nep-gro New Economics Papers
on Economic Growth
Issue of 2022‒10‒03
nine papers chosen by
Marc Klemp
University of Copenhagen

  1. Connecting to power: political connections, innovation, and firm dynamics By Ufuk Akcigit; Salomé Baslandze; Francesca Lotti
  2. Optimal growth with labour market frictions By Guerrazzi, Marco
  3. Neoclassical Growth with Long-Term One-Sided Commitment Contracts By Dirk Krueger; Harald Uhlig
  4. Historical Political Economy: What Is It? By Jeffrey Jenkins; Jared Rubin
  5. Interactions between Financial Constraints and Economic Growth By João Jerónimo; José Assis de Azevedo; Pedro Neves; Maria João Thompson
  6. Relationship among Domestic Investment, Exports and Economic Growth: Evidence form the Case of Greece By Bakari, Sayef
  7. The Impact of Natural resources, CO2 Emission, Energy use, Domestic Investment, Innovation, Trade and Digitalization on Economic growth: Evidence from 52 African Countries By Bakari, Sayef
  8. The Nexus between Domestic Investment and Economic Growth in Developed Countries: Do Exports matter? By Bakari, Sayef
  9. Pension funds in sub-Saharan Africa By Owen Nyangoro; Githinji Njenga

  1. By: Ufuk Akcigit (University of Chicago); Salomé Baslandze (Federal Reserve Bank of Atlanta); Francesca Lotti (Bank of Italy)
    Abstract: How do political connections affect firm dynamics, innovation, and creative destruction? We extend a Schumpeterian growth model with political connections that help firms ease their bureaucratic and regulatory burden. The model highlights how political connections influence an economy's business dynamism and innovation, and generate a number of implications guiding our empirical analysis. We construct a new large-scale dataset, for the period 1993-2014, on the universe of firms, workers, and politicians, supplemented by corporate financial statements, patent and election data, so as to define connected firms as those employing local politicians. We identify a leadership paradox: market leaders are much more likely to be politically connected, but much less likely to innovate. Political connections relate to a higher rate of survival, as well as growth in employment and revenues, but not in productivity. This result was also confirmed using the regression discontinuity design. At the aggregate level, gains from political connections do not offset losses stemming from lower reallocation and growth.
    Keywords: firm dynamics, innovation, political connections, creative destruction, productivity
    JEL: O3 O4 D7
    Date: 2022–07
  2. By: Guerrazzi, Marco
    Abstract: In this paper, I develop an optimal growth model with labour market frictions in which recruiting efforts are measured in terms of labour instead of output. Specifically, I build an intertemporal framework à la Ramsey in which labour has to be alternatively employed in the production of goods or in the recruitment of workers. Within this setting, assuming that capital is paid according to its marginal productivity, I show that (i) capital measured along its intensive margin may converge towards its stationary value in a non-monotonic manner; (ii) Pareto optimal allocations typical of a centralized economy can also be achieved in a decentralized environment in which the prevailing wage is indexed to the labour market tightness indicator; (iii) the consistency of the wage that implements efficient allocations with the competitiveness of the market for goods relies on vanishing values of the discount rate.
    Keywords: Capital accumulation; Searching-and-matching frictions; Efficiency; Capitalization effects; Zero discounting
    JEL: E22 E24 J64
    Date: 2022–09–02
  3. By: Dirk Krueger (University of Pennsylvania CEPR and NBER); Harald Uhlig (University of Chicago CEPR and NBER)
    Abstract: This paper characterizes the stationary equilibrium of a continuous-time neoclassical production economy with capital accumulation in which households can insure against idiosyncratic income risk through long-term insurance contracts. Insurance companies operating in perfectly competitive markets can commit to future contractual obligations, whereas households cannot. For the case in which household labor productivity takes two values, one of which is zero, and where households have logutility we provide a complete analytical characterization of the optimal consumption insurance contract, the stationary consumption distribution and the equilibrium aggregate capital stock and interest rate. Under parameter restrictions, there is a unique stationary equilibrium with partial consumption insurance and a stationary consumption distribution that takes a truncated Pareto form. The unique equilibrium interest rate (capital stock) is strictly decreasing (increasing) in income risk. The paper provides an analytically tractable alternative to the standard incomplete markets general equilibrium model developed in Aiyagari (1994) by retaining its physical structure, but substituting the assumed incomplete asset markets structure with one in which limits to consumption insurance emerge endogenously, as in Krueger and Uhlig (2006).
    Keywords: Idiosyncratic Risk, Limited Commitment, Stationary Equilibrium
    JEL: E21 D11 D91 G22
    Date: 2022–09–09
  4. By: Jeffrey Jenkins; Jared Rubin (Chapman University)
