nep-gro New Economics Papers
on Economic Growth
Issue of 2023‒04‒03
nine papers chosen by
Marc Klemp
University of Copenhagen

  1. Slavery and the British Industrial Revolution By Heblich, Stephan; Redding, Stephen J; Voth, Hans-Joachim
  2. When Did Growth Begin? New Estimates of Productivity Growth in England from 1250 to 1870 By Bouscasse, P.; Nakamura, E.; Steinsson, J.
  3. Gender equality, growth, and how a technological trap destroyed female work By Humphries, Jane; Schneider, Benjamin
  4. Neoclassical growth with long-term one-sided commitment contracts By Krueger, Dirk; Uhlig, Harald
  5. Population growth and economic growth: a panel causality analysis By Silvia London; Gastón Cayssials; Fernando Antonio Ignacio González
  6. Leading Patent Breadth, Endogenous Quality Choice, and Economic Growth By Keishun Suzuki; Shin Kishimoto
  7. Climate change and growth By Stern, Nicholas; Stiglitz, Joseph E.
  8. Remittance inflows, poverty and economic growth in Tanzania: A multivariate causality model By Musakwa, Mercy T; Odhiambo, Nicholas M
  9. Reflections on the Role of Natural Capital for Economic Activity By Björn Döhring; Atanas Hristov; Anna Thum-Thysen; Cristiano Carvell

