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

  1. Left-Handedness and Economic Development By Fabio Mariani; Marion Mercier; Luca Pensieroso
  2. Horsemen of the apocalypse: The Mongol Empire and the great divergence By Rafael Torres Gaviria
  3. Migration, Technology Diffusion and Convergence in a Two-Country AK Growth Model By Ikhenaode, Bright Isaac; Parello, Carmelo Pierpaolo
  4. Persecution, Pogroms and Genocide : A Conceptual Framework and New Evidence By Becker, Sascha O; Mukand, Sharun; Yotzov, Ivan
  5. Entrepreneurship and Economic Growth: A Cross-Sectional Analysis Perspective By Kim, Jungsuk; Castillejos-Petalcorin, Cynthia; Jinjarak, Yothin; Park, Donghyun; Quising, Pilipinas; Tian, Shu
  6. The Dynamic Interactions of Hate, Violence and Economic Well-Being By Appelbaum, Elie
  9. The Golden City on the Edge: Economic Geography and Jihad over Centuries By Masahiro Kubo; Shunsuke Tsuda
  10. Marginal Incentives for Birth Spacing By Naidoo, Jesse
  11. Directed technical change and the resource curse By Mads Greaker; Tom-Reiel Heggedal; Knut Einar Rosendahl
  12. On the Over-determination Problem in a Two Sector Neo-Kaleckian Model By Huang, Biao
  13. Limits to growth and creative destruction in the framework of a vintage capital model By Marc Germain
  14. Robots, Jobs, and Optimal Fertility Timing By Claudio Costanzo

  1. By: Fabio Mariani (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Marion Mercier (LEDa-DIAL, Université Paris-Dauphine, PSL, IRD, CNRS, Paris, France; IZA, Bonn.); Luca Pensieroso (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This paper studies the interplay between left-handedness and economic development, thereby contributing to our understanding of the relationship between evolutionary forces, human diversity and growth. We propose a novel theoretical framework in which economic development influences the prevalence of left-handedness through structural change and a genetic mechanism driven by differential fertility. In particular, the emergence of the industrial sector puts left-handers at a reproductive disadvantage, because of their lower manual ability and wages. This fertility differential changes sign as soon as the income-fertility relationship is reversed, and eventually fades away when the rise of human capital makes manual skills irrelevant. Our model thus explains the decline and subsequent recovery of lefthandedness observed over the last few centuries in the Western world. We further explore the possibility that left-handedness in turn influences growth: despite their lower productivity in manual tasks, left-handers may enhance technological progress through cognitive skills that are conducive to innovation, and through their contribution to the diversity of the workforce. This implies that the link between handedness and economic performance varies across stages of development. We present empirical evidence that lends credence to the core differential-fertility mechanism of our model and suggests that left-handedness can positively contribute to growth, once the economy has reached a sufficiently high level of human capital.
    Keywords: Handedness; Economic growth; Evolution; Diversity; Unified Growth Theory
    JEL: O11 O14 O33 O40 J13 J24 Q57
    Date: 2022–11–11
  2. By: Rafael Torres Gaviria
    Abstract: Why did the Industrial Revolution take place in Europe, but did not in India or China? This paper uses a novel dataset and builds a general model to study the economic transformations of the Late Middle Ages that led to the Industrial Revolution and the Great Divergence. Through modern econometric techniques, I exploit the Mongol Invasions of the 13th century to account for the role of violence, commerce, and technology in the structural transformations of Eurasia from the Middle Ages into the Modern Era. I show theoretically and verify empirically how the large-scale violence and new trade opportunities brought by the Mongol Empire allowed Western Europe to catch up and surpass the levels of income and technical capacity of the great Asian civilizations. Furthermore, I found that the impact of the Mongol Conquests persisted and deepened at least into the 19th century. The Mongol Invasions of the 13th century can be regarded as a fundamental cause of the Rise of Europe and the Decline of Asia. Moreover, the rise and fall of the Mongol Empire is a key event in understanding the transition from a Malthusian world into a world of sustained economic growth and inter-regional inequality.
