nep-gro New Economics Papers
on Economic Growth
Issue of 2021‒10‒25
nine papers chosen by
Marc Klemp
University of Copenhagen

  1. Local majorities: How administrative divisions shape comparative development By Bluhm, Richard; Hodler, Roland; Schaudt, Paul
  2. Is temperature adversely related to economic growth? Evidence on the short-run and the long-run links from sub-national data By Daniel Meierrieks; David Stadelmann
  3. Generalized Cumulative Offer Processes By Zaifu Yang; Rong Zhang
  4. Environmental performance in the West African economy: MM-quantile and 2SLS approach By Musibau, Hammed; Yanotti, Maria; Vespignani, Joaquin; Rabindra, Nepal
  5. Working Time Reduction and Employment in a Finite World By Jean-François Fagnart; Marc Germain; Bruno Van der Linden
  6. Occasional Bulletin of Economic Notes 202101 Drivers of medium term growth By Josina Solomons; Kerschyl Singh; Jean-Francois Mercier
  7. Climate Protection versus Convergence? By Lengwiler, Yvan
  8. The Relationship between Employment and Economic Growth in the Korean Agri-Food Industry By Soon, Byung Min; Lee, Yong-Sun
  9. Could the Colombian economy grow faster? How it would be possible? By Carlos Esteban Posada Posada

