nep-gro New Economics Papers
on Economic Growth
Issue of 2022‒05‒30
sixteen papers chosen by
Marc Klemp
University of Copenhagen

  1. The Child Quantity–Quality Trade-off By Guo, Rufei; Yi, Junjian; Zhang, Junsen
  2. Wealth and Its Distribution in Germany, 1895-2018 By Thilo N. H. Albers; Charlotte Bartels; Moritz Schularick
  3. The universality in urban commuting across and within cities By Lei Dong; Paolo Santi; Yu Liu; Siqi Zheng; Carlo Ratti
  4. Little Divergence in America — Market Access and Demographic Transition in the United States By Guldi, Melanie; Rahman, Ahmed S.
  5. Assortive mating and the industrial revolution: England, 1754-2021 By Cummins, Neil; Clark, Gregory
  6. Understanding Climate Damages: Consumption versus Investment By Gregory P. Casey; Stephie Fried; Matthew Gibson
  7. The Origins of Elite Persistence: Evidence from Political Purges in post-World War II France By Toke S. Aidt; Jean Lacroix; Pierre-Guillaume Méon
  8. The Long-Run Effects of Immigration: Evidence across a Barrier to Refugee Settlement By Antonio Ciccone; Jan Nimczik
  9. Towards an explanation of a declining trend in capacity utilisation in the US economy By Santiago J. Gahn
  10. Harrod-Domar Formula for Two Sector Growth Models By V.K.Chetty; Basanta K Pradhan
  11. The Relationship between Inflation, Interest Rate, Unemployment and Economic Growth By Vîntu, Denis
  12. Productivity By John Van Reenen
  13. The colonial legacy of education: evidence from of Tunisia By Mhamed Ben Salah; Cédric Chambru; Maleke Fourati
  14. Conflict, Civil Wars and Human Development By Dominic Rohner
  15. Green Growth By Anna Valero
  16. The Neoclassical Model and the Welfare Costs of Selection By Fabrice Collard; Omar Licandro

  1. By: Guo, Rufei (Wuhan University); Yi, Junjian (Peking University); Zhang, Junsen (Chinese University of Hong Kong)
    Abstract: This chapter reviews the growing literature on the child quantity–quality (QQ) trade-off. During the transition from the traditional agricultural economy to modern economic growth, household real income increases, fertility decreases, and human capital investment per child increases. Motivated by this observation, economists started to develop theoretical models of the child QQ trade-off in the 1970s. Macroeconomic models that theoretically incorporate the QQ trade-off flourish. As a parallel development, empirical studies exploit multiple sources of exogenous variations in family size, such as twin births, child sex composition, and family planning policies, to identify the causal effect of fertility on child quality. Dialogues between theoretical and empirical analyses should empower future research on the child QQ trade-off.
    Keywords: demographic transition, fertility, child human capital investment, child quantity-quality trade-off
    JEL: D10 J13
    Date: 2022–04
  2. By: Thilo N. H. Albers; Charlotte Bartels; Moritz Schularick
    Abstract: German history over the past 125 years has been turbulent. Marked by two world wars, revolutions and major regime changes, as well as a hyperinflation and three currency reforms, expropriations and territorial divisions, it provides unique insights into the role of country-specific shocks in shaping long-run wealth dynamics. This paper presents the first comprehensive study of wealth and its distribution in Germany since the 19th century. We combine tax and archival data, household surveys, historical national accounts, and rich lists to analyze the evolution of the German wealth distribution over the long run. We show that the top 1% wealth share has fallen by half, from close to 50% in 1895 to 27% today. Nearly all of this decline was the result of changes that occurred between 1914 and 1952. The interwar period and the wealth taxation in the aftermath of World War II stand out as the great equalizers in 20th century German history. After unification in 1990, two trends have left their mark on the German wealth distribution. Households at the top made substantial capital gains from rising business wealth while the middle-class had large capital gains in the housing market. The wealth share of the bottom 50% halved since 1990. Our findings speak to the importance of historical shocks to the distribution and valuations of existing wealth in explaining the evolution of the wealth distribution over the long run.
    Keywords: wealth inequality, portfolio heterogeneity, saving, wealth taxation
    JEL: D31 E01 E21 H20 N30
    Date: 2022
  3. By: Lei Dong; Paolo Santi; Yu Liu; Siqi Zheng; Carlo Ratti
    Abstract: Commuting is a key mechanism that governs the dynamics of cities. Despite its importance, very little is known of the properties and mechanisms underlying this crucial urban process. Here, we capitalize on $\sim$ 50 million individuals' smartphone data from 234 Chinese cities to show that urban commuting obeys remarkable regularities. These regularities can be generalized as two laws: (i) the scale-invariance of the average commuting distance across cities, which is a long-awaited validation of Marchetti's constant conjecture, and (ii) a universal inverted U-shape of the commuting distance as a function of the distance from the city centre within cities, indicating that the city centre's attraction is bounded. Motivated by such empirical findings, we develop a simple urban growth model that connects individual-level mobility choices with macroscopic urban spatial structure and faithfully explains both commuting laws. Our results further show that the scale-invariants of human mobility will ultimately lead to the polycentric transition in cities, which could be used to better inform urban development strategies.
