nep-gro New Economics Papers
on Economic Growth
Issue of 2022‒04‒11
eleven papers chosen by
Marc Klemp
University of Copenhagen

  1. Irregular Economic Growth in the World Economy: Fluctuations of Ergodic Distributions through a Markov Chain Model By Domínguez, Alvaro; Sakamoto, Hiroshi
  2. Persistently egalitarian? Swedish income inequality in 1613 and the four-estate parliament By Andersson, Martin; Molinder, Jakob
  3. Public Debt and Economic Growth By Puonti, Päivi
  4. Labor Substitutability among Schooling Groups By Mark Bils; Barış Kaymak; Kai-Jie Wu
  5. Re-Examining the Convergence of the World Economy: Markov Chain Model with Population Weighting By Domínguez, Alvaro; Sakamoto, Hiroshi
  6. Revisiting the Great Ratios Hypothesis By Alexander Chudik; M. Hashem Pesaran; Ron P. Smith
  7. Assortative mating and the Industrial Revolution: England, 1754-2021 By Clark, Gregory; Cummins, Neil
  8. Tools and concepts for understanding disruptive technological change after Schumpeter By Mark Knell; Simone Vannuccini
  9. Boomtowns: Health, Income, and the Preston Curve: A Long View By Leandro Prados de la Escosura
  10. China’s Demographic Transition: A Quantitative Analysis By Yongkun Yin
  11. Pro-birth policies, missions and fertility : historical evidence from Congo By Catherine Guirkinger; Paola Villar

  1. By: Domínguez, Alvaro; Sakamoto, Hiroshi
    Abstract: We reexamine the convergence hypothesis of economic growth. Traditionally, it was analyzed using econometric methods, although estimating long-term economic fluctuations with a linear model is not always ideal. We thus employ a Markov chain stochastic model that divides the logarithmic value of relative income, comparing each country's GDP per capita with the average, into several ranks in descending order of income. Using the most recent data, we total the time-series changes of the income states in each sample, and represent them through probabilities. We observe the changing ergodic distribution and show that the world economy is not growing monotonously, and proceed to correct the population size of each country for rank changes. The transition probability matrix is re-estimated by applying population weights to changes in the income states of each country. When there is no population weighting, the model shows that the world economy may be divided into two peaks as before. However, when using population weights, the model yields more optimistic results.
    Keywords: Convergence, World Economy, Markov Chain, C49, D39, O50, R11
    Date: 2022–02
  2. By: Andersson, Martin (Swedish University of Agricultural Sciences); Molinder, Jakob (Department of Economic History, Uppsala University)
    Abstract: There is a widespread perception that present-day Nordic egalitarianism is the outcome of a long historical continuity, where the strong political position of peasant farmers and weak feudalism were marking characteristics of pre-industrial society. However, little empirical evidence so far exists on the distribution of income for the early modern period. In this paper, we draw on the schedule and individual assessments devised by the authorities to distribute the tax-burden associated with the Älvsborg ransom to estimate income inequality and the share of income accruing to top income earners and to different social groups in the Swedish realm (present-day Sweden and Finland) in 1613. Using this information, we are able to speak to several debates on pre-industrial distribution of income and historical inequality in the Nordic countries. We find that the income share of the richest one percent was 13 percent while the share of the top 0.01 percent stood at 2 percent. Sweden was characterized by a two- pronged social structure where a large share of income was held by the absolute top as well as by the peasants who made up the majority of the population, while the nobility, clergy, burghers and other middle-rank groups held relatively small income shares not least due to their small population numbers. This finding helps explain the relatively strong position of peasants as a fourth estate within the early modern Swedish parliament. While Sweden in the early seventeenth century was relatively equal compared to other contemporary societies, the egalitarian social structure was upended over the subsequent centuries resulting in vast economic and political inequality by the late nineteenth century. Thus, there is no apparent continuity between early modern equality and post-WW2 egalitarianism.
    Keywords: inequality; income distribution; top incomes; Sweden; early modern period
    JEL: D31 N13 N33
    Date: 2022–02–07
  3. By: Puonti, Päivi
    Abstract: Abstract Economics literature suggests that, even in the absence of fiscal costs, a persistently high and increasing public debt ratio may have a detrimental effect on long run economic growth in an economy that is not over-accumulating capital like Finland today. High public debt creates expectations about future tax increases and a climate of uncertainty, reducing incentives to save and invest. By being informative about its fiscal plans the government can anchor expectations and create a stable investment climate. The relationship between debt and growth is complex and depends on country-specific factors likely to change over time, providing support for country-specific debt-limits or rates of debt reduction. By reducing debt today, the government prepares for unanticipated events requiring significant public borrowing in the future and contains the distortionary effect of taxation required to service the debt. Reducing debt in an economic upturn, when private demand is strong and when monetary policy is accommodative, results in fiscal policy that is optimal both in the short and long run, minimizing the potentially harmful effect of fiscal consolidation on economic growth. Policies and structural reforms boosting economic growth allow the debt ratio to decline through economic growth, reducing the need for fiscal consolidation.