    Keywords: Mongol Empire, Great Divergence, Industrial Revolution, Growth, Trade, Violence, Technology transfer
    JEL: C02 N3 N4 N7 O14 O33 O47
    Date: 2022–11–08
  3. By: Ikhenaode, Bright Isaac; Parello, Carmelo Pierpaolo
    Abstract: This paper proposes a two-country AK model of growth with cross-country knowledge diffusion and endogenous migration to study the relationship between migration, income inequality and economic growth. In contrast with mainstream AK literature, we show that introducing knowledge diffusion from frontier to non-frontier countries makes AK models predict conditional convergence, with migration playing an important role in speeding up the catching-up process of non-frontier countries. When testing the robustness of the policy implications of the AK literature, we find that subsidizing capital accumulation in frontier countries stimulates migration and worldwide growth, but also that it increases cross-country inequalities in terms of both income and technology. On the contrary, subsidizing capital accumulation in non-frontier countries reduces migration and mitigates inequalities worldwide, but has no effects on the long-run pace of economic growth of the two countries.
    Keywords: Two-Country Model; Endogenous Growth; Labor Migration; Technology Transfer; Growth Policy
    JEL: E1 F1 O4
    Date: 2022–11–11
  4. By: Becker, Sascha O (Monash University and University of Warwick, CAGE, CEH@ANU, CEPR, CESifo, CReAM, ifo, IZA, ROA, and SoDaLabs); Mukand, Sharun (University of Warwick and CAGE.); Yotzov, Ivan (University of Warwick and CAGE)
    Abstract: Persecution, pogroms, and genocide have plagued humanity for centuries, costing millions of lives and haunting survivors. Economists and economic historians have recently made new contributions to the understanding of these phenomena. We provide a novel conceptual framework which highlights the inter-relationship between the intensity of persecution and migration patterns across dozens of historical episodes. Using this framework as a lens, we survey the growing literature on the causes and consequences of persecution, pogroms, and genocide. Finally, we discuss gaps in the literature and take several tentative steps towards explaining the differences in survival rates of European Jews in the 20th century JEL Codes: D74 ; F22 ; F51 ; N4 ; O15 ; R23
    Keywords: Genocide ; Persecution ; Migration ; Immigration restrictions ; Exit or Voice
    Date: 2022
  5. By: Kim, Jungsuk (Sejong University); Castillejos-Petalcorin, Cynthia (Asian Development Bank); Jinjarak, Yothin (Asian Development Bank); Park, Donghyun (Asian Development Bank); Quising, Pilipinas (Asian Development Bank); Tian, Shu (Asian Development Bank)
    Abstract: Entrepreneurship, or the activity of starting and running a business, is a vital ingredient of economic growth and development. Entrepreneurs contribute to innovation, and they are central to dynamic Schumpeterian competition and broader economic dynamism. In this paper, we contribute to the entrepreneurship literature by performing cross-sectional analysis to examine the link between entrepreneurship and economic growth. We divide total early-stage entrepreneurship into opportunity-driven entrepreneurship versus necessitydriven entrepreneurship, and our sample economies into advanced economies versus developing economies. We do not find evidence of a positive link between aggregate entrepreneurship and economic growth. This is consistent with the hugely heterogenous nature of entrepreneurial activity. At a broader level, our empirical evidence points to the importance of distinguishing between different types of entrepreneurship and different groups of economies. In particular, for developing economies where manufacturing is relatively important, we find that opportunity-driven entrepreneurship is positively linked with growth.
    Keywords: entrepreneurship; economic growth; development
    JEL: L26 M13 O47
    Date: 2022–10–11
  6. By: Appelbaum, Elie
    Abstract: This paper provides a simple dynamic model that explores the interdependence and dynamic properties of hate, violence and economic well-being. It shows that a time-dependent economic growth process that affects the evolution of hate can yield a long-run steady state, but this steady state will not be free of hate and violence. Moreover, we show that better (long-run) economic conditions do not necessarily result in lower equilibrium levels of hate and violence. We also show that, under reasonable conditions, cycles of hate and violence cannot occur. Thus, the dynamic properties of hate and violence themselves cannot result in cyclical patterns of (net) economic well-being. While stable and unstable equilibria are possible, the most likely equilibrium is a saddle point. We provide several numerical examples demonstrating the implications of psychological attributes such as congruence (reciprocity), long memory and jealousy on the nature of the steady state and stability of the equilibria. These examples also consider the role of responsiveness to economic conditions, externalities and susceptibility to violence. Given its nature, the paper is an example of a formal model for the ideas of the "dynamical system" literature in psychology.
    Keywords: Hate, Violence; Dynamics; Steady State; Stability; Genuine Peace.
