nep-gro New Economics Papers
on Economic Growth
Issue of 2021‒11‒22
eight papers chosen by
Marc Klemp
University of Copenhagen

  1. Population Growth and Firm Dynamics By Michael Peters; Conor Walsh
  2. The asymmetric effect of internet access on economic growth in sub-Saharan Africa By Idris A. Abdulqadir; Simplice A. Asongu
  3. A Note on Migration, Diversity and Economic Growth: a Replication Study of Bove and Elia (World Development, 2017) By Ventura, Luigi
  4. Safe Assets at Financial Globalization By Ly Dai Hung
  5. Regime Switching Optimal Growth Model with Risk Sensitive Preferences By Anindya Goswami; Nimit Rana; Tak Kuen Siu
  6. A revisit to effects of demographic dynamics on economic growth in Asia By Taguchi, Hiroyuki
  7. Do Higher Public Debt Levels Reduce Economic Growth? By Philipp Heimberger
  8. Growth at Risk from Natural Disasters By Sibabrata Das; Mr. Saad N Quayyum; Mr. Tamim Bayoumi

  1. By: Michael Peters; Conor Walsh
    Abstract: Population growth has declined markedly in almost all major economies since the 1970s. We argue this trend has important consequences for the process of firm dynamics and aggregate growth. We study a rich semi-endogenous growth model of firm dynamics, and show analytically that a decline in population growth reduces creative destruction, increases average firm size and concentration, raises market power and misallocation, and lowers aggregate growth in the long-run. We also show lower population growth has positive effects on the level of productivity, making the short-run welfare impacts ambiguous. In a quantitative application to the U.S, we find that the slowdown in population growth since the 1980s and the projected continuation of this trend accounts for a substantial share of the fall in the entry and exit rates and the increase in firm size. By contrast, the impact on markups is modest. The effect on aggregate growth is positive for around two decades, before turning negative thereafter.
    JEL: J11 L11 O3 O4 O44
    Date: 2021–10
  2. By: Idris A. Abdulqadir (Federal University Dutse, Dutse, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: This article investigates the asymmetric effect of internet access (index of the internet) on economic growth in 42 sub-Saharan African (SSA) countries over the period 2008-2018.The estimation procedure is obtained following a dynamic panel threshold regression technique via 1000 bootstrap replications and the 400 grids search developed by Hansen (1996, 1999, 2000). The investigation first explores the presence of inflection points in the relationship between internet access and economic growth through the application of Hansen's threshold models. The finding from the nonlinearity threshold model revealed a significant internet threshold-effect of 3.55 percent for growth. The article also examines the linear short-run effect of internet access on economic growth while controlling for the effects of private sector credit, trade openness, government regulation, and tariff regimes. The marginal effect of internet access is evaluated at the minimum, and the maximum levels of government regulation and tariffs regime are positive. On the other hand, the minimum and maximum levels of private sector credit and trade openness are negative via the interaction terms. The article advances the literature by its nonlinear transformation of the relevance of internet access on economic growth by exploring interactive mechanisms of internet access versus financial resource, internet access versus trade, internet access versus government regulation, and internet access versus the tariff regimes from end-user subscriptions. In policy terms, the statistical significance of the joint impact of government regulations and tariff regimes is relevant in the operation of the telecommunication industry in SSA countries.
    Keywords: Internet access; economic growth; government regulations; trade openness; tariff regimes; sub-Saharan Africa.
    Date: 2021–01
  3. By: Ventura, Luigi
    Abstract: A recent paper (Bove and Elia (2017)) argues that migrants' diversity, as captured by the indexes of both fractionalization and polarization, exerts a posive effect on GDP growth. In fact, by using the same dataset and method- ology, it can easily be shown that the impact of diversity cannot be distinguished from that of migration itself, due to the very high correlation among the corresponding variables. Also, if one disentangles migration from diversity, following Alesina et al. (2016), only migration maintains a positive impact on growth while diversity, as captured by fractionalization, turns out to be weakly and positively associated to growth, but limitedly to the 1980-2010 time span. Polarization, on the other hand, does not seem to exert any effect on growth. The question as to whether diversity is more or less beneficial in terms of economic growth remains therefore an intriguing one, and calls for more theoretical and empirical analyses, possibly based on less (geographically) aggregated data.
    Keywords: Diversity, economic growth, migration.
    JEL: C23 C51 E21 F36
    Date: 2021–05–06
  4. By: Ly Dai Hung (Vietnam Institute of Economics, Hanoi, Vietnam)
