nep-gro New Economics Papers
on Economic Growth
Issue of 2021‒03‒15
eleven papers chosen by
Marc Klemp
University of Copenhagen

  1. On the Origins of the Demographic Transition Rethinking the European Marriage Pattern. By Faustine Perrin
  2. Market Power in Neoclassical Growth Models By Laurence M. Ball; N. Gregory Mankiw
  3. Education and economic growth in South Africa: An empirical investigation By Odhiambo, Nicholas M
  4. in brief... The long shadow of slavery By Luna Bellani; Anselm Hager; Stephan Maurer
  5. Endogenous Immigration, Human and Physical Capital Formation, and the Immigration Surplus By Isaac Ehrlich; Yun Pei
  6. Towards a new growth model in CESEE: Convergence and competitiveness through smart, green and inclusive investment By Gereben, Áron; Wruuck, Patricia
  7. The economic impact of weather and climate By Richard S.J. Tol
  8. The asymmetric effect of internet access on economic growth in sub-Saharan Africa: Insight from a dynamic panel threshold regression By Idris A. Abdulqadir; Simplice A. Asongu
  9. Do institutions and ideology matter for economic growth in Latin America in the first two decades of the 21st century? By Navarrete Gallo, Pamela L.; Ritzen, Jo
  10. Health expenditure and economic growth in Sub-Saharan Africa: An empirical investigation By Odhiambo, Nicholas M
  11. Missing growth measurement in Germany By Schreiber, Sven; Schmidt, Vanessa