    Keywords: Public debt, Economic growth, Literature review
    JEL: O40 H60 H30
    Date: 2022–04–04
  4. By: Mark Bils; Barış Kaymak; Kai-Jie Wu
    Abstract: Knowing the degree of substitutability between schooling groups is essential to understanding the role of human capital in income differences and to assessing the economic impact of such policies as schooling subsidies, immigration systems, or redistributive taxes. We derive a lower bound for the substitutability required for worldwide growth in real GDP from 1960 to 2010 to be consistent with a stable wage premium for schooling despite the rapid growth in schooling, assuming no exogenous worldwide regress in the technology frontier for workers with only primary schooling. That lower bound for the long-run elasticity of substitution is about 4, which is far higher than values commonly used in the literature. Given our bound, we reexamine the importance of human capital in cross-country income differences and the roles of school quality versus the skill bias of technology in greater efficiency gains from schooling in richer countries.
    Keywords: Elasticity of Skill Substitution; Aggregate Human Capital; Growth and Development
    JEL: E24 J24 O15 O47
    Date: 2022–03–23
  5. By: Domínguez, Alvaro; Sakamoto, Hiroshi
    Abstract: We study the convergence hypothesis of economic growth relying on recent data. To fix the population size of each country for rank changes, we re-estimate the transition probability matrix by applying a population weight to changes in the income rank of each country. We then find that with no population weighting, the world economy can be divided into two peaks as before. Nevertheless, the population-weighted probability model yields more optimistic results: We divide the world economy into several regions, estimate similar probability models, and calculate the convergence distribution. We then divide the world into the optimistic and pessimistic region. The optimistic region, with high income, is composed of East Asia and Europe; The pessimistic region, with low income, is composed of Sub-Saharan Africa. These two extremes cause the observed twin peaks. The transition information of China and India has a significant impact when considering population weighting. These two countries show rapid economic growth, which produces optimistic results in our population-weighted model.
    Keywords: Convergence, World Economy, Markov Chain, C49, D39, O50, R11
    Date: 2022–02
  6. By: Alexander Chudik; M. Hashem Pesaran; Ron P. Smith
    Abstract: The idea that certain economic variables are roughly constant in the long run is an old one. Kaldor described them as stylized facts, whereas Klein and Kosobud labelled them great ratios. While such ratios are widely adopted in theoretical models in economics as conditions for balanced growth, arbitrage or solvency, the empirical literature has tended to find little evidence for them. We argue that this outcome could be due to episodic failure of cointegration, possible two-way causality between the variables in the ratios and cross-country error dependence due to latent factors. We propose a new system pooled mean group estimator (SPMG) to deal with these features. Using this new panel estimator and a dataset spanning almost one and a half centuries and 17 countries, we find support for five out of the seven great ratios that we consider. Extensive Monte Carlo experiments also show that the SPMG estimator with bootstrapped confidence intervals stands out as the only estimator with satisfactory small sample properties.
    Keywords: great ratios; arbitrage conditions; heterogeneous panels; episodic cointegration; two-way long-run causality; error cross-sectional dependence
    JEL: B4 C18 C33 C5
    Date: 2022–03–18
  7. By: Clark, Gregory; Cummins, Neil
    Abstract: Using a new database of 1.7 million marriage records for England 1837-2021 we estimate assortment by occupational status in marriage, and the intergenerational correlation of occupational status. We find the underlying correlations of status groom-bride, and father-son, are remarkably high: 0.8 and 0.9 respectively. These correlations are unchanged 1837-2021. There is evidence this strong matching extends back to at least 1754. Even before formal education and occupations for women, grooms and brides matched tightly on educational and occupational abilities. We show further that women contributed as much as men to important child outcomes. This implies strong marital sorting substantially increased the variance of social abilities in England. Pre-industrial marital systems typically involved much less marital sorting. Thus the development of assortative marriage may play a role in the location and timing of the Industrial Revolution, through its effect on the supply of those with upper-tail abilities.
