nep-gro New Economics Papers
on Economic Growth
Issue of 2021‒12‒13
seven papers chosen by
Marc Klemp
University of Copenhagen

  1. Converging to Convergence By Michael Kremer; Jack Willis; Yang You
  2. The Impact of Body Mass Index on Growth, Schooling, Productivity, and Savings: A Cross-Country Study By Tansel, Aysit; Öztürk, Ceyhan; Erdil, Erkan
  3. Population Homeostasis in Sub-Saharan Africa By David de la Croix; Paula E. Gobbi
  4. Artificial Intelligence, Growth and Employment: The Role of Policy By Philippe Aghion; Céline Antonin; Simon Bunel
  5. Demographic Transitions Across Time and Space By Matthew J. Delventhal; Jesús Fernández-Villaverde; Nezih Guner
  6. Preferences, Financial Literacy, and Economic Development By Davoli, Maddalena; Rodríguez-Planas, Núria
  7. Vertical Specialization, International Task Fragmentation, and Convergence By Sugata Marjit; Reza Oladi

  1. By: Michael Kremer; Jack Willis; Yang You
    Abstract: Empirical tests in the 1990s found little evidence of poor countries catching up with rich - unconditional convergence - since the 1960s, and divergence over longer periods. This stylized fact spurred several developments in growth theory, including AK models, poverty trap models, and the concept of convergence conditional on determinants of steady-state income. We revisit these findings, using the subsequent 25 years as an out-of-sample test, and document a trend towards unconditional convergence since 1990 and convergence since 2000, driven by both faster catch-up growth and slower growth of the frontier. During the same period, many of the correlates of growth - human capital, policies, institutions, and culture - also converged substantially and moved in the direction associated with higher income. Were these changes related? Using the omitted variable bias formula, we decompose the gap between unconditional and conditional convergence as the product of two cross-sectional slopes. First, correlate-income slopes, which remained largely stable since 1990. Second, growth-correlate slopes controlling for income - the coefficients of growth regressions - which remained stable for fundamentals of the Solow model (investment rate, population growth, and human capital) but which flattened substantially for other correlates, leading unconditional convergence to converge towards conditional convergence.
    JEL: E02 O11 O4 O43 O47
    Date: 2021–11
  2. By: Tansel, Aysit (Middle East Technical University); Öztürk, Ceyhan (Middle East Technical University); Erdil, Erkan (Middle East Technical University)
    Abstract: We examine the relationship between wealth and health through prominent growth indicators and cognitive ability. Cognitive ability is represented by nutritional status. The proxy variable for nutritional status is BMI. We use the reduced form equation in the cubic specification of time preference rate, strongly related to cognitive ability, to estimate this relationship. The growth indicators utilized are GDP per capita, schooling, overall and manufacturing productivities, and savings. We estimate our models using the FE, GMM estimators, and long difference OLS and IV estimation through balanced panel data for the 1980-2009 period. We conclude that the relationship between all prominent growth indicators and BMI is inverse U-shaped. In other words, cognitive ability has a significant potential to progress growth and economic development only in a healthy status.
    Keywords: cognitive ability, time preference rate, BMI, productivity, health, schooling, growth, economic development
    JEL: E21 I15 I25 J24 O11 Q18
    Date: 2021–09
  3. By: David de la Croix (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Paula E. Gobbi (ECARES, Université Libre de Bruxelles, Belgium and CEPR, London)
    Abstract: Global population growth remains one of the major challenges of the twenty-first century. This is particularly true for African countries which have been undergoing their demographic transitions. To investigate whether predicted increasing population density and urbanization can help to stabilize African population, we construct a database for 84 georeferenced Demographic and Health Survey (DHS) samples including 947,191 individuals in sub-Saharan Africa and match each location with gridded population density from NASA. We apply a proportional hazard model to evaluate the quantitative impact of local population density on the transitions from childlessness to motherhood, and from celibacy to marriage. Moving from the 5th to the 95th percentile of population density increases the median age at first birth by 2.2 years. This roughly decreases completed fertility by half a child. The same increase in population density increases the median age at first marriage by 3.3 years. These findings contribute to the understanding of why fertility has not dropped in Africa as fast as expected. One part of the answer is that population density remains low. Yet the total effect of increased density on fertility remains limited and counting on it to stabilize the population would be unrealistic.
