nep-gro New Economics Papers
on Economic Growth
Issue of 2021‒03‒08
six papers chosen by
Marc Klemp
University of Copenhagen

  1. Culture, Institutions & the Long Divergence By Alberto Bisin; Jared Rubin; Avner Seror; Thierry Verdier; Thierry Verdier
  2. The long-run investment effect of taxation in OECD countries By Jakob B. Madsen; Antonio Minniti; Francesco Venturini
  3. Genetic Distance, Economic Growth and Top Income Shares: Evidence from OECD Countries By Anjan K. Saha; Vinod Mishra
  4. Does urban concentration matter for changes in country economic performance? By Roberto Ganau; Andres Rodriguez-Pose;
  5. Assessing India's productivity trends and endogenous growth: New evidence from technology, human capital and foreign direct investment By Taniya Ghosh; Prashant Mehul Parab
  6. The economic impact of weather and climate By Richard S. J. Tol

  1. By: Alberto Bisin; Jared Rubin; Avner Seror; Thierry Verdier; Thierry Verdier
    Abstract: Recent theories of the Long Divergence between Middle Eastern and Western European economies focus on Middle Eastern (over-)reliance on religious legitimacy, use of slave soldiers, and persistence of restrictive proscriptions of religious (Islamic) law. These theories take as exogenous the cultural values that complement the prevailing institutions. As a result, they miss the role of cultural values in either supporting the persistence of or inducing change in the economic and institutional environment. In this paper, we address these issues by modeling the joint evolution of institutions and culture. In doing so, we place the various hypotheses of economic divergence into one, unifying framework. We highlight the role that cultural transmission plays in reinforcing institutional evolution toward either theocratic or secular states. We extend the model to shed light on political decentralization and technological change in the two regions.
    Keywords: long divergence, cultural transmission, institutions, legitimacy, religion
    JEL: O10 P16 P48 N34 N35 Z12 O33
    Date: 2021
  2. By: Jakob B. Madsen; Antonio Minniti; Francesco Venturini
    Abstract: The gradually changing nature of production and the move away from tangible investment towards intangible investment over the past century suggests that the effects of the tax structure on investment need to be reassessed. To address this issue, we establish an endogenous growth model in which investment in tangible assets, R&D and education are influenced by different types of taxes. We test the long-run implications of the model using annual data for 21 OECD countries over the period 1890-2015. We find that corporate taxes reduce investment in tangible assets and R&D. However, while personal income taxes reduce investment in tertiary education, they enhance the investment in R&D. Thus, a revenue-neutral switch from corporate to personal income taxes is growth enhancing.
    Keywords: taxation, innovation, Tangible and Intangible Capital, economic growth
    JEL: E10 E62 O38 O40
    Date: 2021–02
  3. By: Anjan K. Saha; Vinod Mishra
    Abstract: The relationship between economic growth and income inequality remains a puzzle in the literature. The main problem has been finding a way to account for the endogeneity of growth. Using century-long data of 14 OECD countries, this study disentangles the growth–inequality relationship. In doing so, our main contribution is employing genetic and geographical distances as instruments for economic growth. The instruments are constructed on the premise that the growth of one country spills over to the others if they are connected through trade and other forms of exchange; however, the genetic and geographical distances between countries represent barriers to such spill overs. Using alternative specifications and measures, we find that growth reduces the inequality measured by top income shares. Another important finding is that the effect of growth on top income shares is more significant among the highest income groups. We also find that growth, by reducing inequality, neutralises the inequality-enhancing nature of capital, hence confirming the prediction of Thomas Piketty regarding the pervasive nature of capital.
    Keywords: Genetic distance, top income shares, income inequality, economic growth.
    JEL: D31 O11 O15 N10
    Date: 2020–12
  4. By: Roberto Ganau; Andres Rodriguez-Pose;
    Abstract: This paper uses a novel, globally-harmonised city-level dataset —with cities defined at the Functional Urban Area (FUA) level— to revisit the link between urban concentration and country-level economic dynamics. The empirical analysis, involving 108 low- and high-income countries, examines how differences in urban concentration impinge on changes in employment, Gross Domestic Product (GDP) per capita, and labour productivity at country level over the period 2000-2016. The results indicate that urban concentration reduces employment growth but increases GDP per capita and labour productivity growth. The returns of urban concentration are higher for high- than for low-income countries and are mainly driven by the ‘core’ of FUAs, rather than by sub-urban areas.
    Keywords: Urban concentration; Long-run economic dynamics; Employment growth; GDP per capita growth; Labour productivity growth; Cross-country analysis
    JEL: E24 O47 O57 R12
    Date: 2021–02
  5. By: Taniya Ghosh (Indira Gandhi Institute of Development Research); Prashant Mehul Parab (Indira Gandhi Institute of Development Research)
    Abstract: The study evaluates the role of R&D, human capital, and technology spillovers in influencing India's long-run productivity growth. The primary contributions of the article are: (1) analyzing the applicability of various endogenous growth models in the Indian context, while only R&D driven endogenous growth models have been studied so far, (2) highlighting the role of technology spillovers through FDI and import channels in affecting India's productivity at the aggregate level, as opposed to the existing industry level analysis and, (3) the first study to identify the potential non-linear effects of the variables of interest. The main findings are: (a) FDI and human capital influence India's long-term productivity growth, while R&D based models or technology spillovers via the import channel show mixed evidence of support, (b) the decline in FDI has had a more adverse effect on the economy than the positive effect of increased FDI. Therefore, sustained increase in human capital and FDI is recommended.
    Keywords: Asymmetries, Endogenous growth, R&D, Human capital, FDI, Technology spillovers
    JEL: C5 C6 E3 E61
    Date: 2021–02
  6. By: Richard S. J. Tol
    Abstract: I propose a new conceptual framework to disentangle the impacts of weather and climate on economic activity and growth: A stochastic frontier model with climate in the production frontier and weather shocks as a source of inefficiency. I test it on a sample of 160 countries over the period 1950-2014. Temperature and rainfall determine production possibilities in both rich and poor countries; positively in cold countries and negatively in hot ones. Weather anomalies reduce inefficiency in rich countries but increase inefficiency in poor and hot countries; and more so in countries with low weather variability. The climate effect is larger that the weather effect.
    Date: 2021–02

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