nep-gro New Economics Papers
on Economic Growth
Issue of 2022‒08‒15
nine papers chosen by
Marc Klemp
University of Copenhagen

  1. The Shadow of the Neolithic Revolution on Life Expectancy: A Double-Edged Sword By Raphaël Franck; Oded Galor; Omer Moav; Ömer Özak
  2. Demographic Transition, Industrial Policies and Chinese Economic Growth By Michael Dotsey; Wenli Li; Fang Yang
  3. R&D Capital: An Engine of Growth By Jakub Growiec
  4. Sustainable Economic Growth in an Economy with Exhaustible Resources and a Declining Population under the Balance-of-Payments Constraint By Sasaki, Hiroaki; Fukatani, Noriki; Imai, Daisuke; Kamanaka, Yusuke
  5. Education, public expenditure and economic growth under the prism of performance By Pierre Lesuisse
  6. Public debt, growth, and threshold effects: A comparative analysis based on income categories By Princewill U. Okwoche; Eftychia Nikolaidou
  7. Disruptive innovation and spatial inequality By Tom Kemeny; Sergio Petralia; Michael Storper
  8. Optimal policies in an aging society By Richard Jaimes; Ed Westerhout; Ed Westerhout
  9. Renewable Technology Adoption Costs and Economic Growth By Bernardino Adão; Borghan N. Narajabad; Ted Temzelides

