nep-gro New Economics Papers
on Economic Growth
Issue of 2022‒04‒25
fourteen papers chosen by
Marc Klemp
University of Copenhagen

  1. Catholic Censorship and the Demise of Knowledge Production in Early Modern Italy By Fabio Blasutto; David de la Croix
  2. Natural Selection and Neanderthal Extinction in a Malthusian Economy By Chu, Angus
  3. Solving the longitude puzzle: A story of clocks, ships and cities By Miotto, M; Pascali, L
  4. Monetary Policy and Economic Growth in a Schumpeterian Model with Incumbents and Entrants By Lu, You-Xun; Chen, Shi-kuan; Lai, Ching-chong
  5. Subsidies, Entry, and Economic Growth in a Schumpeterian Model with Incumbents and Entrants By Lu, You-Xun; Chen, Shi-kuan; Lai, Ching-chong
  6. Trend breaks and the long-run implications of investment-specific technological progress By Moura, Alban
  7. New Evidence on Sectoral Labor Productivity: Implications for Industrialization and Development By Berthold Herrendorf; Richard Rogerson; Ákos Valentinyi
  8. Comment on “Labor- and Capital-augmenting technical change”: Does the stability of balanced growth path depend on the elasticity of factor substitution? By Bental, Benjamin; Li, Defu; Tang, Xuemei
  9. Demographic transition and economic growth in 6-EU member states By Srdelic, Leonarda; Davila-Fernandez, Marwil J.
  10. Assessing the Moderating Effect of Institutional Quality on Economic Growth - Carbon Emission Nexus in Nigeria By Anne C. Maduka; Stephen O. Ogwu; Chukwunonso S. Ekesiobi
  11. Modern services led growth and development in a structuralist dual economy: long-run implications of skilled labor constraint By Thakur, Gogol M
  12. The Long-Run Effects of Immigration: Evidence Across a Barrier to Refugee Settlement By Antonio Ciccone; Jan Nimczik
  13. Endogenous childcare costs in R&D based model By Miyake, Yusuke
  14. On the Fragility of the Basis on the Hamilton-Jacobi-Bellman Equation in Economic Dynamics By Yuhki Hosoya

  1. By: Fabio Blasutto (Department of Economics, Stockholm School of Economics); David de la Croix (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: Censorship makes new ideas less available to others, but also reduces the share of people choosing to develop non-compliant ideas. We propose a new method to measure the effect of censorship on knowledge growth, accounting for the agents' choice between compliant and non-compliant occupations. We apply our method to the Catholic Church's censorship of books written by members of Italian universities and academies over the period 1400-1750. We highlight two new facts: once censorship was introduced, censored authors were of better quality than the non-censored authors, but this gap shrank over time, and the intensity of censorship decreased over time. These facts are used to identify the deep parameters of a novel endogenous growth model linking censorship to knowledge diffusion and occupational choice. We conclude that censorship reduced by 34% the average log publication per scholar in Italy, while adverse macroeoconomic processes are responsible for another 9% reduction. Interestingly, the induced reallocation of talents towards compliant activities explains half the effect of censorship.
    Keywords: Censorship, Upper-Tail Human Capital, Publications, Scholars, Early Modern Italy, Occupational Choice
    JEL: J24 N33 O33 O43
    Date: 2022–04–14
  2. By: Chu, Angus
    Abstract: This study develops a Malthusian model with natural selection of human species. We explore how population dynamics of one group of humans may cause the extinction of another group. In our model, different groups of humans engage in hunting-gathering. The larger group of humans can occupy more land. Therefore, in a Malthusian economy, the expansion of one population causes the other population to shrink. Whether it causes the other population to become extinct depends on a structural parameter that is the elasticity of the relative share of land with respect to the relative population size. If this elasticity is below unity, then both populations converge to their positive steady-state levels. However, if the elasticity is equal to unity, then the population that has a lower fertility cost, stronger fertility preference, higher hunting-gathering productivity and higher labor supply converges to a positive steady-state level whereas the other population eventually becomes extinct.
