nep-gro New Economics Papers
on Economic Growth
Issue of 2022‒02‒14
eleven papers chosen by
Marc Klemp
University of Copenhagen

  1. Robots and Humans: The Role of Fiscal and Monetary Policies in an Endogenous Growth Model By Óscar Afonso; Elena Sochirca; Pedro Cunha Neves
  2. Measuring human capital in the united states using copyright title pages, 1790-1870 By Rapone, Tancredi
  3. Is There Economic Convergence in Asia? By Dante B. Canlas
  4. The role of economic prosperity on informality in Africa: evidence of corruption thresholds from PSTR By Loudi Njoya; Ibrahim Ngouhouo; Simplice A. Asongu; Friedrich Schneider
  5. Merchants, proto-firms, and the German industrialization: the commercial determinants of nineteenth century town growth By Greif, Gavin
  6. A Simple Endemic Growth Model for Undergraduates By Carmona, Julio
  7. Useful & reliable: technological transformation in colonial India By Roy, Tirthankar
  8. Corruption, Economic Growth and the Informal Sector: Empirical Evidence from Developing Countries By Ibrahim Ngouhouo; Loudi Njoya; Simplice A. Asongu
  9. Simulating the impact of a raise in education salaries on economic growth in Peru By Paredes Chervellini, Luciano; Ritzen, Jo
  10. Malaria and Economic Development in the Short-term: Plasmodium falciparum vs Plasmodium vivax By Michaela Kecskésová; Štěpán Mikula
  11. Growth and Distribution regimes under Global Value Chains: Diversification, Integration and Uneven Development By Arpan Ganguly; Danilo Spinola

  1. By: Óscar Afonso (Faculty of Economics, University of Porto, CEF.UP and OBEGEF); Elena Sochirca (Department of Management and Economics, University of Beira Interior, NECE and NIPE); Pedro Cunha Neves (Faculty of Economics, University of Porto, CEF.UP and OBEGEF)
    Abstract: In this paper we develop a dynamic general equilibrium growth model in which robots can replace unskilled labor and: i) the government uses tax revenues to invest in social capital and compensate those who do not work; ii) there is monetary policy with cash-in-advance restrictions that impact, for example, wages; iii) social capital increases skilled-labor productivity and facilitates the technological-knowledge progress. Our results confirm that by reducing the unskilled-to-skilled-labor ratio, the robotization process increases the skill premium (and thus wage inequality between skilled and unskilled workers), stimulates economic growth and improves welfare. We also show that fiscal and monetary policies can have important roles in amplifying or mitigating these effects of the robotization process and that implementing specific policies can generate an important efficiency-equity trade-off. Despite the existence of this trade-off, the long-run economic growth is higher with than without the fiscal and monetary policies, which underlines their crucial role in attenuating the negative aspects of Industry 4.0.
    Keywords: Robots; Social Capital; Fiscal Policy; Monetary Policy; Growth
    JEL: E62 I31 I38 O30
    Date: 2022–01
  2. By: Rapone, Tancredi
    Abstract: This paper uses optical character recognition (OCR) to analyze the production of books in the US over 1790 to 1870 using copyright title pages taken from the online archives of the Library of Congress. We construct national time series of book production over this period which show an uptake in per-capita terms in 1830, around the starting point of the US’ industrial revolution. We break down the production of books into topics using keywords for 8 topics: science, religion, novel, invention, diffusion, business, philosophy and textbook. On this basis we show that the composition of book production by topics is stable over time, except for textbooks and novels which show a persistent increase over the whole period both in relative and absolute terms. This pushes back the beginning of the growth in US human capital before the first reliable data on schooling and literacy starting in 1870. We thus offer mild support to an interpretation of US growth over the 19th century based on the expansion of knowledge and capabilities, while conceding that the link between the content of books and industrialization is tenuous.
    JEL: R14 J01 N0
    Date: 2022–01
  3. By: Dante B. Canlas (School of Economics, University of the Philippines Diliman)
    Abstract: This paper opens up a study of economic convergence in Asia. This convergence refers to the ability of developing economies to catch up with the developed ones in terms of levels and growth rates of real per capita GDP. The study uses the lens of neoclassical growth models, both the basic models of Robert Solow and Trevor Swan, along with the models of Robert Lucas Jr. and Paul Romer in endogenous growth theory to interpret observed growth in Asia. Data are taken from the 45 developing member countries of the Asian Development Bank. The study supports conditional convergence but not absolute convergence. That is the lagging economies can catch up with the leading economies provided the former can adopt advanced technologies, such as, those that feature human-capital investments, learning-by-doing and increasing returns from knowledge accumulation.