  1. By: Raphaël Franck; Oded Galor; Omer Moav; Ömer Özak
    Abstract: This research explores the persistent effect of the Neolithic Revolution on the evolution of life expectancy in the course of human history. It advances the hypothesis and establishes empirically that the onset of the Neolithic Revolution and the associated rise in infectious diseases triggered a process of adaptation reducing mortality from infectious diseases while increasing the propensity for autoimmune and inflammatory diseases. Exploiting an exogenous source of variation in the timing of the Neolithic Revolution across French regions, the analysis establishes the presence of these conflicting forces - the beneficial effects on life expectancy before the second epidemiological transition and their adverse effects thereafter.
    JEL: I15 O10
    Date: 2022–07
  2. By: Michael Dotsey; Wenli Li; Fang Yang
    Abstract: We build a unified framework to quantitatively examine the demographic transition and industrial policies in contributing to China’s economic growth between 1976 and 2015. We find that the demographic transition and industrial policy changes by themselves account for a large fraction of the rise in household and corporate savings relative to total output and the rise in the country’s per capita output growth. Importantly, their interactions also lead to a sizable fraction of the increases in savings since the late 1980s and reduce growth after 2010. A novel and important factor that drives these dynamics is endogenous human capital accumulation, which depresses household savings between 1985 and 2010 but leads to substantial gains in per capita output growth after 2005.
    Keywords: Aging; Credit policy; Household saving; Output growth; China
    JEL: E21 J11 J13 L52
    Date: 2022–07–15
  3. By: Jakub Growiec
    Abstract: Research and development (R&D) requires not only skilled research work, but also dedicated machinery and equipment: R&D capital. In this paper I demonstrate that R&D, producing labor-augmenting ideas, and the accumulation of R&D capital can form a dual engine of economic growth. With R&D capital, balanced growth can be sustained even under decreasing returns and in the absence of population growth. This result contributes to the long-lasting debate on endogenous vs. semi-endogenous R&D-based growth and the likelihood of an upcoming secular stagnation.
    Keywords: R&D capital, long-run economic growth, growth engine, endogenous growth, secular stagnation.
    JEL: O30 O40
    Date: 2022–05
  4. By: Sasaki, Hiroaki; Fukatani, Noriki; Imai, Daisuke; Kamanaka, Yusuke
    Abstract: This study builds a growth model and theoretically investigated the effects of the depletion of resources, as well as an increase or decrease in population, on the growth rate of per capita consumption in an open economy that trades with the rest of the world. We specifically consider an open economy where final goods are produced with capital, labor, exhaustible resources, and imported intermediate goods. We examine two cases. In one case, the input ratio of exhaustible resources is fixed while in the other case, it is endogenously determined. In both cases, as long as the combinations of the parameters are confined within a specific range, the long-term growth rate of per capita consumption is positive, irrespective of whether the population growth rate is positive or negative. Comparing the case where the input ratio of exhaustible resources is fixed with the case where it is endogenized, in the latter case, the long-term growth rate of per capita consumption is more likely to be positive.
    Keywords: exhaustible resources; population decline; international trade; balance-of-payments constraint; sustainable growth
    JEL: J11 O13 O41 Q32
    Date: 2022–06–25
  5. By: Pierre Lesuisse (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: Recursively in the literature, public spending on education is found to have an ambiguous impact on economic growth. Using World Development Indicators from the World Bank, we revisit an endogenous growth model from Blankenau et al. (2007), over the last thirty years. Considering the fiscal effect, we analyse the empirical relationship between public spending on education and economic development. Despite having a positive and significant impact on the overall group of 65 countries belonging to upper-middle and high-income countries, our main results are not robust to subgroups , focusing on the economic development. Once we control for the performance of public expenditure, to effectively generate human capital, we find a positive and significant impact from increasing expenditure on education, in what we call "performing countries". Our results demonstrate that increasing spending on education cannot be growth enhancing without considering the prism of performance.
    Keywords: Fiscal policy,Endogenous growth,Education,Performance
    Date: 2022–05
  6. By: Princewill U. Okwoche (School of Economics, University of Cape Town); Eftychia Nikolaidou (School of Economics, University of Cape Town)
    Abstract: Whether or not public debt stifles economic growth remains a relevant research question. An equally relevant follow-up question is whether there is a certain threshold, applicable to all countries, above which debt becomes a drag on growth. Although there is generally no consensus, researchers seem to agree that the relationship between debt and growth is, at best, heterogenous across countries and groups. This study is motivated by the idea of parameter heterogeneity according to which the data generating process that characterizes each country’s growth process is not the same for all observations. Although previous studies have focused more on the asymmetric effect of debt on growth above and below a particular debt threshold, evidence shows that the level of debt is not the only plausible threshold variable. This study examines the influence of income per capita and countries’ historical categorization by income on the debt-growth nexus. It also examines the variation in the nexus across low, lower-middle, upper-middle, and high-income countries. Mainly, the study presents a debt threshold value of around 45% for all countries beyond which debt impacts negatively on growth. It also finds that the relationship between debt and growth varies considerably from one income group to another. Notably, the threshold of debt tends to rise as one moves up from low to high-income category. Given the negative relationship between debt and growth above the threshold, it is important for countries, particularly those in the lower income categories, to exercise some caution in the accumulation of debt.
    Date: 2022
  7. By: Tom Kemeny; Sergio Petralia; Michael Storper
    Abstract: Although technological change is widely credited as driving the last two hundred years of economic growth, its role in shaping patterns of inequality remains under-explored. Drawing parallels across two industrial revolutions in the United States, this paper provides new evidence of a relationship between highly disruptive forms of innovation and spatial inequality. Using the universe of patents granted between 1920 and 2010 by the U.S. Patent and Trademark Office, we identify disruptive innovations through their rapid growth, complementarity with other innovations, and widespread use. We then assign more- and less-disruptive innovations to subnational regions in the geography of the U.S. We document three findings that are new to the literature. First, disruptive innovations exhibit distinctive spatial clustering in phases understood to be those in which industrial revolutions reshape the economy; they are increasingly dispersed in other periods. Second, we discover that the ranks of locations that capture the most disruptive innovation are relatively unstable across industrial revolutions. Third, regression estimates suggest a role for disruptive innovation in regulating overall patterns of spatial output and income inequality
    Keywords: technological change; regional development; industrial revolutions; innovation; inequality
    JEL: O30 O33 O51 J31
    Date: 2022–07
  8. By: Richard Jaimes; Ed Westerhout; Ed Westerhout
    Abstract: We analyze optimal social security in a two-period overlapping generations model with endogenous retirement and demographic change. In this model, households choose to spend the second period of their lives in full retirement if the tax rate on labor income exceeds a certain threshold. We find that this threshold is increasing in life expectancy and decreasing in the fertility rate, which implies that both types of demographic change increase the relevance of the partial retirement case in which households participate on the labor market. Related, both an increase in life expectancy and a drop in fertility imply that retirement is delayed in the partial retirement case. We also show that when the government decides about the retirement age, the command optimum can be replicated through social security policies as long as the laissez-faire equilibrium features an overaccumulation of capital. When households decide about their retirement age themselves, however, replication of the command optimum is not possible, even if overaccumulation of capital applies. In both cases, it is optimal to expand social security when longevity increases and to reduce it when fertility drops.
    Keywords: Aging, Retirement, Optimal taxation.
    JEL: J11 J26 H21
    Date: 2022–06–14
  9. By: Bernardino Adão; Borghan N. Narajabad; Ted Temzelides
    Abstract: We develop a dynamic general equilibrium integrated assessment model that incorporates costs due to new technology adoption in renewable energy as well as externalities associated with carbon emissions and renewable technology spillovers. We use world economy data to calibrate our model and investigate the effects of the technology adoption channel on renewable energy adoption and on the optimal energy transition. Our calibrated model implies several interesting connections between technology adoption costs, the two externalities, policy, and welfare. We investigate the relative effectiveness of two policy instruments-Pigouvian carbon taxes and policies that internalize spillover effects-in isolation as well as in tandem. Our findings suggest that renewable technology adoption costs are of quantitative importance for the energy transition. We find that the two policy instruments are better thought of as complements rather than substitutes.
    Keywords: Technology adoption; Scrapping; Energy transition; Climate; Dynamic taxation
    JEL: H21 O14 O33 Q54 Q55
    Date: 2022–07–08

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