    Keywords: Neanderthals; early modern humans; hunting-gathering; natural selection
    JEL: O13 Q56
    Date: 2022–03
  3. By: Miotto, M (CERGE-EI and CAGE); Pascali, L (Pompeu Fabra Univerity, Barcelona GSE, CAGE and CEPR)
    Abstract: In the 19th century, the process of European expansion led to unprecedented changes in the urban landscape outside of Europe, with the urban population moving towards the coast and tripling in size. We argue that the majority of these changes can be explained by a single innovation, the chronometer, which allowed European explorers and merchants to measure longitude at sea. We use high-resolution global data on climate, ship routes, and demography from 1750 to 1900 to investigate empirically (i) the role of the adoption of the marine chronometer in re-routing trans-oceanic navigation, and (ii) the impact of these changes on the distribution of cities and population across the globe. Our identification relies on the differential impact of the chronometer across trans-oceanic sailing routes.
    Keywords: Longitude, Chronometer, Gravity, Globalization, Trade, Development JEL Classification: F1, F15, F43, R12, R4
    Date: 2022
  4. By: Lu, You-Xun; Chen, Shi-kuan; Lai, Ching-chong
    Abstract: An important aspect of economic growth is the interaction between incumbents and new firms. In this study, we develop a monetary Schumpeterian model with an endogenous market structure (EMS) and two types of quality improvements (the own-product improvements of incumbents and creative destruction of entrants) to analyze the effects of monetary policy. The key finding of our analysis is that an increase in the nominal interest rate importantly affects the composition of innovation that drives economic growth, stimulating the incumbents’ own-product improvements and reducing the entrants’ creative destruction. Therefore, the growth effect of monetary policy is ambiguous, and depends on the relative magnitudes of the incumbents’ and entrants’ contributions to R&D and growth. Finally, we provide a quantitative analysis of the growth and welfare effects of monetary policy and consider an extension of the benchmark model with an elastic labor supply and a CIA constraint on consumption.
    Keywords: innovation, monetary policy, economic growth, endogenous market structure
    JEL: E41 O31 O41
    Date: 2022–01–18
  5. By: Lu, You-Xun; Chen, Shi-kuan; Lai, Ching-chong
    Abstract: This paper explores the effects of various subsidies on economic growth and growth composition in a Schumpeterian model with incumbents and entrants. The main results can be summarized as follows. Subsidizing the production of intermediate goods or subsidizing incumbents’ in-house R&D serves to promote economic growth. However, the growth effect of the subsidy on entrants’ R&D can be positive or negative, depending on the level of the fixed entry cost. Moreover, we show that various types of subsidies have different effects on the entry of new firms and market structure. Finally, we calibrate the model and find that the subsidy on intermediate goods production is more effective than R&D subsidies in terms of promoting growth and raising welfare.
    Keywords: innovation, subsidies, economic growth, market structure, incumbents and entrants
    JEL: O31 O38 O40
    Date: 2022–02–10
  6. By: Moura, Alban
    Abstract: I update the Greenwood, Hercowitz, and Krusell (1997) decomposition of U.S. growth into contributions from neutral and investment-specific technological progress. I allow the decomposition to vary across sub-samples, reflecting the presence of trend breaks in the data. The estimates suggest that neutral technological progress explained virtually all growth between 1950 and the mid-1970s. However, investment-specific technological progress accounts for about 75 percent of growth since the 1980s. These results support splitting the postwar sample and using two-sector models to study the recent period.
    Keywords: neutral technology; investment-specific technology; sources of long-run growth; structural breaks
    JEL: E13 O33 O41 O47
    Date: 2021–08
  7. By: Berthold Herrendorf; Richard Rogerson; Ákos Valentinyi
    Abstract: Moving labor from agriculture to manufacturing – “industrialization” – is often viewed as essential for the development of poor countries. We present new evidence on the channels through which industrialization can help poor countries close the productivity gap with rich countries. To achieve this, we leverage recent data releases by the Groningen Growth and Development Centre and build a new dataset of comparable labor productivity levels in agriculture and manufacturing for 64 mostly poor countries during 1990–2018. We find two key results: (i) cross-country labor productivity gaps in manufacturing are larger than in the aggregate and (ii) there is no tendency for manufacturing labor productivity to converge. While these results challenge the notion that expanding manufacturing employment is essential for the development of today’s poor countries, we also find that higher labor productivity growth in manufacturing is associated with higher labor productivity growth in the aggregate and in several key sectors.
