nep-gro New Economics Papers
on Economic Growth
Issue of 2022‒12‒05
nine papers chosen by
Marc Klemp
University of Copenhagen

  1. Inequality and Climate Change: Two Problems, One Solution? By Nicolli, Francesco; Gilli, Marianna; Vona, Francesco
  2. Long-Term Economic Implications of Demeny Voting: A Theoretical Analysis By Luigi Bonatti; Lorenza Alexandra Lorenzetti
  3. An Alternative Approach to Optimal Growth Path by Adaptive Decision-Making based on Budgetary Control Management By Sakaki, Shungo
  4. Grey power and Economic Performance By Vlandas, Tim
  5. The human capital effect on productivity and agricultural frontier expansion in Brazil By Henrique Batista de Barros, Pedro; Henrique Leite de Castro , Gustavo; Menezes-Filho, Naercio
  6. Structural Change, Elite Capitalism, and the Emergence of Labor Emancipation By Boris Gershman; Quamrul H. Ashraf; Francesco Cinnirella; Oded Galor; Erik Hornung
  7. Optimal Allocations in Growth Models with Private Information By Krebs, Tom; Scheffel, Martin
  8. Millet, Rice, and Isolation: Origins and Persistence of the World's Most Enduring Mega-State By Kung, James Kai-sing; Özak, Ömer; Putterman, Louis; Shi, Shuang
  9. Computing Economic Chaos By Richard H. Day; Oleg V. Pavlov