    Keywords: Fertility, Homeostasis, Africa, Population density
    Date: 2021–11–15
  4. By: Philippe Aghion (Harvard University [Cambridge]); Céline Antonin (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Simon Bunel
    Abstract: In this survey paper, we argue that the effects of artificial intelligence (AI) and automation on growth and employment depend to a large extent on institutions and policies. We develop a two‑fold analysis. In a first section, we survey the most recent literature to show that AI can spur growth by replacing labor by capital, both in the production of goods and services and in the production of ideas. Yet, we argue that AI may inhibit growth if combined with inappropriate competition policy. In a second section, we discuss the effect of robotization on employment in France over the 1994‑2014 period. Based on our empirical analysis on French data, we first show that robotization reduces aggregate employment at the employment zone level, and second that non‑educated workers are more negatively affected by robotization than educated workers. This finding suggests that inappropriate labor market and education policies reduce the positive impact that AI and automation could have on employment.
    Keywords: Artificial intelligence,Growth,Automation,Robots,Employment
    Date: 2019–12–18
  5. By: Matthew J. Delventhal; Jesús Fernández-Villaverde; Nezih Guner
    Abstract: The demographic transition --the move from a high fertility/high mortality regime into a low fertility/low mortality regime-- is one of the most fundamental transformations that countries undertake. To study demographic transitions across time and space, we compile a data set of birth and death rates for 186 countries spanning more than 250 years. We document that (i) a demographic transition has been completed or is ongoing in nearly every country; (ii) the speed of transition has increased over time; and (iii) having more neighbors that have started the transition is associated with a higher probability of a country beginning its own transition. To account for these observations, we build a quantitative model in which parents choose child quantity and educational quality. Countries differ in geographic location, and improved production and medical technologies diffuse outward from Great Britain. Our framework replicates well the timing and increasing speed of transitions. It also produces a correlation between the speeds of fertility transition and increases in schooling similar to the one in the data.
    JEL: J13 N13 O11 O33 O40
    Date: 2021–11
  6. By: Davoli, Maddalena (Goethe University Frankfurt); Rodríguez-Planas, Núria (Queens College, CUNY)
    Abstract: Using data from 74 countries, we uncover important differences in the association between financial literacy and preferences by the level of economic development. We find that patience is only salient in wealthier countries, i.e. countries with their GDP per capita above the sample median. In such cases, countries with higher level of patience display higher levels of financial literacy. Importantly, this association is not driven by a multitude of institutional or cultural factors known to be related to financial literacy. In impoverished countries, we document a higher level of financial literacy in countries with higher levels of risk-taking but with lower levels of trust, positive reciprocity, and altruism. Countries' legal origin drives most of the association with risk-taking and about two fifths of the relationship with trust and positive reciprocity. At the same time, the country's religious composition drives the association between altruism and financial knowledge. Our findings underscore that financial education programs need to be tailored to the cultural aspect of group preferences and suggest what type of traits policies and programs ought to be reinforced in poorer countries.
    Keywords: financial literacy, preferences, and economic development
    JEL: D14 E2 I22
    Date: 2021–09
  7. By: Sugata Marjit; Reza Oladi
    Abstract: In this paper, we construct an elaborate general equilibrium model with a continuum of production fragments for an intermediate good, then embed it in a growth model to address the effects of global production fragmentation, vertical specialization and trade on growth and inequality for a small developing country. Among other results, we show that a small developing economy grows faster than the rest of the world as a result of global fragmentation and trade in intermediates if it is skilled-labor scarce. We also address the effects of such trade opening on wage inequality.
    Keywords: vertical specialization, trade, growth, inequality
    JEL: F10
    Date: 2021

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