nep-gro New Economics Papers
on Economic Growth
Issue of 2021‒04‒19
eight papers chosen by
Marc Klemp
University of Copenhagen

  1. Creativity over Time and Space - A Historical Analysis of European Cities By Michel Serafinelli; Guido Tabellini
  2. Impact of Colonial Institutions on Economic Growth and Development in India: Evidence from Night Lights Data By Priyaranjan Jha; Karan Talathi
  3. The sources of growth in a technologically progressive economy: the United States, 1899‐1941 By Bakker, Gerben; Crafts, Nicholas; Woltjer, Pieter
  4. The link between unemployment and real economic growth in developed countries By Ivan Kitov
  5. The Economic Effects of International Sanctions: An Event Study By Gutmann, Jerg; Neuenkirch, Matthias; Neumeier, Florian
  6. The income-inequality relationship within U.S. metropolitan areas 1980-2016 By Seifert, Friederike
  7. The Partition of Production between Households and Markets By Colburn, Christopher; Zhou, Haiwen
  8. Trade and the Composition of Growth By Robert F. Kane

  1. By: Michel Serafinelli; Guido Tabellini
    Abstract: Creativity is often highly concentrated in time and space, and across different domains. What explains the formation and decay of clusters of creativity? We match data on notable individuals born in Europe between the XIth and the XIXth century with historical city data. The production and attraction of creative talent is associated with city institutions that protected economic and political freedoms and promoted local autonomy. Instead, indicators of local economic conditions such as city size and real wages, do not predict creative clusters. We also show that famous creatives are spatially concentrated and clustered across disciplines, that their spatial mobility has remained stable over the centuries, and that creative clusters are persistent but less than population.
    Keywords: innovation, agglomeration, political institutions, immigration, gravity, human capital
    JEL: R10 O10 J61 J24
    Date: 2021
  2. By: Priyaranjan Jha (Department of Economics, University of California-Irvine); Karan Talathi (Department of Economics, University of California-Irvine)
    Abstract: We study the implications of two historical institutions, direct British rule, and the heterogeneous land tenure institutions implemented by the British, on disparity in present day development using district level data from India. Using nightlights per c apita as a proxy for district level per capita income, we find that modern districts that were historically under direct British rule had 39.47% less nightlights per capita in 1993 relative to modern districts that were historically under indirect British rule. The large gap persists even after including other controls such as educational attainment, health, and physical infrastructure. Looking at the growth pattern during 1993 to 2013, directly ruled districts had a 1.84% lower annual growth rate compared to indirectly ruled districts. As well, directly ruled districts were converging at a rate of 2% per year while indirectly ruled districts were converging at a rate of 5.7% per year. Much of the development gap between areas under indirect rule and direct rule can be accounted for by the adverse effect of landlord-based revenue collection system in the directly ruled areas.
    Keywords: Institutions; Direct British Rule; Economic Growth; Nightlights per Capita; Land Tenure System; Economic Development; Human Capital
    JEL: O11 O43 P16 P51
    Date: 2021–04
  3. By: Bakker, Gerben; Crafts, Nicholas; Woltjer, Pieter
    Abstract: We develop new aggregate total factor productivity (TFP) growth estimates for the USA between 1899 and 1941, and sectoral estimates at the most disaggregated level so far, 38 industries. We include hard-to-measure services, and a refined measure of sectoral labour quality growth. The resulting data set supersedes Kendrick (1961), showing TFP growth lower than previously thought, broadly based across industries, and strongly variant intertemporally. The four ‘great inventions’ that Gordon (2016) highlighted were important but less dominant in TFP growth than their predecessors in the British industrial revolution. The findings also make it unlikely the 1930s had the twentieth century's highest TFP growth.
    Keywords: productivity growth; total factor productivity; great inventions; spillovers; United States history
    JEL: N0
    Date: 2019–08–01
  4. By: Ivan Kitov
