nep-gro New Economics Papers
on Economic Growth
Issue of 2023‒02‒13
four papers chosen by
Marc Klemp
University of Copenhagen

  1. Accounting for Spanish economic development 1850-2019 By del Río, Fernando; Lores, Francisco-Xavier
  2. Working Paper(23-002E)Necessity of Rational Asset Price Bubbles in Two Sector Growth Economies By Tomohiro HIRANO; Ryo Jinnai; Alexis Akira Toda
  3. The Cost of Populism: Evidence from history By Manuel Funke; Moritz Schularick; Christoph Trebesch
  4. Empirical Research on Financial Efficiency and Economic Growth in Sub-Saharan Africa By Nigo, Ayine R.S.; Gibogwe, Vincent

  1. By: del Río, Fernando; Lores, Francisco-Xavier
    Abstract: By conducting wedge-growth accounting, we assess the contribution of the economic forces (expressed as wedges in the equilibrium conditions of the neoclassical growth model) driving Spanish economic growth from 1850 to 2019. We find that declining investment and capital-efficiency wedges slowed down Spanish economic growth and downsized the labour share from 1850 to the First World War. The crisis of the 1930s (Great Depression and Civil War) was primarily driven by the decrease of the labour-efficiency wedge. The simultaneous increase of both efficiency wedges drove the Spanish economic miracle of the 1960s, which was preceded by a large increase in the investment wedge, resulting in a significant rise of the investment rate. From the mid-1970s, the declining capital-efficiency wedge was the primary force driving the fall of the labour share and the output growth slowdown. However, the labour wedge drove the medium-term fluctuations of output, labour, and investment.
    Keywords: Growth Accounting, Capital-Efficiency Wedge, Labour-Efficiency Wedge, Labour Wedge, Investment Wedge, Resource Constraint Wedge, Output, Labour Share, Hours Worked, Investment, Spanish economic growth, Wedge-growth accounting.
    JEL: E13 E17 E25 O41 O47
    Date: 2023–01–17
  2. By: Tomohiro HIRANO; Ryo Jinnai; Alexis Akira Toda
    Abstract: We present plausible economic models in which an equilibrium with rational asset price bubbles exists but equilibria with asset prices equal to fundamental values do not. These economies feature multiple sectors with faster economic growth than dividend growth. In our two-sector endogenous growth model, entrepreneurs have access to a production technology subject to idiosyncratic investment risk (tech sector) and trade a dividend-paying asset (land). When leverage is relaxed beyond a critical value, the unique trend stationary equilibrium exhibits a phase transition from the fundamental regime to the bubbly regime with growth, implying the inevitability of bubbles with loose financial conditions.
    Keywords: bubble, endogenous growth, leverage, phase transition, transversality condition. JEL codes: D52, D53, G12.
    Date: 2023–01
  3. By: Manuel Funke (Kiel Institute for the World Economy); Moritz Schularick (University of Bonn); Christoph Trebesch (Kiel Institute for the World Economy)
    Abstract: The rise of populism in the past two decades has motivated much work on its drivers, but less is known about its economic and political consequences. This column uses a comprehensive cross-country database on populism dating back to 1900 to offer a historical, long-run perspective. It shows that (1) populism has a long history and is serial in nature – if countries have been governed by a populist once, they are much more likely to see another populist coming to office in the future; (2) populist leadership is economically costly, with a notable long-run decline in consumption and output; and (3) populism is politically disruptive, fostering instability and institutional decay. The analysis suggests that populism is here to stay.
    Date: 2021–02
  4. By: Nigo, Ayine R.S.; Gibogwe, Vincent
    Abstract: This study contributes to the literature on financial efficiency and growth. Given the increase in domestic credit, we show evidence of the effects of controlling institutional variables. The domestic credit is adverse, with an insignificant impact on per capita income growth. We make two observations from our findings. First, the negative but insignificant coefficients of the measure of bank credit across all model specifications seem to go against the supply-leading hypothesis, as financial development hurts economic growth; nevertheless, given that the impact is insignificant, this draws more into a neutrality hypothesis of no effect. Second, the findings are likely indications of the underdeveloped state of sub-Saharan Africa's financial system, implying that the present state of the financial systems is not robust enough to be a contributory drive towards enhancing economic growth in the region. However, all models have positive control variables (Inflation and gross fixed capital formation). All coefficients of interactions between credit and institutional quality are statistically insignificant (negative in four of six models).
    Keywords: foreign direct investment; economic growth; absorptive capacity; human capital; market liberalization.
    JEL: O19
    Date: 2023–01–20

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