nep-gro New Economics Papers
on Economic Growth
Issue of 2021‒07‒19
fifteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Democracy, growth, heterogeneity, and robustness By Markus Eberhardt
  2. Migration and Growth in a Schumpeterian Growth Model with Creative Destruction By Parello, Carmelo Pierpaolo
  3. Converging to Converge? A Comment By Daron Acemoglu; Carlos A. Molina
  4. On the comparison of educational subsidy schemes in an endogenous growth model By Miyazaki, Koichi
  5. Public capital and childcare capital in the two sector growth model By Miyake, Yusuke
  6. Economic development and the structure of cross-technology interactions By Anton Bondarev; Frank C. Krysiak
  7. Technological Growth and Hours in the Long Run: Theory and Evidence By Magnus Reif; Mewael F. Tesfaselassie; Maik H. Wolters
  8. Product innovation, diffusion and endogenous growth By Klein, Michael A; Sener, Fuat
  9. The Impact of Human Capital Underutilization on Productivity and Economic Growth in Egypt By Hashem, Eman Ahmed
  10. The impact of the Indian Ocean tsunami on Aceh’s long-term economic growth By Heger, Martin Philipp; Neumayer, Eric
  11. Democracy doesn’t always happen overnight: Regime change in stages and economic growth By Vanessa Boese; Markus Eberhardt
  12. Happier and Sustainable. Possibilities for a post-growth society By Stefano Bartolini; Francesco Sarracino
  13. Genetic Diversity and Performance: Evidence From Football Data By Michel Beine; Silvia Peracchi; Skerdilajda Zanaj
  14. Conspicuous leisure, time allocation, and obesity Kuznets curves By Bolh, Nathalie; Wendner, Ronald
  15. The impact of Combustible Renewables and Waste on Economic Growth and Environmental Quality in Tunisia By Bakari, Sayef; Tiba, Sofien

  1. By: Markus Eberhardt
    Abstract: I motivate and empirically investigate differential long-run growth effects of democratisation across countries. While the existing literature recognises the potential for such heterogeneity, empirical implementations to date unanimously assume a common democracy-growth nexus across countries. Adopting novel methods for causal inference in policy evaluation I relax this assumption to confirm that in the long-run democracy has a positive average effect on per capita income of around 10%, adopting a range of alternative definitions for regime change in the form of binary indicators. Guided by existing hypotheses, additional analysis probes the patterns of the heterogeneous ‘democratic dividend’ across countries. A second common feature of this literature as well as cross-country growth empirics more generally is the absence of concerns for sample selection or influential observations. I carry out two rule-based robustness exercises to demonstrate that my empirical findings are highly robust to substantial changes to the sample.
    Keywords: Democracy, Growth, Political Development, Difference-in-Difference Estimator, Interactive Fixed Effects
    Date: 2021
  2. By: Parello, Carmelo Pierpaolo
    Abstract: This paper incorporates endogenous migration into a second-generation Schumpeterian growth model to study how migration, innovation and growth interact one another. I find that migration always enhances the rates of innovation and growth of the receiving economy, but also that the other way round is not true when the gap in technical knowledge between country is fixed over time. However, when the technology gap is allowed to adjusts endogenously, I find that implementing pro-innovation policies in the receiving economy shrinks immigration flows and reduces the across-country technology.
    Keywords: R&D-based Growth, Labor Migration, R&D policy, Technology Transfer
    JEL: J61 O3 O4
    Date: 2021–06–09
  3. By: Daron Acemoglu; Carlos A. Molina
    Abstract: Kremer, Willis, and You (2021) revisit cross-country convergence patterns over the last six decades. They provide evidence that the lack of convergence that applied early in the sample has now been replaced by modest convergence. They also argue this relationship is driven by convergence in various determinants of economic growth across countries and a flattening of the relationship between these determinants and growth. Although the patterns documented by the authors are intriguing, our reanalysis finds that these results are driven by the lack of country fixed effects controlling for unobserved determinants of GDP per capita across countries. We show theoretically and empirically that failure to include country fixed effects will create a bias in convergence coeffcients towards zero and this bias can be time-varying, even when the underlying country-level parameters are stable. These results are relevant not just for the current paper, but for the convergence literature more generally. Our reanalysis finds no evidence of major changes in patterns of convergence and, more importantly, no flattening of the relationship between institutional variables and economic growth. Focusing on democracy, we show that this variable's impact continues to be precisely estimated and if anything a little larger than at the beginning of the sample.
