nep-gro New Economics Papers
on Economic Growth
Issue of 2022‒08‒08
eight papers chosen by
Marc Klemp
University of Copenhagen

  1. Flow of Ideas: Economic Societies and the Rise of Useful Knowledge By Francesco Cinnirella; Erik Hornung; Julius Koschnick
  2. ICT, Technological Diffusion and Economic Growth in Chinese Cities By Qing Li; Yanrui Wu
  3. Innovation, growth, and productivity appropriation. How the elites learned to stop worrying and love public debt By Jacopo Di Domenico; Alberto Russo
  4. The causal effects of the darker side of financial development By Rachel Cho; Rodolphe Desbordes; Markus Eberhardt
  5. Do Sanctions Affect Growth? By Ohyun Kwon; Constantinos Syropoulos; Yoto V. Yotov
  6. Deep historical roots, culture choice and the New World Order By Miller, Marcus
  7. Political Growth Collapses By Francisco, Rodriguez; Patrick, Imam
  8. Philippine economic development, looking backwards and forward: An interpretative essay By Hal Hill

  1. By: Francesco Cinnirella (University of Bergamo); Erik Hornung (University of Cologne); Julius Koschnick (London School of Economics)
    Abstract: Economic societies emerged during the late eighteenth-century. We argue that these institutions reduced the costs of accessing useful knowledge by adopting, producing, and diffusing new ideas. Combining location information for the universe of 3,300 members across active economic soci-eties in Germany with those of patent holders and World’s Fair exhibitors, we show that regions with more members were more innovative in the late nineteenth-century. This long-lasting effect of societies arguably arose through agglomeration economies and localized knowledge spillovers. To support this claim, we provide evidence suggesting an immediate increase in manufacturing, an earlier establishment of vocational schools, and a higher density of highly skilled mechanical workers by mid-nineteenth century in regions with more members. We also show that regions with members from the same society had higher similarity in patenting, suggesting that social networks facilitated spatial knowledge diffusion and, to some extent, shaped the geography of innovation.
    Keywords: Economic Societies, Useful Knowledge, Knowledge Diffusion, Innovation, Social Networks
    JEL: N33 O33 O31 O43
    Date: 2022–07
  2. By: Qing Li (Department of Economics and Finance, SILC Business School, Shanghai University); Yanrui Wu (Business School, The University of Western Australia)
    Abstract: This study uses a rich city-level dataset to analyse the relationship between information and communication technology (ICT) and economic growth in Chinese cities during 2001-2016. It is shown that ICT not only improves the aggregate efficiency of a city but also helps the city absorb technological diffusion from the frontier city. In addition, distance plays little role in technological diffusion process associated with ICT. Cities geographically farther away from or closer to the frontier city can equally benefit from technological diffusion as long as they have the same level of ICT development.
    Keywords: ICT, technological diffusion, economic growth, Chinese cities
    JEL: O47 O33 R11
    Date: 2022
  3. By: Jacopo Di Domenico (Department of Economics and Social Sciences, Università Politecnica delle Marche, Ancona); Alberto Russo (Department of Management, Università Politecnica delle Marche, Ancona, Italy and Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: In this study, we propose the exploration of the characteristics of the Sraffian- Supermultiplier model where technological change and autonomous demand, coming from the public sector, determine the macroeconomic dynamics. The growth rate of the economy is determined by the productivity growth path that frees up labor to be employed in the production of alternative goods, and the public sector that, if not willing to accept high unemployment, has to increase its expenditure and generate the necessary demand for achieving spread (macroeconomic) growth. Because of the dependency of technological change on the sales level (due to the possibilities this offers in terms of labor division) at the macro and meso dimension, in contrast to the majority of the Supermultiplier models, the long-run growth rate of our artificial economy is also affected by the income distribution (both functional and personal) which affects the level of the total demand and shapes its composition across sectors. For the purpose of our research, we develop a multi-sectoral macroeconomic Agent based - Stock Flow consistent model (AB-SFC). The model is grounded on a theoretical framework representing a monetary economy of production (e.g. Graziani, Lavoie) where the principle of effective demand determines the level of output, while innovation is characterized by a typical Schumpeterian process of creation and destruction. The functional income distribution is determined as in classical theory and results from the struggle between capitalists and workers. The markup fixed by companies over normal unit-cost of production determines the normal rate of profit. Money is endogenous and is injected into the system when banks grant loans to companies to finance investments or wages anticipation and Government expenditure is financed by issuing public bonds. We study the impact the yearly performances have on the long-run path of the economy. After showing that the process innovation represents a necessary but not sufficient element for economic growth (and also a possible source of economic instability) which requires a public state with a hands-on approach (that increases its debt every time an increase in productivity occurs and stabilizes the economy) to achieve macroeconomic growth, we study how different productivity gain appropriations (and therefore different distribution configuration) affect the future trend of productivity (and therefore the long-run growth rate of the economy) through changes in the level of aggregate volumes and their allocation between sectors.
    Keywords: growth, productivity, distribution, instability, public debt, agent-based model, stock-flow consistency