    Keywords: human capital development; occupational mobility; technology transfer; post-war reconstruction
    JEL: N33 N34
    Date: 2022–04
  8. By: Mark Knell (NIFU); Simone Vannuccini (SPRU, University of Sussex)
    Abstract: This chapter is about radical innovation and disruptive technological change. Discovering the nature and mechanisms of disruptive technological change can help to understand the long-run dynamics of innovation and map profound transformation in socio-economic systems. The chapter considers four concepts essential for the understanding radical and disruptive technological change: long waves, techno-economic paradigms, general purpose technologies (GPTs), and disruptive technologies. We conclude with some insights on the emerging technologies in the latest techno-economic paradigm. The tools and concepts given here remain the cornerstone of a useful theory of innovation and change even in our current complex socio-technical landscape.
    Keywords: Radical innovation, Kondratiev, long wave cycle, Schumpeter, perennial gale of creative destruction, technological discontinuities, techno-economic paradigm, technological revolution, great surge of development, general purpose technology, disruptive technology, emerging technology
    JEL: O31
    Date: 2022–04–04
  9. By: Leandro Prados de la Escosura (Universidad Carlos III de Madrid)
    Abstract: Well-being is increasingly viewed as a multidimensional phenomenon, of which income is only one facet. In this paper I focus on another one, health, and look at its synthetic measure, life expectancy at birth, and its relationship with per capita income. International trends of life expectancy and per capita GDP differed during the past 150 years. Life expectancy gains depended on economic growth but also on the advancement in medical knowledge. The pace and breadth of the health transitions drove life expectancy aggregate tendencies and distribution. The new results confirm the relationship between life expectancy and per capita income and its outward shift over time as put forward by Samuel Preston. However, the association between non-linearly transformed life expectancy and the log of per capita income does not flatten out over time, but becomes convex suggesting more than proportional increases in life expectancy at higher per capita income levels.
    Keywords: Well-being, Life Expectancy, Per Capita Income, Inequality, Health Transition, Preston Curve
    JEL: F60 I15 N30 O50
    Date: 2022–03
  10. By: Yongkun Yin (CEMFI, Centro de Estudios Monetarios y Financieros)
    Abstract: China’s fertility decline was very fast. But the drivers of this decline are not well understood. The common wisdom attributes it to the strict population control policies, particularly the One-Child Policy. Yet, fertility decline might also be due to the spectacular economic transformation and substantial mortality decline. To quantify the effects of different factors on China’s demographic and economic transition, I develop a two-sector overlapping-generation model with workers’ movement from rural to urban areas and endogenous fertility and education choices. Quantitative analysis shows that even without any population policy, the total fertility rate (TFR) would decline from 6.40 children around 1950 to 2.85 children around 2010. However, the population policies were critical for TFR to fall below the replacement level and do so very quickly after the 1980s. By around 2010, the cumulative effect of population policies reduced fertility from 2.85 to 1.34 children. The baseline model is also extended to incorporate the hukou system, considering that different hukou types are linked to different child quotas under the One-Child Policy and government transfers. The extended model suggests that the impact of the hukou system on fertility decisions was minor.
    Keywords: Demographic transition, structural transformation, population policies, productivity growth, mortality, China.
    JEL: D1 J13 O41
    Date: 2022–02
  11. By: Catherine Guirkinger (Center for Research in the Economics of Development, University of Namur); Paola Villar
    Abstract: Did colonial powers shape fertility patterns in their colonies? We investigate this question in the context of the Belgian Congo. Starting in the late 1920s, several colonial powers in Africa feared depopulation of their colonies and designed pro-birth policies. The Belgian state heavily relied on Catholic nuns to implement these policies in the Congo. Using a demographic survey conducted in the 1970s in seven major cities, we recovered the individual birth calendars of 30,000 women born between 1900 and 1948, under colonial rule. In addition we digitized high-quality territory level information on fertility by cohort in the 1950s. We rely on unique historical and archival material to reconstruct temporal and geographic heterogeneity in exposure to missionary presence and the type of activities performed at the station level. We find a positive effect of Catholic nuns on fertility. In contrast, Catholic male missionaries have no detectable impact on fertility and Protestant missionaries have a clear negative impact. In terms of mechanisms, we argue that progress in general health are unlikely to explain, alone, the rise in fertility. Another likely channel was the promotion of an ideal of domesticity where women are confined to their role of mother and wife. Finally, using Demographic and Health Survey data, we find some trace of colonial mission’s influence on fertility patterns today.
    Date: 2022–03

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