nep-gro New Economics Papers
on Economic Growth
Issue of 2021‒08‒09
eight papers chosen by
Marc Klemp
University of Copenhagen

  1. Human capital accumulation, long-run GDP growth and technological frontier By Lemoine, Mathilde; Munoz, Mathilde
  2. Optimal Wealth Taxation in the Schumpeterian Growth Model with Unemployment By HIRAGUCHI Ryoji
  3. Institutions and Economic Development: New Measurements and Evidence By Esther Acquah; Lorenzo Carbonari; Alessio Farcomeni; Giovanni Trovato
  4. Automation, Growth, and Factor Shares in the Era of Population Aging By Andreas Irmen
  5. Automation, Education, and Population: Dynamic Effects in an OLG Growth and Fertility Model By Catarina Peralta; Pedro Mazeda Gil
  6. "The Impact of Technological Change on Labor: The Japanese Silk Weaving Industry during the Industrial Revolution" By Tetsuji Okazaki
  7. Economic Growth as a Double-Edged Sword: The Pollution-Adjusted Kaldor-Verdoorn Effect By Guilherme de Oliveira; Gilberto Tadeu Lima
  8. Witchcraft Beliefs, Social Relations, and Development By Boris Gershman

  1. By: Lemoine, Mathilde; Munoz, Mathilde
    Abstract: While initial education is at the heart of growth models, less work has been done on the influence of human capital accumulation on long-run growth. Our first step was to overcome the “human capital puzzle” by the introduction of the technological frontier as defined by Vandenbusshe, Aghion and Meghir (2006). The “human capital puzzle” means that the level of human capital has a significant positive effect on growth in countries where educational attainment is low and a significant negative effect in countries where educational attainment is high. We specified an aggregate long-run growth equation while taking account the limitations of the various approaches but without rejecting the contribution of endogenous theories. By combining the distance to technological frontier and the workhorse cross-country regression model, our coefficient on both the level and rate of accumulation of human capital are positive, and significant at the 1 and 10 percent level for the human capital predictors alone, and that the interaction between the rate of accumulation of human capital and distance to the technological frontier is also significant at the 5 percent level. This shows that the distance to the technological frontier significantly affects the relationship between human capital accumulation and economic growth, while cross-country differences in technology do not change the relationship between initial level of human capital stock and economic growth. Moreover, the effects of human capital accumulation on economic growth tend to increase with technological advancements of countries. According to oure conometric results, the “human capital puzzle” is thus partially solved by taking into account cross-country differences in technological advancements, and their interaction with human capital proxies. To address th eendogeneity of the human capital variable, we turn toward a simultaneous equations mode (SEM) where accumulation of human capital is also caused by economic growth, and where accumulation of physical capital is allowed to be endogenous. Despite a less complete dataset(fewercountries), the both human capital level and accumulation have a positive and significant effect on long-term growth of GDP per capita. These first results were needed before investigating the relationship between human capital and economic development at a more granular level and could help to not underestimate the spillover effect of the investment in human capital accumulation on long-run GDP growth especially incountries close to the technological frontier
    Keywords: human capital,human capital accumulation,long-run GDP growth, technological frontier, productivity, educational training, human capital equation, human capital spillover effects
    Date: 2021–07
  2. By: HIRAGUCHI Ryoji
    Abstract: In this paper, we construct a Schumpeterian endogenous growth model, taking into account unemployment, and study the effect of wealth tax policy on the employment and the growth rate. In our model, the final good firms use labor and intermediate goods as input. The firms search and match with workers in a frictional labor market. The wage rate is determined by Nash bargaining. We first show that there may be one or two balanced growth paths in the model. We next show that when the equilibrium path is uniquely determined, the reduction of the bargaining power of the worker reduces the balanced growth rate and raises unemployment. We finally show that the wealth tax can enhance innovation, reduce unemployment and raise the economic growth rate. The welfare-maximizing wealth tax rate is generally non-zero, and for some plausible parameter values, the rate is strictly positive.
    Date: 2021–07
  3. By: Esther Acquah (Fundamentos del Análisis Económico, University of Alicante, Spain); Lorenzo Carbonari (Dipartimento di Economia e Finanza, Università di Roma Tor Vergata, Italy); Alessio Farcomeni (Dipartimento di Economia e Finanza, Università di Roma Tor Vergata, Italy); Giovanni Trovato (Dipartimento di Economia e Finanza, Università di Roma Tor Vergata, Italy)
    Abstract: We propose a new set of indices to capture the multidimensionality of a country’s institutional quality. Our indices are obtained by employing a dimension reduction approach on the institutional variables provided by the Frazer Institute (2018). We estimate the impact that our measures of institutional quality have on the level and the growth rate of per capita GDP, using a large sample of countries over the period 1980-2015. To identify the causal effect of our measures of institutional quality on a country’s GDP dynamics we employ the Generalized Propensity Score method. Institutions matter especially in low- and middle-income countries, and not all institutions are alike for economic development. For this group of countries, we find: i) a positive correlation between our main institutional index and the GDP growth and ii) that improvement in the reliability and fairness of the legal system leads to a higher long-run per capita GDP level. We also document non-linearities in the causal effects that different institutions have on growth, and the presence of threshold effects.
    Keywords: Economic Development, Institutions, Threshold Effects, Mixture Model, High-income countries, Low- and middle-income countries