    JEL: Z10 Z13
    Date: 2022
  7. By: Mduduzi Biyase (College of Business and Economics, University of Johannesburg); Mathias Manguzvane (College of Business and Economics, University of Johannesburg); Thomas Udiman (Southwest Forestry University)
    Abstract: We take another look at the relationship between remittances and economic growth in South Africa, using recent data and a fairly lengthy time period of approximately 50 years for South Africa running from 1970 to 2019. We use the autoregressive distributed lag (ARDL) bounds testing approach to assess the cointegration among remittances, economic growth, including control variables in the presence of structural breaks. We find evidence to suggest that the structural change in economic growth occurred in 2008 during the global financial crisis, while the break point for remittances received emerged in 1997. After taking into consideration the presence of structural breaks, our study confirmed a cointegration relationship between remittances received and economic growth in South Africa. Specifically, the ARDL results present a negative and significant estimates of remittances on economic growth in the short and long-run, consistent with previous studies. All the specification tests confirm the statistical robustness of the ARDL bounds testing method.
    Keywords: ARDL; economic growth; remittances; WDI
    JEL: C32 F24
    Date: 2022
  8. By: Gibogwe, Vincent; Nigo, Ayine; Kufuor, Karen
    Abstract: In this paper, we use the ARDL method to find the Impact of institutional quality on economic growth in Tanzania from 1990 to 2021. The ARDL technique frees variables from residual correlation as all variables are assumed to be endogenous. They distinguish between dependent and explanatory variables in any long-run relationship, identify the co-integrating vectors with multiple co-integrating vectors, and derive the Error Correction Model (ECM) or Error Correction Model (ECM) Vector Error Correction Model (VECM) by integrating short-run adjustments with long-run equilibrium without losing extended-run information. Our results show all adjustment terms in the respective models that have a long-run relationship have correct (negative) signs and are more than one, implying there is convergence in the long run; that is, the models returned to their long-run equilibrium; the rate (or speed) at which this happened ranged between 15% to 106.6% annually. Institutional quality has a significant affirmative (0.047) causal long-run effect on economic growth.
    Keywords: institutional quality, economic growth, the rule of law, market liberalization
    JEL: F63 O19 O47 O55
    Date: 2022–11–17
  9. By: Masahiro Kubo; Shunsuke Tsuda
    Abstract: This paper uncovers the evolution of cities and Islamist insurgencies, so called jihad, in the process of the reversal of fortune over the centuries. In West Africa, water access in ancient periods predicts the locations of the core cities of inland trade routes -- the trans-Saharan caravan routes -- founded up to the 1800s, when historical Islamic states played significant economic roles before European colonization. In contrast, ancient water access does not have a persistent influence on contemporary city formation and economic activities. After European colonization and the invention of modern trading technologies, along with the constant shrinking of water sources, landlocked pre-colonial core cities contracted or became extinct. Employing an instrumental variable strategy, we show that these deserted locations have today been replaced by battlefields for jihadist organizations. We argue that the power relations between Islamic states and the European military during the 19th century colonial era shaped the persistence of jihadist ideology as a legacy of colonization. Investigations into religious ideology related to jihadism, using individual-level surveys from Muslims, support this mechanism. Moreover, the concentration of jihadist violence in "past-core-and-present-periphery" areas in West Africa is consistent with a global-scale phenomenon. Finally, spillovers of violent events beyond these stylized locations are partly explained by organizational heterogeneity among competing factions (Al Qaeda and the Islamic State) over time.
    Date: 2022–11
  10. By: Naidoo, Jesse (University of Chicago)
    Abstract: I construct a model of life-cycle fertility choice and human capital accumulation in which women have the option to have children instantaneously, but the growth rate of human capital is potentially affected by the presence of children. Unless the growth rate of human capital falls permanently at the event of a birth, it will not be optimal to wait a finite, but nonzero, length of time between births. The model is, I argue, minimally sufficient to account for birth spacing. It is also simple enough to allow me to obtain its comparative statics analytically. The effects of fertility subsidies can be subtle: subsidies to marginal births accelerate the time to next birth, but subsidies to higher-order births extend times to the next birth. This ambiguity arises because forward-looking agents anticipate slower human capital growth in the future, and respond by accumulating more in the present.