    JEL: O47 P16
    Date: 2021–07
  4. By: Miyazaki, Koichi
    Abstract: This study considers a three-period overlapping generations model with an endogenous growth setting, in which an agent borrows in the first period and repays the loan in the second period under a perfect credit market. Two educational subsidy schemes are considered: one is provided when an agent borrows and the other is provided when the agent repays their loan. This study compares the growth rates and social welfare under each educational subsidy scheme at a unique balanced growth path equilibrium. The first contribution of this paper is that it provides sufficient conditions under which the growth rate in one scheme is higher than that in the other. A key to determining the size relationship of growth rates is whether the production of goods and services is physical-capital-intensive, which determines the size of the interest rate. The second contribution is that it shows that higher growth and higher social welfare may not be achieved simultaneously. Specifically, this paper presents a case wherein, even if the growth rate when student loans are subsidized is higher than that when the cost of education is subsidized, social welfare defined by the Golden Rule criterion in the former scheme can be lower than that in the latter scheme.
    Keywords: Endogenous growth; educational subsidy; balanced growth path equilibrium; growth rate; social welfare; Golden Rule
    JEL: H52 I22 O40
    Date: 2021–06–09
  5. By: Miyake, Yusuke
    Abstract: Although many policies to raise the fertility rate have been conducted in many developed countries, they experience the low fertility rate. In the first place, what kind of impact will rapid population decline have on economic growth? This study is to analyze to answer these questions with two sector labor augmented growth model using two periods over-lapping-generations model. We consider a public capital by classifying it into two types, firstly, labor-augmented general public capital in final goods sector which indicated by Futagami, et al. (1993) and secondly, considering a public capital in childcare sector like as nursery school. This paper clearly shows the relationship between the optimal policies against the declining birthrate and an increase in the economic growth.
    Keywords: Public capital - Childcare capital - Income tax - Economic growth
    JEL: D91 E6 E62 O4 O41
    Date: 2021–06–16
  6. By: Anton Bondarev; Frank C. Krysiak
    Abstract: Most explanations of economic growth are based on knowledge spillovers, where the development of some technologies facilitates the enhancement of others. Empirical studies show that these spillovers can have a heterogeneous and rather complex structure. But, so far, little attention has been paid to the consequences of different structures of such cross-technology interactions: Is economic development more easily fostered by homogenous or heterogeneous interactions, by uni- or bidirectional spillovers? Using a detailed description of an r&d sector with cross-technology interactions embedded in a simple growth model, we analyse how the structure of spillovers influences growth prospects and growth patterns. We show that some type of interactions (e.g., one-way interactions) cannot induce exponential growth, whereas other structures can. Furthermore, depending on the structure of interactions, all or only some technologies will contribute to growth in the long run. Finally, some spillover structures can lead to complex growth patterns, such as technology transitions, where, over time, different technology clusters are the main engine of growth.
    Date: 2021–07
  7. By: Magnus Reif; Mewael F. Tesfaselassie; Maik H. Wolters
    Abstract: Over the last decades, hours worked per capita have declined substantially in many OECD economies. Using a neoclassical growth model with endogenous work-leisure choice, we assess the role of trend growth slowdown in accounting for the decline in hours worked. In the model, a permanent reduction in technological growth decreases steady state hours worked by increasing the consumption-output ratio. Our empirical analysis exploits cross-country variation in the timing and the size of the decline in technological growth to show that technological growth has a highly significant positive effect on hours. A decline in the long-run trend of technological growth by one percentage point is associated with a decline in trend hours worked in the range of one to three percent. This result is robust to controlling for taxes, which have been found in previous studies to be an important determinant of hours. Our empirical finding is quantitatively in line with the one implied by a calibrated version of the model, though evidence for the model’s implication that the effect on hours works via changes in the consumption-output ratio is rather mixed.