    Keywords: economic convergence; neoclassical growth models; Asia
    JEL: N15 O11 O42
    Date: 2020–06
  4. By: Loudi Njoya (University of Dschang, Cameroon); Ibrahim Ngouhouo (University of Dschang, Cameroon); Simplice A. Asongu (Yaoundé, Cameroon); Friedrich Schneider (Kepler University of Linz, Austria)
    Abstract: This paper is interested in explaining the causes of the simultaneous evolution between economic growth and informality. Using a large annual panel of African countries with a time series of 25 years, ours results show that when the corruption rate is above (below) a threshold of 1.3577, economic growth reduces (increases) informal economic sector. The corruption proxy is measured as a decreasing function of corruption such that higher levels of the corruption proxy translate lower levels of corruption. It is therefore desirable for policymakers to improve the transparency of interactions between firms, public and private agents to fight corruption, in view of decreasing the informal economic sector through economic growth.
    Keywords: Informal sector, Growth, Corruption, African countries
    JEL: D73 F47 J46 O1 O17 O47
    Date: 2022–01
  5. By: Greif, Gavin
    Abstract: The role of merchants in shaping the German industrialization is often acknowledged, yet scarcely researched. A small number of case-studies of merchant families and individual towns have shown the significance of merchants as capital providers, industrial entrepreneurs, and political actors, yet no supra-local study into the wider significance of this social group for the German economy exists. This dissertation introduces a new source, a business directory from 1798, to construct micro-data on 6099 individual merchant and manufacturing enterprises across 56 towns in Germany. The resulting dataset is the earliest supraregional evidence on the spatial variation of urban merchant communities in Germany to date. Furthermore, this paper provides a detailed overview of the types of eighteenth-century merchants and analyses under what exact circumstances merchants became industrial entrepreneurs. Using multivariate OLS regressions, it finds a strong association between a greater share of proto-firms in a town in 1798 and its growth rates across the nineteenth century. The findings point to a hitherto overlooked link between the qualitative structure of late eighteenth century merchant activity, the elasticity of supply of early industrial entrepreneurship, and the spatial variation of urban growth experiences in nineteenth century Germany
    JEL: N14
    Date: 2022–01
  6. By: Carmona, Julio (University of Alicante, D. Quantitative Methods and Economic Theory)
    Abstract: The coronavirus SARS-CoV-2 has changed dramatically our lives. Most economic analysis have focused on its short run effects. However, its persistence could raise concerns about its long-run consequences. This is, unfortunately, the case for many emergent countries suffering endemic diseases. To illustrate to our undergraduate students the important consequences of persistent infectious diseases, I couple the standard Solow model, taught in any introductory course to economic growth, with a simple model of persistent diseases, the so called SIS model. Additionally, this will also illustrate the usefulness of the well known Lyapunov theorem, an essential tool for the convergence analysis in many dynamical systems.
    Keywords: SIS Model; Solow Model; Lyapunov Theorem
    JEL: E00 I15 O40
    Date: 2022–01–19
  7. By: Roy, Tirthankar
    Abstract: The proposition that Useful and Reliable Knowledge (URK) produced divergent patterns of long-term economic growth implies that such knowledge had weak agency in countries that fell behind. This article rejects such a theory on the evidence of colonial India. Indo-European contacts activated transfer, transplantation, and adaptation in URK; however, the impact was uneven within India. Despite boosting productivity in manufacturing and consumption, large areas were left untouched. These contrasts highlight the differentiated impact of URK on production conditions in India and question its transferability and mode of knowledge exchange under colonialism.