    Abstract: Ten years ago we presented a modified version of Okun law for the biggest developed economies and reported its excellent predictive power. In this study, we revisit the original models using the estimates of real GDP per capita and unemployment rate between 2010 and 2019. The initial results show that the change in unemployment rate can be accurately predicted by variations in the rate of real economic growth. There is a discrete version of the model which is represented by a piece wise linear dependence of the annual increment in unemployment rate on the annual rate of change in real GDP per capita. The lengths of the country-dependent time segments are defined by breaks in the GDP measurement units associated with definitional revisions to the nominal GDP and GDP deflator (dGDP). The difference between the CPI and dGDP indices since the beginning of measurements reveals the years of such breaks. Statistically, the link between the studied variables in the revised models is characterized by the coefficient of determination in the range from R2=0.866 (Australia) to R2=0.977 (France). The residual errors can be likely associated with the measurement errors, e.g. the estimates of real GDP per capita from various sources differ by tens of percent. The obtained results confirm the original finding on the absence of structural unemployment in the studied developed countries.
    Date: 2021–03
  5. By: Gutmann, Jerg; Neuenkirch, Matthias; Neumeier, Florian
    Abstract: Although international sanctions are a widely used instrument of coercion, their economic effects are still not fully understood. This study uses a novel dataset and an event study approach to evaluate the economic consequences of international sanctions, thereby accounting for pre-treatment dynamics in countries subject to sanctions. Our analysis focuses on the effects of sanctions on GDP growths as well as various transmission channels through which sanctions affect economic activity. We document a significant negative effect of international sanctions on GDP growth and its components (consumption, investment, and government expenditures) as well as on trade and foreign direct investment. Additional panel difference-in-differences estimations reveal that this detrimental effect is driven by financial sanctions and US unilateral sanctions.
    Keywords: economic growth,event study,international sanctions,transmission channels
    JEL: F43 F51 F52 F53 O43 O47
    Date: 2021
  6. By: Seifert, Friederike
    Abstract: Economic growth might both increase and decrease income inequality, depending on the circumstances. The nature of this relationship matters at the city level as well. This paper examines the income-inequality relationship within U.S. metropolitan areas using cross-section and panel regression techniques over the 1980-2016 period. It finds that this relationship changes over time. A higher per capita income level was associated with a lower within-MSA inequality level in earlier years, but this association vanished later. For the 1980-2000 panel, per capita income increases are accordingly associated with decreases in inequality. In contrast, an increase in per capita income is associated with an increase in inequality in the 2006-2016 panel. The obtained results hint at polarization resulting from technological change substituting middle-skill routine tasks, but further research is still required to solve this puzzle.
    Keywords: Inequality,Income,Metropolitan Areas,United States
    JEL: D31 O18 R11
    Date: 2021
  7. By: Colburn, Christopher; Zhou, Haiwen
    Abstract: The process of industrialization was accompanied by the switch from household production to firm production. The industrialization process was also a process of population growth, the appearance of general-purpose technologies, and the expansion of international trade. This paper studies the partition of production between households and firms in an analytically tractable general equilibrium model with a continuum of goods. We show that population growth, development of general-purpose technologies, and the opening of international trade increase the percentage of goods produced by firms. However, with the appearance of a technology biased toward home production, the percentage of goods produced by households can increase.
    Keywords: Household production, economic development, structural change, technology choice, increasing returns
    JEL: F12 L13 O14
    Date: 2021–04–12
  8. By: Robert F. Kane (IUJ Research Institutey, International University of Japan)
    Abstract: This paper studies the relationship between innovation driven growth, distribution, and international trade. The model features two trade barriers: tariffs and distribution costs and three sources of growth: quality improvement, cost reduction, and product proliferation. This paper shows that distribution and manufacturing technologies have important interactions and are fundamentally linked. The distribution costs reduce the incentive to engage in cost reduction. Through this mechanism, trade has a compositional affect on economic growth. Tariffs affect both the extent of the market and the composition of the market. A reduction in tariffs increases market size and hence generates a temporary increase in quality growth and the entry rate. Because overseas sales are distribution intensive, the expansion of overseas sales drives a temporary reduction in manufacturing productivity growth. In contrast, if increased trade is driven by improvements to the distribution technology, both quality improvement and manufacturing productivity growth increase.
    Date: 2021–03

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