    JEL: O43 O47
    Date: 2021–07
  4. By: Andreas Irmen
    Abstract: How does population aging affect economic growth and factor shares in times of increasingly automatable production processes? The present paper addresses this question in a new macroeconomic model of automation where competitive firms perform tasks to produce output. Tasks require labor and machines as inputs. New machines embody superior technological knowledge and substitute for labor in the performance of tasks. Automation is labor-augmenting in the reduced-form aggregate production function. If wages increase then the incentive to automate becomes stronger. Moreover, the labor share declines even though the aggregate production function is Cobb-Douglas. Population aging due to a higher longevity reduces automation in the short and promotes it in the long run. It boosts the growth rate of absolute and per-capita GDP in the short and the long run, lifts the labor share in the short and reduces it in the long run. Population aging due to a decline in fertility increases automation, reduces the growth rate of GDP, and lowers the labor share in the short and the long run. In the short run, it may or may not increase the growth rate of per-capita GDP, in the long run it unequivocally accelerates per-capita GDP growth.
    Keywords: population aging, automation, factor shares, endogenous technical change, endogenous labor supply
    JEL: E22 J11 J22 J23 O33 O41
    Date: 2021
  5. By: Catarina Peralta (Faculty of Economics, University of Porto); Pedro Mazeda Gil (Faculty of Economics, University of Porto and CEF.UP)
    Abstract: We address two main structural changes occurring in developed countries: the rise of automation and population ageing. We use an R&D-based growth model in an OLG framework with endogenous education and fertility, and automation in the production process. Our model is able to combine the growth of real wages over time and either a fall or an increase in birth rates, consistent with recent data regarding the birth rate by skill group. Moreover, our model allows for the study of the interplay between the effects of population ageing and those of automation. The results show a dynamics consistent with the US trends for the period covering 1970 to 2019.
    Keywords: Ageing; Automation; Economic growth; Endogenous fertility
    JEL: J11 J23 J24 O3 O4
    Date: 2021–07
  6. By: Tetsuji Okazaki (Faculty of Economics, The University of Tokyo)
    Abstract: The impact of the Industrial Revolution on labor has long attracted the interest of economists as well as economic historians, and recent technological changes and changes in the labor market have newly raised interest in this issue. The accepted view is that technological change in the Industrial Revolution was deskilling and lowered the wage of workers. This paper reexamines this view, by investigating the silk weaving industry in early twentieth-century Japan, which experienced the Industrial Revolution. Power looms, a major technological innovation in the Industrial Revolution, substituted for routine tasks of handloom weavers, and thereby made weavers concentrate on nonroutine tasks, such as stopping looms and supplying warp or weft when it ran out and connecting threads when they broke. Using the model of Autor et al. (2003) and newly constructed plant-level panel data, this paper studies the implications of this change in labor for wages. We find that adoption of power looms was associated with significant increases in the wage of both female and male adult workers, playing a central role in weaving, which suggests the need for revision of the view that technological change in the Industrial Revolution was deskilling.
    Date: 2021–05
  7. By: Guilherme de Oliveira; Gilberto Tadeu Lima
    Abstract: There is evidence that pollution concentration impacts negatively on labor productivity, which has implications for the Kaldor-Verdoorn law. While the growth rate of labor productivity varies positively with the growth rate of output, the growth rate of pollution concentration also varies positively with the latter. As a result, an increase in pollution concentration leading to environmental degradation might offset the productivity-enhancing effect of a rise in the scale of output production. This paper explores such a double-edged sword feature of output growth in a demand-led macrodynamic framework having pollution concentration as a further influence on the class conflict over the functional distribution of the social product. The stability of the environment-economy system in the long run hinges on how output growth varies with the functional distribution of income. When output growth is positively related to the wage share, the balanced growth path is unstable. When output growth varies positively with the profit share, stability is a possibility, but the system undergoes fluctuations in the wage share and the ratio of capital to pollution concentration when converging to the balanced growth path. Environmental preservation and functional distribution and growth of the social product interact to each other in a complex way.
    Keywords: Economic growth; pollution concentration; labor productivity; functional Distribution of the social product
    JEL: E11 O44 Q52
    Date: 2021–07–26
  8. By: Boris Gershman
    Abstract: Beliefs in witchcraft, or the ability of certain people to intentionally cause harm via supernatural means, have been documented across societies all over the world. Extensive ethnographic research on this phenomenon over the past century explored the many roles of witchcraft beliefs in communities highlighting both their social functions and detrimental consequences. Yet, empirical evidence based on systematic statistical analyses or experiments has been lacking until very recently. This chapter reviews the nascent literature on witchcraft beliefs in economics and other quantitative social sciences and summarizes the main directions and results of this research to date. The major themes discussed in the chapter include social relations, economic development, and institutions in their connection to witchcraft beliefs.
    Keywords: Culture, Development, Institutions, Religion, Social capital, Witchcraft
    JEL: I31 O10 O31 O43 O57 Z10 Z12 Z13
    Date: 2021

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