nep-gro New Economics Papers
on Economic Growth
Issue of 2021‒04‒26
six papers chosen by
Marc Klemp
University of Copenhagen

  1. Energy, knowledge, and Demo-Economic Development in the Long-Run : A Unified Growth Model By Emmanuel Bovari; Victor Court
  2. The Supply of Hours Worked and Fluctuations between Growth Regimes By Ka-Kit Iong; Andreas Irmen
  3. A Representation of the World Population Dynamics for Integrated Assessment Models By Court Victor; Florent Mc Isaac
  4. Backwardness Advantage and Economic Growth in the Information Age: A Cross-Country Empirical Study By Vu, Khuong; Asongu, Simplice
  5. Budget deficit for full-employment under growth and inflation by excessive deficit in an OLG model with bequest motive By Tanaka, Yasuhito
  6. Budget Deficit to Achieve and Maintain Full-employment Under Growth by Technological Progress By Tanaka, Yasuhito

  1. By: Emmanuel Bovari (UP1 - Université Paris 1 Panthéon-Sorbonne); Victor Court (IFP School, IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles)
    Abstract: Because energy is usually absent from modern growth analysis, Unified growth models designed to study the economic take-off process have tended to focus on the role of human capital accumulation and its interaction with technical change. However, prominent economic historians claim that the transition to coal and its use in steam engines was the main driver of the Industrial Revolution. In order to try to reunite these diverging point of views, we provide in this article a quantitative analysis of the role of energy in long-term growth, accounting for the interaction between human capital accumulation and technological change. To do so, we design a unified growth model featuring fertility and educational choices, energy resources extraction, directed technical change, and endogenous general purpose technologies (GPTs) diffusion. The associated energy transition results from the endogenous shortage in the availability of renewable resources (wood), and the arrival of new GPTs that, together, redirect technical change towards the exploitation of previously unprofitable exhaustible energy (coal). A calibrated version of the model replicates the historical episode of the British Industrial Revolution, for which counterfactual simulations are performed to characterize the impact of the energy transition on the timing and magnitude of the economic take-off. Another numerical exercise provides a comparative analysis of Western Europe and Eastern Asia, emphasizing the relevance of discrepancies in terms of energy resources accessibility to explain the diverging dynamics of these two world regions. Our findings show that, whenever demographic dynamics and human capital accumulation are accounted for, energy use appears as a vital catalyst for the economic take-off process.
    Keywords: Unified Growth Theory,Directed Technical Change,Energy Transition,Demographic Transition
    Date: 2020–05
  2. By: Ka-Kit Iong; Andreas Irmen
    Abstract: Declining hours of work per worker in conjunction with a growing work force may give rise to fluctuations between growth regimes. This is shown in an overlapping generations model with two-period lived individuals endowed with Boppart-Krusell preferences (Boppart and Krusell (2020)). On the supply side, economic growth is due to the expansion of consumption-good varieties through endogenous research. A sufficiently negative equilibrium elasticity of the individual supply of hours worked to an expansion in the set of consumption-good varieties destabilizes the steady state so that equilibrium trajectories may fluctuate between two growth regimes, one with and the other without an active research sector. Fluctuations affect intergenerational welfare, the evolution of GDP, and the functional income distribution. A stabilization policy can shift the economy onto its steady-state path. Fluctuations arise for empirically reasonable parameter constellations. The economics of fluctuations between growth regimes is linked to the intergenerational trade of shares and their pricing in the asset market.
    Keywords: endogenous fluctuations, growth regimes, endogenous technological change, endogenous labor supply, OLG-model
    JEL: J22 O33 O41
    Date: 2021
  3. By: Court Victor (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School, Institut Louis Bachelier); Florent Mc Isaac (AFD - Agence française de développement, Institut Louis Bachelier)
    Abstract: Using the gross world product (GWP) as the only exogenous input variable, we design a model able to accurately reproduce the global population dynamics over the period 1950–2015. For any future increasing GWP scenarios, our model yields very similar population trajectories. The major implication of this result is that both the United Nations and the Intergovernmental Panel on Climate Change assume future decoupling possibilities between economic development and fertility that have never been witnessed during the last sixty-five years. In case of an abrupt collapse of the economic production, our model responds with higher death rates that are more than offset by increasing birth rates, leading to a relatively larger and younger population. Finally, we add to our model an excess mortality function associated with climate change. Estimates of additional climate-related deaths for 2095-2100 range from 1 million in a +2◦C scenario to 6 million in a +4◦C scenario.
    Keywords: System dynamics,Global population model,Demographic transition,Climate change
    Date: 2019–11
  4. By: Vu, Khuong; Asongu, Simplice
    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: C5 O40
    Date: 2020–01
  5. By: Tanaka, Yasuhito
    Abstract: We will show, using a simple two-periods overlapping generations (OLG) model with bequest motive in which goods are produced solely by labor in a monopolistically competitive industry, that a continuous budget deficit is necessary to maintain full-employment under economic growth driven by technological progress. Since the budget deficit to maintain full-employment must be continuous, it should be financed by seigniorage not by public debt. Budget deficit is necessary under growth because of deficiency of the consumptions of the older generation. This budget deficit is not debt and does not need to be redeemed. If the budget deficit is excessive, inflation will be triggered. About this excessive budget deficit that has caused inflation, only the excess portion should be reduced, and there is no need to make up for past excesses by creating surpluses or reducing deficits. We also show that insufficient government expenditure causes involuntary unemployment.
    Keywords: overlapping generations model, budget deficit, full-employment, growth, inflation
    JEL: E12 E24
    Date: 2021–04–18
  6. By: Tanaka, Yasuhito
    Abstract: The purpose of this paper is to show, using a simple two-periods overlapping generations (OLG) model in which goods are produced solely by labor in a monopolistically competitive industry, that a continuous budget deficit is necessary to maintain full-employment under economic growth driven by autonomous technological progress. Since the budget deficit must be continuous, it should be financed by seigniorage not by public debt. Also we will show that to achieve full employment in the presence of involuntary unemployment we need extra budget deficit. Budget deficit is necessary under growth because of deficiency of the savings of the older generation. These budget deficits are not debt and do not need to be redeemed. The money supply equals the savings. An increase in the money supply equals an increase in the savings. It equals the budget deficit. The rate of an increase in the savings equals the growth rate and therefore budget deficit does not cause inflation.
    Keywords: overlapping generations model, budget deficit, full-employment, growth
    JEL: E12 E24
    Date: 2021–04–18

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