nep-gro New Economics Papers
on Economic Growth
Issue of 2023‒01‒02
five papers chosen by
Marc Klemp
University of Copenhagen

  1. 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
  2. British economic growth and development By Stephen Broadberry
  3. Lower for longer under endogenous technology growth By Elfsbacka Schmöller, Michaela; Spitzer, Martin
  4. Energy Dependency and Long-Run Growth By Novelli, Giacomo
  5. Directed Technical Change and the Resource Curse By Mads Greaker; Tom-Reiel Heggedal; Knut Einar Rosendahl

  1. 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
  2. By: Stephen Broadberry
    Abstract: British per capita GDP grew at an average annual rate of 0.13 per cent between 1086 and 1700. Although the annual growth rate increased to 0.48 per cent between 1700 and 1870, the period covering the Industrial Revolution, this was still not particularly fast. What mattered for Britain’s catching-up and forging ahead of other economies was its resilience, with few episodes of negative growth. By the late nineteenth century, other countries had begun to emulate Britain’s Industrial Revolution and by the beginning of the twentieth century, the United States had emerged as the new per capita income leader. However, the process by which the United States and Germany overtook Britain owed more to a later structural shift out of agriculture and developments within services than to any change in the comparative productivity position within manufacturing. After 1870, other countries were bound to grow faster than Britain while catching-up, and once Britain had fallen behind, it too could benefit from borrowing technology and institutions from abroad. TFP growth has been an important proximate source of Britain’s rise to GDP per capita leadership and also of Britain’s relative economic decline since 1870. However, the ultimate source of these developments in technology lies in the institutional framework. Britain’s rise to GDP per capita leadership occurred as innovators responded to the factor price combination that they faced within an environment shaped by the Enlightenment. After 1870, British relative decline occurred as barriers to competition arose and slowed the response to technological change.
  3. By: Elfsbacka Schmöller, Michaela; Spitzer, Martin
    Abstract: This paper studies monetary policy strategies under endogenous technology dynamics and low r ∗ . Endogenous growth strengthens the gains from make-up strategies relative to inflation targeting, especially if policy space is reduced. This result is due to the long-run non-neutrality of money and the hysteresis effects in TFP through which ELB episodes generate permanent scars on long-run aggregate supply. Make-up strategies not only foster the alignment of inflation with target but also support productivity-improving investment in R&D and technology adoption and hence the long-run trend path, provided that the inherent make-up element is sufficiently pronounced. Inflation is less responsive to monetary policy due to the interaction with productivity dynamics. As a result, additional stimulus is required at the ELB and the degree of subsequent overshooting is alleviated. Endogenous growth also generates novel monetary policy trade-offs, most notably credibility challenges, which can be mitigated by confining make-up elements to ELB episodes.
    Keywords: Make-up Strategies,ZLB,Endogenous TFP,Hysteresis,Cycle-Trend Interaction
    JEL: E24 E31 E32 E52 O30
    Date: 2022
  4. By: Novelli, Giacomo
    Abstract: We investigate whether the degree of energy dependency of countries influences their macroeconomic performance in terms of long-run growth. Specifically, we study whether the impact of energy price changes on economic growth differs depending on a country’s degree of energy dependency. There are two novel aspects in this paper. First, all energy commodities are considered, not only oil, and second, our work goes beyond the standard distinction between energy importing and exporting countries. We claim that energy importing and exporting countries are too heterogeneous in terms of net energy imports, energy consumption, and level of development to be clustered and analysed together. Relying on a sample clusterization in groups of countries with a similar degree of energy dependency and using a cross-sectionally augmented panel autoregressive distributed lag (CS-ARDL) approach, we show that countries with a high degree of energy dependency are associated with a negative and significant long-run energy price elasticity of GDP, while countries with a low degree experience the opposite effect, and more balanced countries are less or not significantly affected. Moreover, we contribute to the resource curse paradox showing that the energy price volatility negatively affects the long-run economic growth of countries with a low degree of energy dependency, but it does not hamper the long-run growth of other countries. We argue that the impact of energy price changes differs across countries with a different degree of energy dependency and that a balanced degree of energy dependency is preferable. Therefore, we suggest major energy importers should reduce their degree of energy dependency, while major energy exporters may differentiate their energy production, avoiding to rely only on fossil sources. Renewable sources may be a key driver to improve the management of the degree of energy dependency.
    Keywords: Political Economy, Resource /Energy Economics and Policy
    Date: 2022–12–12
  5. By: Mads Greaker (Oslo and Akershus University College - Oslo Business School); Tom-Reiel Heggedal (BI Norwegian Business School); Knut Einar Rosendahl (Norwegian University of Life Sciences; Statistics Norway - Research Department)
    Abstract: The "resource curse" is a potential threat to all countries relying on export income from abundant natural resources. 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 petroleum can lead to the wrong type of technological progress. 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 lead to a 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. 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
    Date: 2022–10–10

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