  1. By: Bluhm, Richard; Hodler, Roland; Schaudt, Paul
    Abstract: We study the role of subnational borders and the importance of local majorities for local economic development. We exploit that France imposed a particular administrative structure on its Sub-Saharan African possessions in the early 20th century. The French government had little interest in pre-colonial political units. As a result, their colonial districts cut across ethnic homelands in a way that led to plausibly exogenous variation in an ethnic group's population share across colonial districts. We find that ethnic groups who were a local majority in most colonial districts, in which they were present, are more economically developed today. Furthermore, we show that the parts of ethnic homelands with a higher district-level population share are more economically developed today than other parts of the same homeland. We also provide evidence that the effects are persistent for various reasons, including the stickiness of subnational borders and higher infrastructure investments during colonial times.
    Keywords: Ethnic politics, local majorities, administrative-territorial structures, colonization, regional development, persistence
    JEL: D72 F54 H54 H75 N97 O10 R12 R50 Z13
    Date: 2021–10
  2. By: Daniel Meierrieks; David Stadelmann
    Abstract: We investigate the effect of rising temperatures on economic development, using sub-national data for approximately 1,500 sub-national regions in 81 countries from the 1950s to the 2010s. Accounting for region- and time-fixed factors by means of a two-way fixed effects panel approach, we find no evidence that rising temperatures are adversely related to regional growth measured as changes in regional per capita gross domestic product (GDP). In addition to a panel setting, we also consider the long-run analogue of the panel model, exploring the relationship between regional temperature and growth over longer time periods. Applying this long-difference approach, we find evidence of a statistically significant negative association between temperature and regional economic activity. This suggests that intensification effects matter, meaning that the adverse relationship between temperature increases and growth may compound and materialize only in the longer run. What is more, we find that these adverse long-run effects of regional warming matter only to regions located in countries with relatively unfavorable economic and institutional conditions, that is, in countries with high levels of poverty, a lack of democracy, and a weak rule of law. This strongly points to the role of sound (country-specific) economic and institutional conditions in reducing vulnerability to higher temperatures. In line with this interpretation, we find no evidence for an adverse long-run relationship between temperature and growth for regions located in richer and democratic countries or those with an established rule of law.
    Keywords: regional temperature; regional economic growth; sub-national data; long- difference approach
    JEL: Q54 Q56 R11
    Date: 2021–10
  3. By: Zaifu Yang; Rong Zhang
    Abstract: In this paper we provide a quantitative analysis of how wealth may affect economic growth. In the economy, the utility of every individual depends on both consumption and wealth. Exploring a class of specific utility functions in which wealth has a weakening effect on the marginal utility of consumption, we find a closed-form solution of steady-state consumption, capital stock, savings rate, and convergence rate and obtain several novel results of wealth effects on economic growth. We also demonstrate that the new models can be calibrated to fit well with empirical observation.
    Keywords: Economic growth, wealth effects, savings rate, convergence rate.
    JEL: C61 O40 O41
    Date: 2021–10
  4. By: Musibau, Hammed (Tasmanian School of Business & Economics, University of Tasmania); Yanotti, Maria (Tasmanian School of Business & Economics, University of Tasmania); Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania); Rabindra, Nepal (School of Business, Faculty of Business and Law, University of Wollongong)
    Abstract: The 2019 World Bank report on West Africa's coast indicates that over $3.8 billion is lost annually due to environmental issues, like erosion, flooding, and pollution. In this paper, the newly introduced environmental performance index (EPI) is incorporate into the neoclassical growth model to empirically address the impact of environmental performance on economic growth for the Economic Community of West African States (ECOWAS). Using the novel Method of Moments-Quantile Regression methodology and 2SLS models, the empirical investigation finds a positive relationship between environmental performance and economic growth across quantiles for ECOWAS. Empirical results provide evidence supporting bidirectional relationship running from environmental performance to economic growth; from government size to economic growth; and from trade openness to economic growth across all quantiles. Results show that environmental performance, government size, labour, and capital stock have a positive impact on West African Economic Growth, while trade openness decreases economic growth. We find a 48% optimal threshold of environmental performance index (EPI) on economic Growth for ECOWAS countries. Based on the findings, policies to encourage improved environmental performance above the threshold estimated will go a long way to enhance West African economies.
    Keywords: economic growth, environmental performance, ECOWAS, Moment of Method-QR estimator
    JEL: F43 F64 C31
    Date: 2021
  5. By: Jean-François Fagnart; Marc Germain; Bruno Van der Linden
    Abstract: We study the consequences of a working time reduction (WTR hereafter) in a growth model with efficiency wages and an essential natural resource (natural capital). Considering that technical progress cannot reduce the resource content of final production to zero, we show that the effects of a WTR on (un)employment depend on the abundance of natural capital. If it is unlimited, the economy converges toward a balanced growth path and a WTR lowers output, employment and wage levels along this path. With finite natural capital, the economy converges toward a stationary state. A WTR then increases the hourly wage and employment if natural capital is scarce enough, which is necessarily the case if technical progress on produced capital and labour is unbounded. The long-term elasticity of employment (resp., of the hourly wage) to the cut in hours is larger (resp., smaller) when natural capital is scarcer. A numerical analysis of the transitory impacts of a WTR confirms that when natural capital is scarcer, it increases employment more and the hourly wage less, with a less negative initial impact on output.
    Keywords: unemployment, fair wage, work sharing, (limits to) growth, natural capital
    JEL: J68 O44 Q57
    Date: 2021
  6. By: Josina Solomons; Kerschyl Singh; Jean-Francois Mercier
    Abstract: Occasional Bulletin of Economic Notes 2021/01 Drivers of medium term growth
    Date: 2021–10–06
  7. By: Lengwiler, Yvan (University of Basel)
    Abstract: Global economic convergence and protection of the climate are both worthwhile goals. Yet, there is an inherent tension between them. Greenhouse gases are a waste product that is often emitted in the production process. Limiting such emissions therefore hampers the accumulation of income and capital. I expand Solow's growth model to accommodate green house gases, and use this to estimate the contribution of such emissions to economic development. The sobering insight is that we would not have witnessed any convergence in the last 45 years if poorer countries had not increased greenhouse gas emissions.
    Keywords: climate change, convergence, growth theory, growth accounting, green house gases, GHG, carbon emissions, pollution, poverty, natural resources.
    JEL: O44
    Date: 2021–09–19
  8. By: Soon, Byung Min; Lee, Yong-Sun
    Keywords: Marketing, Labor and Human Capital, Agricultural and Food Policy
    Date: 2021–08
  9. By: Carlos Esteban Posada Posada
    JEL: O11 O33 O41 O47 O54
    Date: 2021–10–17

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