  1. By: Faustine Perrin
    Abstract: Why did France experience the demographic transition first? This question remains one of the greatest puzzles of economics, demography, and economic history. The French pattern is hard to reconcile with elucidations of the process as found in other countries. The present analysis goes back to the roots of the process and offers novel ways of explaining why people started to control their fertility in France and how they did so. In this paper, I track the evolution of marriage patterns to a point before the premises of the demographic transition. I identify two distinct phases. Next, I rely on exploratory methods to classify French counties based on their discriminatory features. Five profiles emerge. I discuss these profiles through the lens of the French Revolution, one of the greatest events that ever occurred in French history, which irretrievably altered its society. In particular, the results show that the fertility transition was not as linear, but more complex than previous research had argued. They show the importance of accounting for cultural factors and for individuals’ predispositions to adapt more or less quickly to societal changes. Yet cultural factors are not all. They can help to explain the timing of the transition and the choice of methods used to control fertility, but modernity and gender equality are also needed to describe the mechanisms in play behind the process.
    Keywords: Demographic Transition, European Marriage Pattern, French Revolution, Gender Equality, Women Empowerment.
    JEL: J12 J13 J16 N33 O15 O18 Z12
    Date: 2021
  2. By: Laurence M. Ball; N. Gregory Mankiw
    Abstract: This paper examines the optimal accumulation of capital and the effects of government debt in neoclassical growth models in which firms have market power and therefore charge prices above marginal cost. In this environment, the real interest rate earned by savers is less than the net marginal product of capital. We establish a new method for evaluating dynamic efficiency that can be applied in such economies. A plausible calibration suggests that the wedge between the real interest rate and the marginal product of capital is more than 4 percentage points and that the U.S. economy is dynamically efficient. In addition, government Ponzi schemes can have different implications for welfare than they do under competition. Even if the government can sustain a perpetual rollover of debt and accumulating interest, the policy may nonetheless reduce welfare by depressing steady-state capital and aggregate consumption. These findings suggest that even with low interest rates, as have been observed recently, fiscal policymakers should still be concerned about the crowding-out effects of government debt.
    JEL: E13 E22 E62 H63 O41
    Date: 2021–03
  3. By: Odhiambo, Nicholas M
    Abstract: This paper examines the dynamic causal relationship between education and economic growth in South Africa using annual time-series data from 1986-2017. The study attempts to answer one critical question: Does education, which is one of the priority sectors in South Africa, drive economic growth? Unlike some of the previous studies, this study uses three proxies to measure the level of education in South Africa, namely: education expenditure, primary school enrolments, and secondary school enrolments. In addition, the study uses two variables, namely: investment and labour, as intermittent variables between the various proxies of education and economic growth ? thereby estimating a system of multivariate Granger-causality models. Using the ARDL-bounds testing approach, the study finds that the causal relationship between education and economic growth is dependent on the variable used to measure the level of education. In addition, the causality tends to change over time. When education expenditure is used as a proxy, a unidirectional causal flow from economic growth to education is found to prevail both in the short run and in the long run. When primary school enrolment is used as a proxy, a unidirectional causal flow from economic growth to education is also found to prevail, but only in the short run. However, when secondary school enrolment is used as a proxy, education is found to Granger-cause economic both in the short run and in the long run, but economic growth is also found to Granger-cause education in the short run. Overall, the study finds the causal flow from economic growth to education to supersede the causal flow from education to economic growth. Policy implications are discussed.
    Date: 2020–11
  4. By: Luna Bellani; Anselm Hager; Stephan Maurer
    Abstract: The politics and economy of the antebellum American South were dominated by those who practiced forced enslavement. Research by Luna Bellani, Anselm Hager and Stephan Maurer, which examines a database of Texas legislators from 1860 to 1900, reveals that the power of slave-owners continued long after the Civil War.
    Keywords: wealth inequality, elites and development, us south, intergenerational persistence, slavery
    Date: 2021–03
  5. By: Isaac Ehrlich; Yun Pei
    Abstract: We evaluate the economic consequences of immigration in a two-country, two-skill, overlapping-generations framework, where immigration, population, human and physical capital formation, and economic growth are endogenous variables. We go beyond extant literature by integrating physical capital in our model. This enables the derivation of new insights about the induced-immigration effects of exogenous triggers, including pull and push factors and policy variables, on the dynamic evolution of the “immigration surplus” in the short run versus the long run, in destination vs. source countries and in the global economy. The policy shifts we analyze include the easing of constraints on potential migrants’ labor and physical capital mobility, and the role of physical capital endowments. We also discuss the policy implications of asymmetries in the net benefits from immigration across destination and source countries.
    JEL: F22 F43 J11 J24 O15
    Date: 2021–02
  6. By: Gereben, Áron; Wruuck, Patricia
    Abstract: This paper focuses on the growth and convergence of Central, Eastern and South-Eastern European EU countries (CESEE). We argue that the factors behind the pre-crisis growth model of the region - skilled yet affordable labour force, foreign direct investment, imports of productivity-enhancing technology - are petering out, and are yet to be substituted. We propose a new growth model centred around a shift towards more home-grown innovation, digitalisation, climate change mitigation and a strong focus on skills, labour and social inclusion to leave the middle income trap behind for good and to boost economies' growth prospects in a post-COVID world. Based on analysis of firm-level data, we highlight the prerequisites of making this transition happen.
    Keywords: climate change,convergence,economic policy,digitalisation,innovation,labourmarket,long-term growth,productivity,skills
    JEL: J24 O14 O33 O40 P27 P28
    Date: 2021
  7. By: Richard S.J. Tol (Department of Economics, University of Sussex, Falmer, United Kingdom)
    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.
    Keywords: climate change, weather shocks, economic growth, stochastic frontier analysis
    JEL: D24 O44 O47 Q54
    Date: 2021–03
  8. By: Idris A. Abdulqadir (Federal University Dutse, Dutse, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: This article investigates the asymmetric effect of internet access (index of the internet) on economic growth in 42 sub-Saharan African (SSA) countries over the period 2008-2018. The estimation procedure is obtained following a dynamic panel threshold regression technique via 1000 bootstrap replications and the 400 grids search developed by Hansen (1996, 1999, 2000). The investigation first explores the presence of inflection points in the relationship between internet access and economic growth through the application of Hansen's threshold models. The finding from the nonlinearity threshold model revealed a significant internet threshold-effect of 3.55 percent for growth. The article also examines the linear short-run effect of internet access on economic growth while controlling for the effects of private sector credit, trade openness, government regulation, and tariff regimes. The marginal effect of internet access is evaluated at the minimum, and the maximum levels of government regulation and tariffs regime are positive. On the other hand, the minimum and maximum levels of private sector credit and trade openness are negative via the interaction terms. The article advances the literature by its nonlinear transformation of the relevance of internet access on economic growth by exploring interactive mechanisms of: internet access versus financial resource, internet access versus trade, internet access versus government regulation, and internet access versus the tariff regimes from end-user subscriptions. In policy terms, the statistical significance of the joint impact of government regulations and tariff regimes is relevant in the operation of the telecommunication industry in SSA countries.
    Keywords: Internet access; economic growth; government regulations; trade openness; tariff regimes; sub-Saharan Africa
    Date: 2021–01
  9. By: Navarrete Gallo, Pamela L. (UNU-MERIT, Maastricht University, and Ministry of Education, Government of Peru); Ritzen, Jo (UNU-MERIT, Maastricht University)
    Abstract: Institutions have a positive, strong and significant impact on GDP growth; in 20 Latin American countries between 2002 and 2018. Government size has a negative impact on GDP growth itself but, in interaction with strong institutions, the effect of government size on growth turns to positive and significant, while political ideology has no significant effect on economic growth.
    Keywords: Economic growth, Institutions, Government Size, Political ideology, Latin America
    JEL: F43 N26 O11
    Date: 2021–03–09
  10. By: Odhiambo, Nicholas M
    Abstract: In this study, the causal relationship between health expenditure and economic growth is examined using panel data from sub-Saharan African countries for the period 2008-2017. The study decomposes health expenditure into two components: public health expenditure and private health expenditure. In order to establish whether the causal relationship between health expenditure and economic growth depends on a country?s level of income, the study divides the studied countries into two groups: low-income countries and middle-income countries. In order to address the omission-of-variable bias, which is associated with some of the previous studies, the study incorporates life expectancy as an intermittent variable between health expenditure and economic growth ? thereby creating a system of multivariate equations. Using a panel ECM-based Granger-causality model, the study found that when public expenditure is used as a proxy, a distinct unidirectional causality from health expenditure to economic growth is found to prevail in low-income countries, but no causality is found to exist in middle-income countries. However, when private health expenditure is used, a short-run causality from economic growth to health expenditure is found to prevail in middle-income countries, but no causality is found to exist in low-income countries. Policy implications are discussed.
    Keywords: Health Expenditure; Economic Growth; Sub-Saharan Africa; Panel Granger Causality
    Date: 2021–01
  11. By: Schreiber, Sven; Schmidt, Vanessa
    Abstract: Using detailed establishment-level micro data, this paper analyzes for the German case the hypothesis by Aghion, Bergeaud, Boppart, Klenow, and Li (2019), stating that officially published figures for real output growth would be systematically understated. The effect rests on overstated inflation estimates due to imputed prices for disappearing goods and services varieties, where measurable plant entry and exit dynamics play a crucial rule. Our main results regarding understated real output growth lie in the range of 0:39 to 0:54 average annual percentage points for 1998-2016, which is quite closely in line with existing findings for France, the USA, and Japan (in different periods). We also find that services sectors appear most affected, and that the effect in East Germany is somewhat larger. We investigate different market share proxies, provide additional robustness analysis and also discuss limitations of the approach.
    Keywords: creative destruction,price imputation,inflation measurement
    JEL: E31 O47
    Date: 2021

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