertur (UO - Université d'Orléans, Laboratoire d'Economie d'Orléans - LEO - Laboratoire d'Économie d'Orleans - CNRS - Centre National de la Recherche Scientifique - Université de Tours - UO - Université d'Orléans)
    Abstract: The interaction matrix, or spatial weight matrix, is the fundamental tool to model cross-sectional interdependence between observations in spatial econometric models. However, it is most of the time not derived from theory, as it should be ideally, but chosen on an ad hoc basis. In this paper, we propose a modified version of the J test to formally select the interaction matrix. Our methodology is based on the application of the robust against unknown heteroskedasticity GMM estimation method, developed by Lin & Lee (2010). We then implement the testing procedure developed by Hagemann (2012) to overcome the decision problem inherent to non-nested models tests. An application is presented for the Schumpeterian growth model with worldwide interactions (Ertur & Koch 2011) using three different types of interaction matrix: genetic distance, linguistic distance and bilateral trade flows and we find that the interaction matrix based on trade flows is the most adequate. Furthermore, we propose a network based innovative representation of spatial econometric results.
    Keywords: Bootstrap,GMM,Interaction matrix,J tests,Non-nested models,Heteroscedasticity,Spatial autoregressive models,Heteroskedasticity
    Date: 2019–03

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