  1. By: Nicolli, Francesco; Gilli, Marianna; Vona, Francesco
    Abstract: This paper re-examines the relationship between per capita income, inequality, and per capita emissions while accounting for nonhomotheticity in green preferences and nonlinearities in the impact of economic growth on GHG emissions. Theoretically, our research is motivated by the fact that if environmental quality is a need with low priority on the hierarchical scale, the effect of inequality on emissions should vary depending on the level of income per capita. Specifically, for a given level of income per capita, a richer median voter will be more likely to approve of more stringent environmental policies, and thus, lower inequality is beneficial for the environment. With nonhomothetic preferences, the beneficial environmental effect of reducing inequality emerges only for countries that are sufficiently rich. We test this hypothesis by augmenting a standard EKC equation with the interaction between income per capita and the Gini coefficient. Our results for CO2, SO2 and N2O emissions corroborate our main hypothesis: reducing inequality is beneficial for the environment only for rich countries.
    Keywords: Labor and Human Capital, Public Economics
    Date: 2022–11–17
  2. By: Luigi Bonatti; Lorenza Alexandra Lorenzetti
    Abstract: This paper places itself at the intersection between the literature on “Demeny voting” (the proposal of letting custodial parents exercise their children’s voting rights until they come of age) and the vast literature on formal models with endogenous fertility that address the problem of fiscal redistribution between young and old cohorts in the presence of an aging population. Linking these issues to the process of economic growth through a simple overlapping generations model, we show that, even if the government is myopic, in the sense that it cares only about the current well being of the living (and voting) generations, an increase in the relative importance that it attaches to the interests of the young cohort (for instance, due the introduction of Demeny voting) leads in the long run to a higher population growth rate and raises the consumption level of each young adult, the capital stock per worker and the output per adult. We also show that in the long run such a reform raises the well being that individuals can expect at birth to achieve during their lifetime.
    Keywords: OLG model, fertility, fiscal redistribution, well being, child allowances
    JEL: D10 D72 H23 J13 O41
    Date: 2022
  3. By: Sakaki, Shungo (Tokyo University of Technology)
    Abstract: In economics, we generally assume rational decision-making. However, practical decision-making is performed based on budgetary control management from businesses to households and governments. This principle corresponds to adaptive decision-making through sequentially updating decisions by managing variances between plans and actual results. In this paper, we examine the consumers' over time decision-making problem within the framework of the neoclassical growth model by incorporating replicator dynamics instead of the Keynes-Ramsey rule. Consequently, we show analytically that numerous and stable paths exist following the optimal growth path that leads to the modified golden rule level. Furthermore, simulation results show that we can achieve levels above 0.9 of the optimal growth path based on the social welfare level over time. The optimal growth model remains valuable because it provides a social welfare norm. But we can practically realize sufficient economic benefits without assuming the existence of an omniscient government or perfectly rational economic agents.
    Date: 2022–06–15
  4. By: Vlandas, Tim (University of Oxford)
    Abstract: Democracies have experienced profound population ageing in the last decades. Yet we still know little about the political consequences of ageing for economic performance. This article develops a novel theoretical framework linking ageing to lower economic growth through two mechanisms: first, grey power pushes elected governments to expand consumption policies thereby ‘crowding out’ investments; second, ageing populations weaken the electoral penalty for lower growth performance leading to ‘economic unaccountability’. Using microdata from four cross-national survey of preferences and vote choices, I show that elderly individuals care more about pensions, but less about education, and they are less likely to penalize governments for low growth. Using macrodata on 21 advanced economies since the 1960s, OLS and instrumental variable regressions provide evidence that ageing leads to more spending on consumption policies but less on social investment policies, and lower growth. Ageing countries may paradoxically become economically inefficient because they are politically efficient.
    Date: 2022–10–01
  5. By: Henrique Batista de Barros, Pedro (Departamento de Economia, Universidade de São Paulo); Henrique Leite de Castro , Gustavo (Departamento de Economia, Universidade de São Paulo); Menezes-Filho, Naercio (Departamento de Economia, Universidade de São Paulo)
    Abstract: Agricultural production expansion is an important strategy to encourage structural changes and lead to economic development. However, the increase in the agricultural production can occur in two different ways: through productivity - intensive margin - and through area expansion - extensive margin. Human capital can enhance production both ways, but its effects remain little explored in the literature. This paper aims to investigate the effect of human capital on the increase in agricultural productivity and on the expansion of the agricultural frontiers in Brazil. The results indicate that human capital has a positive effect on these albeit with varying intensities and significant heterogeneities. Human capital affects agricultural productivity more in agricultural frontier regions where there is often a shortage of skilled labor. However, human capital does not affect the expansion of agricultural area in consolidated agricultural regions of the country.
    Keywords: Agricultural Productivity; Frontier Expansion; Human Capital; Education
    JEL: E24 O13 O15 Q10 Q12
    Date: 2022–10–27
  6. By: Boris Gershman; Quamrul H. Ashraf; Francesco Cinnirella; Oded Galor; Erik Hornung
    Abstract: This study argues that the decline of coercive labor institutions over the course of industrialization was partly driven by complementarity between physical capital and effective labor in manufacturing. Given that it is difficult to extract labor effort in care-intensive industrial tasks through monitoring and punishment, capital-owning elites ultimately chose to emancipate workers to induce their supply of effective labor and, thus, boost the return to physical capital. This mechanism is empirically examined in the context of serf emancipation in nineteenth-century Prussia. Exploiting a plausibly exogenous source of variation in proto-industrialization across Prussian regions, the analysis finds that, consistent with the proposed hypothesis, the initial abundance of elite-owned capital contributed to a higher intensity of subsequent serf emancipation and the elites’ willingness to accept emancipation in exchange for lower redemption payments.
    Keywords: Labor coercion, serfdom, emancipation, industrialization, capital accumulation, effective labor, nineteenth-century Prussia
    JEL: J24 J47 N13 N33 O14 O15 O43
    Date: 2022
  7. By: Krebs, Tom (University of Mannheim); Scheffel, Martin (University of Cologne)
    Abstract: This paper considers a class of growth models with idiosyncratic human capital risk and private information about individual effort choices (moral hazard). Households are infinitely-lived and have preferences that allow for a time-additive expected utility representation with a one-period utility function that is additive over consumption and effort as well as logarithmic over consumption. Human capital investment is risky due to idiosyncratic shocks that follow a Markov process with transition probabilities that depend on effort choices. The production process is represented by an aggregate production function that uses physical capital and human capital as input factors. We show that constrained optimal allocations are simple in the sense that individual effort levels and individual consumption growth rates are history-independent. Further, constrained optimal allocations are the solutions to a recursive social planner problem that is simple in the sense that exogenous shocks are the only state variables. We also show that constrained optimal allocations can be decentralized as competitive equilibrium allocations of a market economy with a simple tax- and transfer scheme. Finally, it is always optimal to subsidize human capital investment in the market economy.
    Keywords: economic growth, private information, human capital risk
    JEL: D51 D82 E20
    Date: 2022–10
  8. By: Kung, James Kai-sing; Özak, Ömer (Southern Methodist University); Putterman, Louis; Shi, Shuang
    Abstract: We propose and test empirically a theory describing the endogenous formation and persistence of mega-states, using China as an example. We suggest that the relative timing of the emergence of agricultural societies, and their distance from each other, set off a race between their autochthonous state-building projects, which determines their extent and persistence. Using a novel dataset describing the historical presence of Chinese states, prehistoric development, the diffusion of agriculture, and migratory distance across 1-degree x 1-degree grid cells in eastern Asia, we find that cells that adopted agriculture earlier and were close to Erlitou -- the earliest political center in eastern Asia -- remained under Chinese control for longer and continue to be a part of China today. By contrast, cells that adopted agriculture early and were located further from Erlitou developed into independent states, as agriculture provided the fertile ground for state-formation, while isolation provided time for them to develop and confront the expanding Chinese empire. Our study sheds important light on why eastern Asia kept reproducing a mega-state in the area that became China and on the determinants of its borders with other states.
    Date: 2022–06–04
  9. By: Richard H. Day; Oleg V. Pavlov
    Abstract: Existence theory in economics is usually in real domains such as the findings of chaotic trajectories in models of economic growth, tatonnement, or overlapping generations models. Computational examples, however, sometimes converge rapidly to cyclic orbits when in theory they should be nonperiodic almost surely. We explain this anomaly as the result of digital approximation and conclude that both theoretical and numerical behavior can still illuminate essential features of the real data.
    Date: 2022–11

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