    JEL: E24 O11 O14 O47
    Date: 2022–03
  8. By: Bental, Benjamin; Li, Defu; Tang, Xuemei
    Abstract: In a classic paper, Acemoglu (2003) developed a growth model where firms can undertake both labor- and capital-augmenting technological improvements. According to that paper the balanced growth path with purely labor-augmenting technical change is the unique asymptotic (noncycling) equilibrium, and is stable only when capital and labor are gross complements, i.e., only when the elasticity of substitution between these two factors is no greater than 1. Otherwise, the model not only has two other asymptotic steady-state paths, but also the balanced growth path is unstable. The current comment points out that Acemoglu's conclusion ignores the crowding effect in innovation sector that he has proposed due to the assumption of perfect mobility of scientists between sectors. By replacing the perfect mobility assumption with a smooth adjustment process, implicitly invoking the presence of some adjustment costs, this comment not only points out that the factors affecting the direction of technological progress include both the demand side of innovations (relative price and relative market size) and the supply side of innovations (relative marginal productivity of innovation), but also proves that regardless of whether the substitution elasticity is greater than 1 or less than 1, the balanced growth path is not only unique, but also at least locally saddle-path stable.
    Keywords: elasticity of substitution, crowding effect of innovation, scientist migration function, balanced growth path, direction of technological progress
    JEL: E25 O14 O31 O33
    Date: 2022–03–23
  9. By: Srdelic, Leonarda; Davila-Fernandez, Marwil J.
    Abstract: Europe is experiencing a dramatic shift in its demographic structure, ending three centuries of unprecedented population growth. However, there are few empirical estimates of the realised effect of such a process on economic performance. The present article attempts to fill this gap in the literature by assessing the impact of demographic transition in six European countries between 1971 and 2019. Unlike most studies in the field that rely on Cobb-Douglas production functions, we adopt an open-economy approach under the premise that, in the long-run, growth is balance-of-payments constrained. Applying time-varying-parameter estimation techniques, we compute the rate of growth compatible with equilibrium in the balance-of-payments (yBP) and show it is a good predictor of output growth trends. We proceed by investigating the importance of population dynamics as one of its determinants. The obtained effects are moderate, and there is significant heterogeneity between countries. In Italy, for instance, a 10-points increase in the old-age dependency ratio is associated with a 3% lower yBP, while in France, we have the opposite effect. Moreover, population decline effects are conditional to controlling for migration, with Germany and Austria differentiating themselves from their Southern Europe counterparts.
    Keywords: Demographic transition; Long-run growth; Thirlwall's law; Europe.
    JEL: J11 O41 O52
    Date: 2022–03
  10. By: Anne C. Maduka (Igbariam, Nigeria); Stephen O. Ogwu (Nsukka, Nigeria); Chukwunonso S. Ekesiobi (Igbariam, Nigeria)
    Abstract: This study explores the relationship between economic growth and carbon dioxide and the moderating effect of institutional quality in Nigeria from 1990 to 2020, by employing long run and short run dynamic ARDL regression, quartile regression and granger causality test for the estimation. Utilizing CO2 per capita emissions, GDP per capita– a proxy for economic growth, capital stock (CAPSTK) – proxy for capital investment in Nigeria and Control of Corruption and Regulatory Quality (COC and RGQ) which represent the effective environmental regulations and laws put in place for the control and prevention of environmental degradation, the study found a significant cointegration between CO2 emissions and economic growth (lnGDP) in Nigeria. Furthermore, an N-shaped nexus exist between CO2 emissions and economic growth in the long run and short run instead of the inverted U-shape curve postulated by the EKC hypothesis. This was confirmed by both ARDL and quartile regression results. Similarly, InCAPSTK contributed significantly to the growth of CO2 emissions in Nigeria both in the long run and short run, although, the short run did so at 10% significant level. Contrary to expectations, control of corruption (COC), contributes significantly to CO2 emissions in the long run but when it interacts with income (InGDP×COC), it significantly contributes to the reduction of CO2 emissions. More so, Regulatory quality (RGQ) had no significant impact on CO2 emissions in Nigeria either in the long run or short run, even when it interacts with InGDP. This finding is further supported by the quartile regression outcomes and granger causality. The study therefore concludes that CO2 emissions - economic growth nexus in Nigeria assumes an N-shape both in the long run and short run. Based on the results, the study recommends that Government should pursue industrialization policy with sophisticated method of production that will bring about rapid economic progress and at the same time support environmental sustainability.