    Keywords: productivity growth, technological growth, working hours, employment
    JEL: E24 O40
    Date: 2021
  8. By: Klein, Michael A; Sener, Fuat
    Abstract: We develop a model of Schumpeterian growth featuring a stochastic diffusion process where the rate of commercial success of product innovations is endogenously determined by advertising intensity. We consider both informative advertising, which young technological leaders use to increase the probability of diffusion, and defensive advertising, which incumbents use to prevent the diffusion of competing products. Economic growth depends positively on the arrival rate of product innovations and the diffusion rate of innovations into the mainstream market. We show that R&D subsidies shift relative investment incentives towards innovation and away from diffusion. This creates an inverted U-shaped relationship between R&D subsidies and both economic growth and welfare as innovations arrive more frequently, but fewer commercialize successfully. We find that lower advertising costs increase diffusion, growth, and welfare when advertising is purely informative. When we include defensive advertising, lower costs lead to socially wasteful increases in resources devoted to advertising without large increases in diffusion, reducing growth and welfare.
    Keywords: Endogenous growth; innovation; diffusion; commercialization; advertising; marketing; R&D subsidies
    JEL: M30 O31 O33
    Date: 2021–06–25
  9. By: Hashem, Eman Ahmed
    Abstract: This study estimates the effects of human capital underutilization on economic growth and productivity. This paper investigated the relationship between underutilization of human capital and economic growth using a variety of econometric tests like the Augmented Dickey Fuller test, the Johansen Integration test, and the ARDL model. The results indicate that, there is a negative relationship between human capital underutilization and economic growth. The results indicate that underutilization of human capital has a greater long-term impact on economic growth than it does in the short run. Reforms to education and training systems are required in order to maximise human capital utilisation and thus increase productivity and economic growth.
    Date: 2021–06–09
  10. By: Heger, Martin Philipp; Neumayer, Eric
    Abstract: Existing studies typically find that natural disasters have negative economic consequences, resulting in, at best, a recovery to trend after initial losses or, at worst, longer term sustained losses. We exploit the unexpected nature of the 2004 Indian Ocean tsunami for carrying out a quasi-experimental difference-in-differences analysis of flooded districts and sub-districts in Aceh. The Indonesian province saw the single largest aid and reconstruction effort of any developing world region ever afflicted by a natural disaster. We show that this effort triggered higher long-term economic output than would have happened in the absence of the tsunami.
    JEL: O40 O47 Q54
    Date: 2019–11–01
  11. By: Vanessa Boese; Markus Eberhardt
    Abstract: We motivate and empirically analyse the idea that democratic regime change is not a discrete event but a two-stage process: in the first stage, autocracies enter into an ‘episode’ of political liberalization which can last for years or even decades; in the second stage, the ultimate outcome of the episode manifests itself and a nation undergoes regime change or not. Failure to account for this chronology risks biased estimates of the economic effects of democratic regime change since this ignores the relevance of the counterfactual group in which liberalisation did not culminate in a democratic transition. Using novel Varieties of Democracy (V-Dem) data on Episodes of Regime Transformation (ERT) for a large sample of countries from 1950 to 2014 we study this phenomenon in a repeated-treatment difference-in-difference framework which accounts for non-parallel pre-treatment trends and selection into treatment. Our findings suggest that a single event approach significantly underestimates the economic benefits from lasting democratic regime change.
    Keywords: Democracy, Growth, Political Development, Interactive Fixed Effects, Difference-in-Difference
    Date: 2021
  12. By: Stefano Bartolini; Francesco Sarracino
    Abstract: Empirical evidence suggests that achieving sustainability requires reducing economic growth, not just greening it. This conclusion often leads to ecological pessimism, based on two beliefs. The first is that there is a human tendency to unlimited expansion; the second is that lack of consensus makes limiting growth politically unfeasible. We challenge both beliefs. The decline of fertility and per-capita income growth provide reasons to expect decreasing human pressure on ecosystems. Moreover, the lack of a clear alternative to growth as a means to increase well-being creates the widespread perception of a trade-off between sustainability and current well-being. This hinders the consensus to the policy of limits to growth. Drawing on a large literature on happiness, social capital and other topics, we argue that policies for social capital can decouple well-being from economic growth. Indeed, the crisis of social capital experienced by much of the world's population is at the origin of the current unsustainable growth of the world economy. Declining social capital leads the economies to excessive growth, because people seek economic affluence to compensate for the emotional distress and collective disempowerment caused by poor social capital. We then suggest policies that, by promoting social capital, would expand well-being, and shift the economy to a more sustainable path characterized by slower economic growth. Such set of proposals is more politically viable than the current agenda of limits to growth and reconcile sustainability and well-being
    Keywords: sustainability; social relations; subjective well-being; economic growth.