    Abstract: In this chapter, we define what historical political economy (HPE) is and is not, classify the major themes in the literature, assess the relative strengths and weaknesses of the literature, and point to future directions. We view HPE as social scientific inquiry which highlights political causes or consequences of historical issues. HPE is different from conventional political economy in the emphasis placed on historical processes and context. While we view HPE in the most inclusive manner reasonable, we define it to exclude works that are either solely of contemporary importance or use historical data without any historical context (e.g., long-run macroeconomic time series data). The future of HPE is bright, especially as more historical data from around the world become available via digitization. Consequently, the future frontier of the field likely falls outside of the US, which is the concern of a disproportionate amount of the current literature.
    Keywords: historical political economy, economics, political science, economic history, political history
    JEL: N00 P00
    Date: 2022
  5. By: João Jerónimo (University of Minho); José Assis de Azevedo (University of Minho); Pedro Neves (Departamento de Gestão e Economia and CEFAGE-UBI, University of Beira Interior); Maria João Thompson (University of Minho and NIPE)
    Abstract: Wishing to contribute theoretically to the understanding of the interactions between financial constraints and economic growth, we introduce financial dynamics in the R&D-based growth literature, by developing a generalization of Romer’s (1990) growth model, in which the original framework arises as a special case. We find that the overall effects of informational asymmetries on growth are negative, whilst asymptotically tending to null as our introduced financial parameter tends to zero.
    Keywords: Financial constraints; Economic growth
    JEL: C E
    Date: 2021
  6. By: Bakari, Sayef
    Abstract: The aim of this paper is to investigate the relationship among domestic investment, exports and economic growth in the case of Greece. To attempt our goal, we used annual data over the period 1970 – 2020 and Vector Error Correction Model. Empirical results indicate that in the long run there is no causality relationship between exports, domestic investment, and economic growth. In the short run, we found that only exports cause domestic investment. These results proved as evidence that domestic investment and exports are not seen as a source of economic growth in the case of Greece which also explain the catastrophe situation of economic activity in Greece
    Keywords: Domestic Investment, Exports, Economic Growth, VECM, Greece.
    JEL: C13 E22 F14 O47 O52
    Date: 2022
  7. By: Bakari, Sayef
    Abstract: The aim of this paper is to examine the impact of natural resources, CO2 emission, energy use, domestic investment, innovation, trade, and digitalization on economic growth in the case of 52 African Countries. To attempt our goal, we used annual data of 52 African countries for the period 1996 to 2021 which was estimated by using random effect model, fixed effect model and Hausman test. Empirical results indicate that domestic investment, exports, natural resources and final consumption expenditure have a positive impact on economic growth. Also, we found that labor force, imports and energy use have a negative effect on economic growth. However, we found that CO2 emission, innovation and internet use don’t have any effect on economic growth. The study recommends vital policies that should focus on promoting domestic investment, exports, natural resources, and final consumption to stimulate economic growth in African countries. Similarly, it recommends creating new strategies to manage the role of the active population, imports, energy consumption, CO2 emissions, innovation, and digitalization to make their effects influential in improving the economic growth.
    Keywords: Natural Resources, CO2 Emission, Energy Use, Domestic Investment, Innovation, Trade, Digitalization, Economic Growth, African Countries.
    JEL: C10 C22 C23 E22 F11 F14 J60 O31 O32 O34 O40 O44 O47 O49 O55 Q43 Q47 Q48 Q50
    Date: 2022
  8. By: Bakari, Sayef
    Abstract: We examine the effect of the exports on the relationship between domestic investment and economic growth. Data for 28 Developed Countries over the period 1998–2021 are used for panel data analysis. The effect of domestic investment on economic growth proves to be affected positively by exports and the effect of exports on the economic growth is positively strengthened by an increase in domestic investment.
    Keywords: Domestic Investment, Exports, Economic Growth, Developed Countries.
    JEL: F14 O16 O47
    Date: 2022–07–18
  9. By: Owen Nyangoro; Githinji Njenga
    Abstract: The population structure the world over is going through a demographic shift, and the elderly proportion is projected to increase with population growth. This change is a matter of concern for sub-Saharan African (SSA) countries, where the majority of the people are young and the rates of both population growth and unemployment are high. A good pension system provides elderly assistance and is a source of savings for long-term investment.
    Keywords: Elderly care, Pensions, Saving, Sub-Saharan Africa
    Date: 2022

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