    Keywords: Regulatory Quality, Control of Corruption, Carbon Emission, Economic Growth, Quartile Regression, Environmental Sustainability
    JEL: O44 Q5 C5
    Date: 2022–01
  11. By: Thakur, Gogol M
    Abstract: Motivated by the South Asian experience, this paper highlights the importance of the rate of expansion of skilled labor force for service-led growth and development in economies characterized by large populations and low average education and skill endowments using a dual economy model. The model economy consists of a skilled-labor intensive service sector and a skilled-labor indifferent industrial sector - both Kaleckian, in the sense that they maintain excess capacity and operate under conditions of imperfect competition. Labor market is fragmented. There is unlimited supply of unskilled labour but skilled labor is scarce and grows only at a finite rate. Growth of skilled labor supply is only fractionally explained by growth in real wage of skilled labor while the rest depends on education policy of the government. Since government policies take time to adjust to the needs of the private sector, we argue that effect of education policy on skilled labor supply growth can be treated as autonomous. The main result of this paper shows that the model economy can converge to a steady state characterized by balanced sectoral growth at a rate equal to the autonomous part of skilled labor growth. Also, increase in returns to skilled labor can drive up the output share of modern services as the two are positively related in the steady state. The model also shows that the supply side can determine growth in structuralist models despite persistence of unemployed resources.
    Keywords: developing economies, dual economy model, modern services, skilled labor, education policy
    JEL: I25 O14 O15 O41
    Date: 2022–03
  12. By: Antonio Ciccone; Jan Nimczik
    Abstract: After the end of World War II in 1945, millions of refugees arrived in what in 1949 became the Federal Republic of Germany. We examine their e ect on today's productivity, wages, income, rents, education, and population density at the municipality level. Our identification strategy is based on a spatial discontinuity in refugee settlement at the border between the French and US occupation zones in the South-West of post-war Germany. These occupation zones were established in 1945 and dissolved in 1949. The spatial discontinuity arose because the US zone admitted refugees during the 1945-1949 occupation period whereas the French zone restricted access. By 1950, refugee settlement had raised population density on the former US side of the 1945-1949 border significantly above density on the former French side. Before the war, there never had been significant di erences in population density. The higher density on the former US side persists entirely in 2020 and coincides with higher rents as well as higher productivity, wages, and education levels. We examine whether today's economic di erences across the former border are the result of the di erence in refugee admission; the legacy of other policy di erences between the 1945-1949 occupation zones; or the consequence of socio-economic di erences predating WWII. Taken together, our results indicate that today's economic di erences are the result of agglomeration e ects triggered by the arrival of refugees in the former US zone. We estimate that exposure to the arrival of refugees raised income per capita by around 13% and hourly wages by around 10%.
    Keywords: immigration, productivity wages, refugess, long-run effects
    JEL: O4 O11 R11
    Date: 2022–04
  13. By: Miyake, Yusuke
    Abstract: In an AI society, ICT is being introduced in all sectors. This trend is expected to significantly impact an aging society with a declining birthrate, which is expected to accelerate in the future. The development of medical care and improvements in diet will promote longer life expectancy, while the spread of online services will promote more efficient labor, and the development of home appliances will greatly reduce the burden of housework and childcare. In this paper, we analyze how the increase in longevity and disposable time of households in an AI society will affect the decline in fertility based on an R&D model.
    Keywords: Endogenous Childcare cost - Endogenous lifetime - Two-sector growth model
    JEL: J11 J22 O41
    Date: 2022–03–22
  14. By: Yuhki Hosoya
    Abstract: In this paper, we provide an example of the optimal growth model in which there exists infinitely many solutions to the Hamilton-Jacobi-Bellman equation but the value function does not satisfy this equation. We consider the cause of this phenomenon, and find that the lack of a solution to the original problem is crucial. We show that under several conditions, there exists a solution to the original problem if and only if the value function solves the Hamilton-Jacobi-Bellman equation. Moreover, in this case, the value function is the unique nondecreasing concave solution to the Hamilton-Jacobi-Bellman equation. We also show that without our conditions, this uniqueness result does not hold.
    Date: 2022–03

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