nep-gro New Economics Papers
on Economic Growth
Issue of 2023‒05‒08
five papers chosen by
Marc Klemp
University of Copenhagen

  1. Sustainable Economic Growth: A Critical Assessment of SDG 8.1 By Ahlerup, Pelle; Olsson, Ola
  2. Military Spending and Innovation: Learning from 19th Century World Fair Exhibition Data By Danzer, Alexander M.; Danzer, Natalia; Feuerbaum, Carsten
  3. The conditional influence of poverty, inequality and severity of poverty on economic growth in Sub-Saharan Africa By Simplice A. Asongu; Joel Hinaunye Eita
  4. Endogenous Growth, Countercyclical Dividends, and Asset Prices By Palma Filep-Mosberger; Lorant Kaszab; Zhou Ren
  5. Africa's Industrialization Prospects: A Fresh Look By Naudé, Wim; Tregenna, Fiona

  1. By: Ahlerup, Pelle (Department of Economics, School of Business, Economics and Law, Göteborg University); Olsson, Ola (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In this report, we focus on the Sustainable Development Goal (SDG) target 8.1, stipulating that countries should pursue real GDP per capita growth rates that are in accordance with their national circumstances and that total GDP should grow by more than seven percent a year in the least developed countries. We start by briefly discussing the background of this target and then review some of the existing research on economic growth across the world, starting with growth theory and its predictions concerning the convergence of growth rates and income levels in the short and long term. We also review the extensive empirical work on cross-country income and growth regressions that have accumulated during the last three decades, focusing on recent (pre-covid) and historical patterns regarding the fulfillment of the SDG 8.1 targets. We show that a growth rate in total GDP of seven percent per year has only been observed in about 10 percent of all available country-year observations over history. Growth rates exceeding seven percent were relatively frequent among poor countries during 2000-2009 but not during 2009-2019. Since 2000, the relatively high average growth rates among poor countries have implied that their income levels have steadily converged towards those of richer countries, although at a slow pace. This pattern is manifested in longer periods of sustained growth episodes in poor countries and can probably be explained by successful policy reforms. We also show that about a third of all countries managed to have positive economic growth during 2010-19 while at the same time decreasing their emissions of CO2 from production (decoupling). For poor and rich countries alike, the growth prospects post-covid and after Russia’s invasion of Ukraine, are uncertain.
    Keywords: economic growth; sustainable development goals; convergence; SDG 8.1
    JEL: N10 O47 O57
    Date: 2023–04
  2. By: Danzer, Alexander M. (Catholic University of Eichstätt-Ingolstadt); Danzer, Natalia (Free University of Berlin); Feuerbaum, Carsten (Catholic University of Eichstätt-Ingolstadt)
    Abstract: We provide quantitative evidence on the relationship between military spending and innovation in the 19th century. Combining innovation data from world fairs and historical military data across Europe, we show that national military spending is associated with national innovation towards war logistics such as food processing, but less towards war technology such as guns. This pattern reflects differences in the historical markets for war supplies. European patent data of 1990-2015 suggest a long-term correlation between historical and con- temporaneous innovation patterns.
    Keywords: military spending, innovation, war logistics, food processing, military supply, 19th century
    JEL: H56 O31 O14 N43
    Date: 2023–03
  3. By: Simplice A. Asongu (Yaounde, Cameroon); Joel Hinaunye Eita (Johannesburg, South Africa)
    Abstract: Poverty and inequality represent major policy syndromes that are relevant in the achievement of most United Nations’ sustainable development goals (SDGs) in sub-Saharan Africa, while economic growth is also essential for the achievement of attendant SDGs. The present study extends existing literature by assessing the conditional influence of poverty, income inequality and severity of poverty on economic growth. The focus is on 42 countries in sub-Saharan Africa with data from 1980 to 2019. The Gini index is used to measure income inequality. Poverty is measured in terms of the poverty headcount ratio while the severity of poverty is computed as the squared of the poverty gap index. The empirical evidence is based on quantile regressions in order to assess how income inequality and poverty dynamics affect economic growth throughout the conditional distribution of economic growth. Our main finding shows that the negative response of economic growth to poverty is a decreasing function of economic growth. In other words, the incidence of poverty in reducing economic growth decreases with increasing levels of economic growth. In two specifications, the effect of inequality is negative in bottom quantiles and positive in top quantiles of the conditional distribution of economic growth. Policy implications are discussed, especially as it pertains to: (i) the relevance of poverty in mitigating economic growth in SSA contingent on initial levels of economic growth and (ii) comparative incidences of poverty and inequality in affecting economic growth.
    Keywords: poverty; inequality; economic growth; sub-Saharan Africa; econometrics; economics
    JEL: D31 I10 I32 K40 O55
    Date: 2023–01
  4. By: Palma Filep-Mosberger (Central Bank of Hungary); Lorant Kaszab (Central Bank of Hungary); Zhou Ren (Wienna University of Economics and Business)
    Abstract: We study the nexus between endogenous growth and asset prices. We show that endogenous growth models with either horizontal and vertical innovation match financial data well due to countercyclical dividends which are either procyclical or acyclical in US data. Countercyclical dividends redistribute income from consumption towards investment in innovation improving growth prospects which are reflected in asset prices. In the horizontal innovation model of Kung and Schmid (2015) countercyclical dividends are the result of high monopoly markups. When markup is lowered from their benchmark 65 percent to 60 or 55 percent dividends become procyclical, the price-dividend ratio countercyclical, and the mean of the equity risk premia reduces from 290 to 82 or 46 basis points, respectively. When we introduce leisure preferences the wealth effect of technology shocks makes the aggregate dividends countercyclical as long as labour supply is not too elastic even with low values of the monopolist markup.
    Keywords: endogenous growth, innovation, markup, asset pricing, dividends, equity premium.
    JEL: E13 E31 E43 E44 E62
    Date: 2023
  5. By: Naudé, Wim (RWTH Aachen University); Tregenna, Fiona (University of Johannesburg)
    Abstract: This paper identifies the determinants of industrialization in 18 African countries, 1965 to 2018, using various estimators and applying a battery of robustness checks. Industrialization in Africa is driven by historical legacies such as colonialism; geographical factors such as rainfall and distance from international markets; economic factors such competition from China, market size and urbanization; and technological factors such as digital technology adoption. An inverse U-shape relationship between industrialization and GDP per capita is consistent with (premature) de-industrialization. Technological change and adoption of digital technologies are found to have an ambiguous relationship with industrialisation in Africa. The establishment of the AfCFTA is timely, but its benefits will only be realised if countries also improve infrastructure to overcome the negative consequences of adverse geography, improve trade facilitation to exploit learning-by-exporting from intra-African trade, and facilitate urbanization.
    Keywords: industrialization, development, employment, technology, trade, Africa
    JEL: O47 O33 J24 E21 E25
    Date: 2023–03

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