    JEL: C63 H63 O33 O41
    Date: 2022
  4. By: Rachel Cho; Rodolphe Desbordes; Markus Eberhardt
    Abstract: We study the causal implications of financial deepening for economic development and financial crises, adopting a heterogeneous difference-in-difference framework. Using cross-country data for the past six decades we demonstrate that very high levels of finance, proxied by credit/GDP, are neither associated with lower long-run growth nor with higher short-run propensity of banking crises due to ‘credit booms gone bust’ cycles or unfettered capital inflows. When we investigate ‘too much finance’ at intermediate levels of credit/GDP we find increased crisis propensity due to capital inflows and commodity price movements, but, again, no detrimental long-run growth effects for these (emerging) economies.
    Keywords: financial development, economic growth, financial crises, difference-in-difference, interactive fixed effects, heterogeneous treatment effects
    Date: 2022
  5. By: Ohyun Kwon; Constantinos Syropoulos; Yoto V. Yotov
    Abstract: Direct measures of the economic impact of sanctions are contaminated by the endogeneity that arises when other events in target countries (e.g., civil or interstate conflicts, political independence, etc.) instigate the imposition of sanctions. To address this issue, we propose a novel instrument, sender’s aggressiveness, captured by the number of sanctions imposed in a given year. After establishing the validity of this instrument, we quantify the impact of sanctions on growth in sanctioned states and show that, on average, an additional sanction decreases contemporaneous real GDP per capita in target states by 0.39 percent. We also substantiate the presence of a significant (in magnitude) downward bias in the corresponding OLS estimates and demonstrate that the effects of sanctions on growth vary widely depending on the types of sanctions considered, their purported objectives, measures of their success, and the duration of their effects.
    Keywords: real GDP per capita growth, trade sanctions, smart sanctions, long-run effects
    JEL: F43 F51 F63
    Date: 2022
  6. By: Miller, Marcus (University of Warwick, CAGE and CEPR)
    Abstract: Gerard Roland examines data going back to 3,000 BC for historical roots that might explain the current division of nations as between cultures of collectivism and individualism. In response to the appeal for theories bearing on the empirical evidence presented - and of recent moves by Russia and China to create a New World Order based on similar cultural division - three contributions are discussed. First is the competing powers perspective of Acemoglu and Robinson, who propose that individualism flourishes where power is evenly balanced between the state and the people : otherwise, either Despotism or Disorder will ultimately prevail. Then there is Ken Binmores study of cooperative social contracts : this offers support for stable societies of each cultural type, based on the folk theorem of repeated games. Finally the notion that dictatorship may be sustained by deception rather than repression - by leaders whom Guriev and Treisman call spin dictators. In the light of these perspectives, what to make of the current drive for a new global order that recognizes different spheres of influence for each of Roland’s cultural types? We look specifically at the case of Russia.
    Keywords: Individualism ; Collectivism, Culture ; Social Contracts ; social preferences ; Neofeudalism ; Despotism ; New World Order JEL Classification: C70 ; C73 ; N00 ; P00 ; P50 ; Z10 ; Z13
    Date: 2022
  7. By: Francisco, Rodriguez; Patrick, Imam
    Abstract: We argue that economic collapses can result from the adoption by political actors of strategies that generate severe negative economic externalities for society. We establish the conditions for political conflict to become economically destructive and develop a diagnostics toolkit to identify when income declines are consequence of the breakdown of conflict-management arrangements. When political conflict drives a collapse in growth, we expect the onset of the contraction to coincide with the intensification of political conflict, authority to be truly contested, politically advantageous strategies to generate negative externalities, economic collapse to be driven by productivity losses, short-term biases in policies to increase with contestation of power, and the policy framework to improve once political conflict recedes. We argue that all these conditions were satisfied in two of the largest peacetime collapses in modern history: Venezuela (2012-2020) and Zimbabwe (1997-2008).
    Keywords: Economic Growth, Growth Collapses, Venezuela, Zimbabwe, Political Economy, Appropriation.
    JEL: D72 D74 O11
    Date: 2022–07–04
  8. By: Hal Hill
    Abstract: Over the past decade, the Philippine development story has attracted international attention as it transformed from being the “Sick Man of Asia” to “Asia’s Rising Tiger”. However, the country’s strong growth momentum was abruptly interrupted by the COVID-19 pandemic, which continues to cast a huge shadow over its development outlook. With the country now at the crossroads, this paper reflects on and draws lessons for economic development and policy by examining the country’s three main economic episodes over the post-independence era: (a) the period of moderately strong growth from 1946 to the late 1970s, (b) the tumultuous crisis years from the late 1970s to the early 1990s, and (c) the period from the early 1990s to the 2019 when it rejoined the dynamic East Asian mainstream. Through comparative analysis, the paper also seeks to understand the country’s development dynamics and political economy. We conclude by highlighting elements of a recovery and reform agenda in the post-pandemic era.
    Keywords: Philippines, economic development, economic history, political economy, institutions, COVID-19, ASEAN, comparative analysis.
    JEL: E02 I0 N15 O10 O43 O53 P52
    Date: 2021

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