    Date: 2022–10–03
  11. By: Mads Greaker; Tom-Reiel Heggedal; Knut Einar Rosendahl (Statistics Norway)
    Abstract: The "resource curse" is a potential threat to all countries relying on export income from abundant natural resources such as fossil fuels. The early literature hypothesized that easily accessible natural resources would lead to lack of technological progress. In this article we instead propose that abundance of fossil fuels can lead to the wrong type of technological progress. In order to inquire into our research question, we build a model of a small, open economy having specialized in export of fossil fuels. R&D in fossil fuel extraction technology competes with R&D in clean energy technologies. Moreover, technological progress is path dependent as current R&D within a technology type depends on past R&D within the same type. Finally, global climate policy may reduce the future value of fossil fuel export. We find that global climate policy may either lead to a resource curse or help the country escaping a potential resource curse. The ripeness of the clean energy technologies is essential for the outcomes: If the clean technology level is not too far beyond the fossil fuel technology, a shift to exporting clean energy is optimal independent of global climate policy and climate policy can accelerate this shift. While if the clean technology is far behind, a shift should only happen as a response to global climate policy, and the government should intervene to accelerate this shift.
    Keywords: Environment; Directed technological change; Innovation policy; Resource curse
    JEL: O30 O31 O33
    Date: 2022–09
  12. By: Huang, Biao (Renmin University of China)
    Abstract: In this paper, we aim to solve the over-determination problem in two-sector neo-Kaleckian models raised by Park (1995) against Dutt (1990). After summarising the over-determination problem and existing solutions, we argue that the over-determination problem is not caused by the incompatibility of sectors’ investment functions and equalised rates of profit, but rather the incompatibility of profit rate equalisation and the arbi-trarily given mark-up rates of different sectors. We propose to solve the problem by introducing an endogenous variable, the relative mark-up ratio, which makes the model perfectly determined and more logically consistent. We also discuss the adjustment mechanism from the short-run to the long-run equilibrium.
    Keywords: Two-sector neo-Kaleckian model; equalised profit rate; mark- up pricing; free competition
    JEL: B51 E11 O41
    Date: 2022–07–07
  13. By: Marc Germain (LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper studies the path of a resource-constrained economy in an original vintage capital growth model involving a Schumpeterian process of creative destruction. The path of the economy is characterized by three successive phases: (i) unsustainable « high » growth; (ii) after a peak, a deep and brutal decline; (iii) slower growth gradually leading to equilibrium. The slowdown and reversal of the economy are linked to the continuous rise in the extraction rate of the resource, which occurs despite technical progress due to the creative destruction process. This process also has a non-monotonic trajectory, in particular its destruction component, one of the factors behind the economic obsolescence of equipment. The latter evolves in the opposite direction to production, in contradiction with the widespread assumption of a constant capital depreciation rate.
    Abstract: Cet article étudie la trajectoire d'une économie soumise à des contraintes de ressource, dans le cadre d'un modèle de croissance à générations de capital original, intégrant un processus de destruction créatrice à la Schumpeter. La trajectoire de l'économie est caractérisée par trois phases successives : (i) une croissance « forte » non durable ; (ii) après un pic, une décroissance profonde et brutale ; (iii) une croissance plus lente conduisant progressivement à l'équilibre. Le ralentissement et le retournement de l'économie sont liés à la hausse continue du taux d'exploitation de la ressource, qui survient malgré le progrès technique dû au processus de destruction créatrice. Ce processus a également une trajectoire non monotone, en particulier sa composante destruction, un des facteurs à la base de l'obsolescence économique des équipements. Celle-ci évolue en sens inverse de la production, en porte-à-faux avec l'hypothèse répandue d'un taux de dépréciation constant du capital.
    Keywords: limites à la croissance,destruction créatrice,obsolescence,générations de capital
    Date: 2022–11–12
  14. By: Claudio Costanzo
    Abstract: Labor automation is generally associated with a decrease in demand for mid-skill jobs,often routine-intensive, in favor of the others. This paper investigates its effects onfertility timing decisions using European panel data, by constructing a measure of localexposure to industrial robotics, and by adopting a Fixed Effect with Two-StageLeast Squares methodology. Higher exposure is associated with an anticipation offertility in low- and high-skilled regional labor markets, and with its postponementin medium-skilled ones. An optimal stopping model, in which individuals adjust thetiming based on their future labor opportunities, formalizes the causal intuition. Itsnumerical application, based on survey data, suggests that the effect of an increase inobserved automation on the willingness to postpone fertility is concave with respect toeducation, consistently with the Routine-Biased Technological Change hypothesis.
    Keywords: Automation; Demography; Fertility; Robots
    JEL: J13 J21 J24 O33
    Date: 2022–11

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