    Date: 2022–04
  4. By: Guldi, Melanie (University of Central Florida); Rahman, Ahmed S. (Lehigh University)
    Abstract: This paper assesses the causal impact of greater market access on demographic transition during the latter half of the 19th century in the United States. We construct new measures of fertility changes and measures of railroad access at the county level from 1850 – 1890. We are able to document market-access-induced changes in fertility due to both extensive margins (shifts in occupations with different average fertility rates) and intensive margins (changes in fertility within each occupation class). Both our theoretical model and empirical results suggest that declining fertility in counties mainly occurred through extensive margins. We further discover that fertility changes occurred mainly through strengthening patterns of specialization, rather than through greater industrialization or urbanization, suggesting that demographics diverged within the United States during this period.
    Keywords: demographic transition, market access, railroads, fertility, agricultural production, manufacturing production
    JEL: J11 J13 N11 N31
    Date: 2022–04
  5. By: Cummins, Neil; Clark, Gregory
    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.
    JEL: N0 B1 O52
    Date: 2022–04
  6. By: Gregory P. Casey; Stephie Fried; Matthew Gibson
    Abstract: Existing climate-economy models use aggregate damage functions to model the effects of climate change. This approach assumes climate change has equal impacts on the productivity of firms that produce consumption and investment goods or services. We show the split between damage to consumption and investment productivity matters for the dynamic consequences of climate change. Drawing on the structural transformation literature, we develop a framework that incorporates heterogeneous climate damages. When investment is more vulnerable to climate, we find short-run consumption losses will be smaller than leading models with aggregate damage functions suggest, but long-run consumption losses will be larger. We quantify these effects for the climate damage from heat stress and find that accounting for heterogeneous damages increases the welfare cost of climate change by approximately 4 to 24 percent, depending on the discount factor.
    Keywords: climate change, structural transformation, growth
    JEL: O13 O44 Q56
    Date: 2021
  7. By: Toke S. Aidt (Faculty of Economics, University of Cambridge); Jean Lacroix (Université Paris-Saclay, Faculté Jean Monnet, RITM); Pierre-Guillaume Méon (Centre Emile Bernheim, Université libre de Bruxelles)
    Abstract: This paper studies a new mechanism that allows political elites from a non-democratic regime to survive a democratic transition: connections. We document this mechanism in the transition from the Vichy regime to democracy in post-World War II France. The parliamentarians who had supported the Vichy regime were purged in a two-stage process where each case was judged twice by two di erent courts. Using a di erence-in-di erences strategy, we show that Law graduates, a powerful social group in French politics with strong connections to one of the two courts, had a clearance rate that was 10 percentage points higher than others. This facilitated the persistence of that elite group. A systematic analysis of 17,589 documents from the defendants' dossiers is consistent with the hypothesis that the connections of Law graduates to one of the two courts were a major driver of their ability to avoid the purge. We consider and rule out alternative mechanisms.
    Keywords: Purges, Political transitions, Elite persistence, Connections
    JEL: D73 K40 N44 P48
    Date: 2022–05
  8. 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 effect 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 differences 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 differences across the former border are the result of the difference in refugee admission; the legacy of other policy differences between the 1945-1949 occupation zones; or the consequence of socio-economic differences predating WWII. Taken together, our results indicate that today’s economic differences are the result of agglomeration effects 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%.
    Date: 2022
  9. By: Santiago J. Gahn
    Abstract: In this paper I analyse a declining trend of effective capacity utilisation in the United States. After identifying determinants of normal capacity utilisation in the literature, I find that this declining trend of the FRB’s capacity utilisation is also present in the output-capital ratio of the NBER-CES sectoral database since 1958. Results suggest that permanent changes on technical change (K/L), distribution (W/Y ) and output have transitory effects on the output-capital ratio, my proxy of effective capacity utilisation.
    Keywords: capacity utilisation, technical change, income distribution, Panel Structural VAR
    JEL: B50 E11 E22 O41 O47
    Date: 2022–05
  10. By: V.K.Chetty; Basanta K Pradhan (Institute of Economic Growth, Delhi)
    Abstract: In this paper the much celebrated Harrod-Domar model is extended to include a non-consumable capital good. Here, growth rate of capital is directly proportional to saving rate and inversely proportional to weighted harmonic mean of capital output ratios of two sectors. Moreover, our formula includes differential prices for the two goods. Further, here, flexible prices or variable capital output ratio for consumer goods sector help to balance savings and investments avoiding the famed knife-edge problem. Our model can provide explanations for possible relationships between wealth income ratios on one side, and interest rate and rent on the other, and help to confirm the possibilities of Piketty’s well-known empirical observations.