    Abstract: The paper explores the impact of safe assets on the economic growth on the financial globalization context. The method employs both cross-section and panel data regression on a data sample of 150 economies, both advanced and developing ones, over the 1990-2019 period. The robustness analysis is carried out by controlling for different sub-sampling data, including advanced economies compared with emerging and developing economies, and 3 consecutive 10-year periods from 1990 to 2019. The empirical evidence establishes an inverted-U-shaped dependence pattern of economic growth on the assets safety, measured by the sovereign debts rating. The economic growth is first increasing then decreasing on the assets safety, with the turning point being the value at 12.0 of sovereign debts rating. Thus, the assets safety only exerts a positive impact on the economic growth for the low safety level. The paper makes contribution on the economic growth literature by uncovering an inverted-U-shaped pattern of economic growth, and also on the safe assets literature by charactering the impact of sovereign debts rating, a proxy for the safety of government debts, on the economic growth.
    Keywords: Economic Growth,Safe Assets,Globalizaton,Cross-Section Regression.
    Date: 2020–09
  5. By: Anindya Goswami; Nimit Rana; Tak Kuen Siu
    Abstract: We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time, finite-state, Markov chain. We suppose that the production function also depends on a sequence of i.i.d. random shocks. For the sake of generality, the utility and the production functions are allowed to be unbounded from above. Under the Markov regime-switching model, it is shown that the value function of optimization problem satisfies an optimality equation and that the optimality equation has a unique solution in a particular class of functions. Furthermore, we show that an optimal policy exists in the class of stationary policies. We also derive the Euler equation of optimal consumption. Furthermore, the existence of the unique joint stationary distribution of the optimal growth process and the underlying regime process is examined. Finally, we present a numerical solution by considering a regime switching extension of Cobb-Douglas production function with power utility.
    Date: 2021–10
  6. By: Taguchi, Hiroyuki
    Abstract: This paper aims to examine the effects of demographic dynamics on economic growth with a focus on working-age population and saving rate in 17 Asian economies for the past period from 1970 to 2018 and for the future period from 2018 to 2050. For the analytical methodology, this study applies a panel vector autoregressive model considering endogenous interactions among concerned variables. The main findings are summarized as follows: first, the estimation identified both the direct channel from working-age population share to economic growth and the indirect channel through saving rate; second, the estimated result also found the feedback effect from economic growth to saving rate; third, the contribution ratio of the demographic effect to economic growth for the past period, around 30 percent on average, is consistent with those in previous studies; and fourth, in the projection for 2018-2050, the degrees of the negative demographic effects in sample economies are getting larger than those of previous studies, due to the earlier-coming population onus with aging.
    Keywords: demographic dynamics, economic growth, Asia, saving rate, working-age population, panel vector-autoregressive model
    JEL: J11 O11 O53
    Date: 2021
  7. By: Philipp Heimberger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: While the effect of higher public debt levels on economic growth has received much attention, the literature partly points to contradictory results. This paper applies meta-regression methods to 826 estimates from 48 primary studies. The unweighted mean of the reported results suggests a 10 percentage points increase in public-debt-to-GDP is associated with a decline in annual growth rates by 0.14 percentage points, with a 95% confidence interval from 0.10 to 0.18 percentage points. However, we cannot reject a zero effect after correcting for publication bias. Furthermore, the meta-regression analysis shows that tackling endogeneity between public debt and growth makes estimates lean less towards the negative side. In testing for non-linear effects, our results do not point to a universal public-debt-to-GDP threshold beyond which growth slows threshold estimates are sensitive to data and econometric choices. These findings imply a lack of evidence of a consistently negative growth effect of higher public-debt-to-GDP.
    Keywords: Public debt; economic growth; meta-analysis
    JEL: E62 F34 O11 O47
    Date: 2021–11
  8. By: Sibabrata Das; Mr. Saad N Quayyum; Mr. Tamim Bayoumi
    Abstract: The paper analyzes the impact of natural disasters on per-capita GDP growth. Using a quantile regressions and growth-at-risk approach, the paper examines the impact of disasters and policy choices on the distribution of growth rather than simply its average. We find that countries that have in place disaster preparedness mechanisms and lower public debt have lower probability of witnessing a significant drop in growth as a consequence of a natural disaster, but our innovative methodology in this paper finds that the two policies are complements since their effectiveness vary across different disaster scenarios. While both are helpful for small to mid-size disasters, lower debt—and hence more fiscal space—is more beneficial in the face of very large disasters. A balanced strategy would thus involve both policies.
    Date: 2021–09–17

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