    JEL: N15
    Date: 2021–04–01
  8. By: Ibrahim Ngouhouo (University of Dschang, Cameroon); Loudi Njoya (University of Dschang, Cameroon); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: The main objective of this paper is to contribute to in-depth literature on the relationship between growth and the informal sector in the presence of corruption. The impact of the interaction between growth and corruption on economic performance (increase or decrease of the informal sector) will be discussed. To the best of our knowledge, our paper is unique in the empirical literature because it studies the effect of the interaction between growth and corruption in the informal sector using a sample of developing countries. Our results based on the FE, system GMM, MG, AMG, and IV-2SLS for 112 countries between the 1991-2015 periods, show that growth reduces informality in the direct effect regression. Moreover, economic growth interacts with corruption and produces negative net effects up to a corruption threshold of 4.79745 when this effect is nullified. This negative net effect was found to be robust across different regional groupings and income groups except in the Middle East and North Africa (positive net effect) and high income and upper-middle-income countries (only direct effects) producing different thresholds per sample. The study recommends that policymakers should intensify their fight against corruption in their quest to reduce the size of the informal economy.
    Keywords: Informal sector, Growth, Corruption, Developing countries
    JEL: D73 F47 J46 O1 O17 O47
    Date: 2022–01
  9. By: Paredes Chervellini, Luciano (UNU-MERIT, Maastricht University, and ComexPeru); Ritzen, Jo (UNU-MERIT, Maastricht University)
    Abstract: A simulation shows that increasing teacher salaries is likely to be (very) profitable for Peru. The required investments have in the long run a substantial return in economic growth as higher salaries would lead to higher teacher cognitive skills, which in turn impact student achievement. We suggest that international development banks should develop products for education finance with a long period (60 years or more) before repayments must be made.
    Keywords: Education, Return over investment, Economic growth, GDP, PISA, Cognitive Skills, Teachers, Development finance
    JEL: C63 H52 I25 O15 O21 O24 N36
    Date: 2021–07–06
  10. By: Michaela Kecskésová (Department of Economics, Masaryk University); Štěpán Mikula (Department of Economics, Masaryk University)
    Abstract: Malaria – a disease caused by parasitic microorganisms of the Plasmodium genus – has been shown to impede economic growth and socioeconomic development in the long-term. In this paper we use annual regional data from India to show that malaria outbreaks are associated with an immediate decline in economic development approximated by night light intensity. We find the association to be significant for outbreaks of both the globally most prevalent Plasmodium species: Plasmodium falciparum and Plasmodium vivax. The estimated associations are quite sizeable. Severe outbreaks correlate with night light reductions of 5% of the standard deviation for P. falciparum and 4% for P. vivax.
    Keywords: Malaria, Economic development, India, Plasmodium falciparum, Plasmodium vivax, Night light intensity
    JEL: I15 R11 R12 N55
    Date: 2022–02
  11. By: Arpan Ganguly; Danilo Spinola
    Abstract: This article aims to theoretically and empirically study the macroeconomic interactions between productive structure and income distribution in the context of the Global Value Chains (GVC). Firstly, we develop a theoretical framework, inspired by the Structuralist macroeconomic literature, establishing distinct regimes in the scenario of globalized production chains. The regimes are defined in terms of (1) a structure/diversification regime, (2) an integration/GVC regime, both drawn from the Balance of Payments Constrained Model (BPCM) literature, and (3) a functional income distribution regime. The theoretical framework guides the selection of proxies used to characterize each regime, measured using Principal Component Analysis (PCA) scores. That allows us to identify country patterns in a structured typology. Finally, we focus on growth trajectories, estimating the causal relationship between each of the beforementioned regimes and per-capita growth, using IV estimations. The dataset consists of 37 countries, with sources from the World Development Indicators (WDI), World Input-Output Database (WIOD), Trade in Value Added (TiVA), and the Penn World Tables (PWT). On one hand, this article contributes to structuralist growth models that typically estimate demand and distribution regimes independently, thereby offering a unified narrative on regimes of economic growth in the context of GVCs. On the other hand, our typology depicts how growth dynamics vary distinctly by geographical regions and how globalization has retained and accelerated processes of uneven development globally. The results show that (1) developed countries are more inclusive in terms of distribution under GVCs, (2) structural change has been exclusive, and growth patterns have been following a specialized pattern, and (3) the growth pattern has been associated with higher integration, but less diversification.
    Keywords: Global Value Chains, Uneven Development, Income Distribution
    JEL: E12 F15 F43 O47
    Date: 2022–02

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