    JEL: I31 J1 O1 Q56
    Date: 2021–06
  13. By: Michel Beine (Department of Economics and Management, Université du Luxembourg); Silvia Peracchi (Department of Economics and Management, Université du Luxembourg); Skerdilajda Zanaj (Department of Economics and Management, Université du Luxembourg)
    Abstract: The theoretical impact of genetic diversity is ambiguous since it leads to costs and benefits at the collective level. In this paper, we assess empirically the connection between genetic diversity and the performance of sport teams. Focusing on football (soccer), we built a novel dataset of national teams of European countries that have participated in the European and the World Championships since 1970. Determining the genetic diversity of national teams is based on the distance between the genetic scores of every players’ origins in the team. Genetic endowments for each player are recovered using a matching algorithm based on family names. Performance is measured at both the unilateral and bilateral level. Identification of the causal link relies on an instrumental variable strategy that is based on past immigration at the country level about one generation before. Our findings indicate a positive causal link between genetic diversity and teams’ performance. We find a substantial effect, a one- standard increase in diversity leading to ranking changes of two to three positions after each stage of a championship.
    Keywords: Genetic diversity, Football, Sports team, Performance, Family names, Migration.
    JEL: F22 F66 O15 O47 Z22
    Date: 2021
  14. By: Bolh, Nathalie; Wendner, Ronald
    Abstract: We build a theoretical model to explain the complex patterns of income and obesity, accounting for changes in behavior related to exercise. We combine the theory of time allocation with the theory of conspicuous leisure in a growth model, assuming that consumption expenditures connected to exercise time are conspicuous, and that conspicuous behavior changes with economic development. As a result, as economies develop, we show that there is a growing wedge between optimal exercise and consumption choices made by individuals with different income levels. We show that this pattern is connected to a dynamic Kuznets curve linking body weight to economic development over time, and a static Kuznets curve linking different steady state levels of income per worker to body weight. Thus, our model helps explain the rise and slowdown in obesity prevalence in the USA, as well as the positive correlation between obesity and income per worker in developing countries, and the negative correlation between obesity and income per worker in industrialized countries. We supplement our theoretical results with numerical simulations of the static and dynamic obesity Kuznets curves for the USA. We show that while exercise choices have contributed to a slowdown in the rise in obesity prevalence, there is to this date no dynamic Kuznets curve pattern for obesity in the USA. By contrast, we find the existence of a static Kuznets curve: the steady state level of average body weight increases with the per worker stock of capital up to a level of 186.5 pounds, corresponding to a capital stock 25% higher than the current steady state US capital stock, and decreases thereafter. We discuss policy implications of our findings.
    Keywords: Obesity, Status, Conspicuous leisure, Inequality, Kuznets Curve, Economic Development
    JEL: D11 D30 H31 I15 O41
    Date: 2021–07–05
  15. By: Bakari, Sayef; Tiba, Sofien
    Abstract: This paper aiming at investigating the impact of renewable combustible and waste on the economic growth and environmental quality for the case of Tunisia using the ARDL bounds testing approach during the period 1971-2018. The results confirm the presence of long-run relationships between the combustible renewables and waste and the aggregate wealth proxy and the ecological proxies, respectively. Furthermore, for the production function model, our empirical results reflect that combustible renewables and waste exerts a significant positive effect on economic growth. For the environmental model, the findings confirm that combustible renewables and waste has a negative effect on environmental quality. From this outlook, the perspectives on the use of renewable energy use in Tunisia seem to be constructive and positive. The transition towards friendly energy sources is the main response to the climate emergency for a green economy in accordance with the Millennium Development Goals (MDGs).The encouragement of sustainable consumption, sustainable goods, and practices will be the main element towards the achievement of the green transition of the structure Tunisian economy as a whole.
    Keywords: Renewable combustible and waste ; GDP ; CO2 ; ARDL Bounds testing ; Tunisia.
    JEL: O40 O44 O47 Q2 Q20 Q28 Q5 Q52 Q54 Q57
    Date: 2021

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