  1. By: Heblich, Stephan (University of Toronto and NBER); Redding, Stephen J (Princeton University, NBER and CEPR); Voth, Hans-Joachim (University of Zurich, CEPR and CAGE)
    Abstract: Did overseas slave-holding by Britons accelerate the Industrial Revolution? We provide theory and evidence on the contribution of slave wealth to Britain’s growth prior to 1835. We compare areas of Britain with high and low exposure to the colonial plantation economy, using granular data on wealth from compensation records. Before the major expansion of slave holding from the 1640s onwards, both types of area exhibited similar levels of economic activity. However, by the 1830s, slavery wealth is strongly correlated with economic development – slave-holding areas are less agricultural, closer to cotton mills, and have higher property wealth. We rationalize these findings using a dynamic spatial model, where slavery investment raises the return to capital accumulation, expanding production in capital-intensive sectors. To establish causality, we use arguably exogenous variation in slave mortality on the passage from Africa to the Indies, driven by weather shocks. We show that weather shocks influenced the continued involvement of ancestors in the slave trade; weather-induced slave mortality of slave-trading ancestors in each area is strongly predictive of slaveholding in 1833. Quantifying our model using the observed data, we find that Britain would have been substantially poorer and more agricultural in the absence of overseas slave wealth. Overall, our findings are consistent with the view that slavery wealth accelerated Britain’s industrial revolution.
    Keywords: slavery, industrial revolution, trade, nance JEL Classification: J15, F60, N63
    Date: 2023
  2. By: Bouscasse, P.; Nakamura, E.; Steinsson, J.
    Abstract: We provide new estimates of the evolution of productivity in England from 1250 to 1870. Real wages over this period were heavily influenced by plague-induced swings in the population. We develop and implement a new methodology for estimating productivity that accounts for these Malthusian dynamics. In the early part of our sample, we find that productivity growth was zero. Productivity growth began in 1600—almost a century before the Glorious Revolution. We estimate productivity growth of 3% per decade between 1600 and 1760, which increased to 6% per decade between 1770 and 1860. Our estimates attribute much of the increase in output growth during the Industrial Revolution to a falling land share of production, rather than to faster productivity growth. Our evidence helps distinguish between theories of why growth began. In particular, our findings support the idea that broad-based economic change preceded the bourgeois institutional reforms of 17th century England and may have contributed to causing them. We estimate relatively weak Malthusian population forces on real wages. This implies that our model can generate sustained deviations from the “iron law of wages†prior the Industrial Revolution.
    JEL: N13 O40 J10
    Date: 2023–03–07
  3. By: Humphries, Jane; Schneider, Benjamin
    Abstract: Development economists have long studied the relationship between gender equality and economic growth. More recently, economic historians have taken an overdue interest. We sketch the pathways within the development literature that have been hypothesized as linking equality for women to rising incomes, and the reverse channels–from higher incomes to equality. We describe how the European Marriage Pattern literature applies these mechanisms, and we highlight problems with the claimed link between equality and growth. We then explain how a crucial example of technological unemployment for women–the destruction of hand spinning during the British Industrial Revolution–contributed to the emergence of the male breadwinner family. We show how this family structure created household relationships that play into the development pathways, and outline its persistent effects into the twenty-first century.
    Keywords: development economics; family structure; gender equality; technological unemployment
    JEL: J12 J63 N33 O14 O33
    Date: 2021–11–09
  4. By: Krueger, Dirk; Uhlig, Harald
    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 log-utility 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: 2023
  5. By: Silvia London; Gastón Cayssials; Fernando Antonio Ignacio González
    Abstract: This paper examines the relationship between population growth and economic growth using panel data for 111 countries over the period 1960 - 2019. In a first stage of the analysis, using a non-parametric method, we divided the sample into three groups of countries, obtained from objective criteria and not from ad hoc decisions such as size or economic performance used in some previous studies. From these groups that are internally homogeneous (made up of countries with similar trajectories for population growth and economic growth) and clearly differentiated from each other, we perform a Granger causality analysis. Our results show that there are relevant qualitative differences in the dynamics of population growth and economic growth between groups
    JEL: C10 C14
    Date: 2022–11
  6. By: Keishun Suzuki; Shin Kishimoto
    Abstract: O'donoghue and Zweimuller (2004, J. of Econ. Growth), a seminal work, showed that broadening leading breadth in patent protection can stimulate innovation. However, the empirical literature has consistently found skeptical results on the positive effect. To fill the gap, we build another framework where the quality improvement size is derived as an interior solution. In our model, broadening leading breadth can negatively affect innovation because each innovator is incentivized to free-ride the other innovators' quality improvements. As a further analysis, we quantitatively investigate the growth effect of intervention in patent licensing negotiation using two different profit division rules derived from a cooperative game. We find that intervention in patent licensing negotiation increases the growth rate and stabilizes the economy.
    Date: 2023–03
  7. By: Stern, Nicholas; Stiglitz, Joseph E.
    Abstract: Contrary to much of the conventional wisdom, taking stronger actions on climate change may enhance economic growth, even as conventionally measured, but even more so, in terms of societal well-being. We identify the flaws in the models and analyses which contend that there must be a trade-off and explain the mechanisms and dynamic forces which have the potential to enhance growth. Critically, there are numerous market failures that result in suboptimal economic performance. We explain how addressing climate change reduces the bite of these failures and enhances the incentives and political will to address them. We identify packages of policies that alleviate market failures, enhance growth, and reduce carbon emissions. Finally, we argue that the green transition is coming at a time when, both because of persistent deficiencies of aggregate demand and advances in technology, including artificial intelligence and robotization, the macroeconomic opportunity costs of strong climate actions may be especially low and the benefits particularly high.
    JEL: O40 O49 Q58
    Date: 2023–02–17
  8. By: Musakwa, Mercy T; Odhiambo, Nicholas M
    Abstract: The study examined the causal flow between economic growth, poverty, and remittances in Tanzania, using annual data from 1990 to 2020. Tanzania is working to achieve the policy targets set in its Vision 2025, and the findings of this study will add value to policy effectiveness and timing. The study uses household consumption expenditure per capita (HCE) as a measure of poverty, the rate of change in GDP as a measure of economic growth, and remittance inflows as a percentage of GDP as a measure of remittances. Using the autoregressive distributed lag (ARDL) approach to cointegration and ECM-based Granger causality, the study found a bidirectional causality between remittances and poverty in the short run and a unidirectional causal flow from remittances to poverty in the long run. No causality was found between remittances and economic growth and between economic growth and household consumption expenditure per capita. The findings of this study point to the importance of remittances in poverty reduction and sustainable development in Tanzania. Policy implications are also discussed.
    Keywords: autoregressive distributed lag (ARDL); economic growth; poverty; remittances; Tanzania
    Date: 2022–12
  9. By: Björn Döhring; Atanas Hristov; Anna Thum-Thysen; Cristiano Carvell
    Abstract: The discussion of the role of natural capital in economic activity is not new; increasing evidence of environmental pressures, climate deregulation and biodiversity loss have however increased the interest in the role of natural capital in the production process. This paper reviews approaches to conceptualising the contribution of natural capital to economic processes. It covers the neoclassical tradition of production functions with natural resources as well as damage functions, but also considers a more heterodox approach to reflecting the vulnerability of natural assets. Different ways of modelling natural capital lead to divergent conclusions about the sustainability of economic growth on a finite planet. By focusing on efforts to integrate nature’s contribution to economic production in economic modelling and standard economic metrics, this paper differs from ‘beyond GDP’ scoreboards that complement GDP with additional statistics. The applied part of the paper discusses selected approaches for quantifying the contribution of natural capital including production functions at different levels of aggregation, environmental-economic accounting and damage functions and highlights insights to be gained as well as difficulties. On this basis, we outline next steps for modelling natural capital in the production process.
    JEL: Q57 E01 E23
    Date: 2023–02

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