    JEL: E10 E22 O41
    Date: 2020–12
  11. By: Vîntu, Denis
    Abstract: This paper presents a quarterly structural macroeconomic model for the Republic of Moldova, which is known as the macroeconomic data model (MDM). This model can be used to assess economic conditions in the Republic of Moldova, forecast the macro economy, analyze policy options, and deepen our understanding of the functioning of a market economy. Some of the key features of the model are highlighted. First, the report looks at the Moldovan economy as a whole and finds that it is a small and open economy. Second, the model is small enough to be manageable for forecasting and simulation exercises, but still has enough detail for most purposes. Third, the model is designed to have a stable equilibrium over a long period of time, in accordance with classical economic theory, while its short-run dynamics are demand-driven. Fourth, the current version of MDM is mostly backward-looking, i.e. Expectations are influenced by the inclusion of lagged variables. The MDM uses a quarterly frequency data set, which allows for a more detailed analysis of the dynamics. The data is mostly estimated based on historical information. The paper includes stochastic long-run simulation results. The relationship between inflation, interest rates, unemployment and economic growth is important.
    Keywords: Republic of Moldova, macroeconometric modelling, open and small economy, inflation, interest rate, unemployment, economic growth, classical economics, Keynesian economics.
    JEL: C13 E21 E30 E41 E44
    Date: 2022–03
  12. By: John Van Reenen
    Abstract: Economics is the study of how to share out scarce resources. But it is also about how to make those resources less scarce by creating a bigger economic pie to share. The key to economic growth is increased productivity - producing more goods or services relative to the amount of money and work going in. Economists study how firms and countries can become more productive.
    Keywords: Productivity, Management, Growth, Innovation, R&D, Technology, Firms
    Date: 2022–03–03
  13. By: Mhamed Ben Salah; Cédric Chambru; Maleke Fourati
    Abstract: We study the effect of exposure to colonial public primary education on contemporary education outcomes in Tunisia. We assemble a new data set on the location of schools with the number of pupils by origin, along with population data during the French protectorate (1881–1956). We match those with contemporary data on education at both district and individual level. We find that the exposure of local population to colonial public primary education has a long-lasting effect on educational outcomes, even when controlling for colonial investments in education. A one per cent increase in Tunisian enrolment rate in 1931 is associated with a 1.69 percentage points increase in literacy rate in 2014. Our results are driven by older generations, namely individuals who attended primary schools before the 1989/91 education reform. We suggest that the efforts undertaken by the Tunisian government after independence to promote schooling finally paid off after 40 years and overturned the effects of history.
    Keywords: Colonial investment, primary education, Tunisia
    JEL: D10 N37 N47
    Date: 2022–05
  14. By: Dominic Rohner
    Abstract: Conflicts such as civil wars have manifold negative consequences on human development. In this survey article the existing literature is reviewed on the impact of conflict on educational attainment, health outcomes, inter-group trust and generalized social capital, as well as economic outcomes. It is stressed that four dimensions of adverse consequences from war exposure can give birth to four corresponding vicious cycles and war traps. Finally, a series of policies for peace are discussed, including policies that boost productivity and human capital accumulation, that foster inter-group trust and interaction, and that strengthen democratic institutions and governance.
    Date: 2022–04
  15. By: Anna Valero
    Abstract: Many countries have plans for a "green recovery" from the pandemic, in which the invention and diffusion of "clean" technologies and practices are central. How can environmental and broader industrial policies be combined to achieve growth that is strong, sustainable and inclusive? Economists study what drives innovation and growth - and how these can be steered towards delivering a zero-carbon future.
    Keywords: environment, industrial policies, , Productivity, growth
    Date: 2021–09–10
  16. By: Fabrice Collard (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique); Omar Licandro (UON - University of Nottingham, UK)
    Abstract: This paper embeds firm dynamics into the Neoclassical model and provides a simple framework to solve for the transitional dynamics of economies moving towards more selection. As in the Neoclassical model, markets are perfectly competitive, there is only one good and two production factors (capital and labor). At equilibrium, aggregate technology is Neoclassical, but the average quality of capital and the depreciation rate are both endogenous and positively related to selection. At steady state, output per capita and welfare both raise with selection. However, the selection process generates transitional welfare losses that may reduce in around 60% long term (consumption equivalent) welfare gains. The same property is shown to be true in a standard general equilibrium model with entry and fixed production costs.
    Keywords: Firm dynamics and selection,Neoclassical model,Capital irreversibility,Investment distortions,Transitional dynamics,Welfare gains
    Date: 2022–03–30

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