nep-gro New Economics Papers
on Economic Growth
Issue of 2023‒09‒25
ten papers chosen by
Marc Klemp, University of Copenhagen

  1. Population Aging and Economic Growth: From Demographic Dividend to Demographic Drag? By Rainer Kotschy; David E. Bloom; Rainer Franz Kotschy
  2. Balanced growth and degrowth with human capital By Bosi, Stefano; Camacho, Carmen; Ha-Huy, Thai
  3. Colonialism, Institutional Quality, and the Resource Curse By Jubril Animashaun; Ada Wossink; Katsushi S. Imai
  4. Social Capital and Economic Growth: A Meta-Analysis By Xindong Xue; W. Robert Reed; Robbie C.M. van Aert
  5. The nexus between domestic investment and economic growth in MENA countries; Does unemployment matter? By Bakari, Sayef
  6. Leviathan's Shadow: The Imperial Legacy of State Capacity and Economic Development in the Kingdom of Yugoslavia By Magnus Neubert
  7. Capital, Productivity, and Human Welfare since 1870 By Daniel Gallardo-Albarrán
  8. Is Productive Entrepreneurship Getting Scarcer? A Reflection on the Contemporary Relevance of Baumol's Typology By Minniti, Maria; Naudé, Wim; Stam, Erik
  9. Super Advanced S M Nazmuz Sakib’s Economic Growth and Development Index (SASEGDI) By Sakib, S M Nazmuz
  10. Roots of Inequality By Oded Galor; Marc Klemp; Daniel C. Wainstock

  1. By: Rainer Kotschy; David E. Bloom; Rainer Franz Kotschy
    Abstract: This paper examines the extent to which changes in working-age shares associated with population aging might slow economic growth in upcoming years. We first analyze the economic effects of changing working-age shares in a standard empirical growth model using country panel data from 1950–2015. We then juxtapose the estimates with predicted shifts in population age structure to project economic growth in 2020–2050. Our results indicate that population aging will slow economic growth throughout much of the world. Expansions of labor supply due to improvements in functional capacity among older people can cushion much of this demographic drag.
    Keywords: population health, life expectancy, prospective aging, labor supply, economic development
    JEL: J11 O11 O47
    Date: 2023
  2. By: Bosi, Stefano; Camacho, Carmen; Ha-Huy, Thai
    Abstract: We consider a simple discrete-time version of Lucas (1988). When the speed of human capital accumulation is high (low), the Balanced Growth (Degrowth) Path is the unique optimal solution.
    Keywords: human capital, balanced growth path
    JEL: E00 E21
    Date: 2023–08–16
  3. By: Jubril Animashaun (Department of Economics, The University of Manchester, UK); Ada Wossink (Department of Economics, The University of Manchester, UK); Katsushi S. Imai (Department of Economics, The University of Manchester, UK and Research Institute for Economics and Business Administration, Kobe University, JAPAN)
    Abstract: This paper tests the hypotheses that (1) European colonization indirectly hinders the development outcomes, namely GDP per capita growth, by lowering institutional quality and encouraging corruption in colonized oil-rich countries, and (2) better macro institutional quality mitigates the historically-rooted resource curse. We constructed the instrumental variable by categorizing countries based on the evidence of settlers' mortality and the persistence of European colonial languages as official post-independence languages in oil-rich non-western countries. Also, we isolate the effect of giant oil discoveries with the depth of oil fields because of the plausible relationship with the geological characteristics of oil formation. We estimate a 2-Step GMM model that controls the lagged moments of GDP per capita using the data for 69 countries with at least a discovery of giant oil fields from 1960 to 2015. We show that oil-rich countries without colonial experience have better institutions, which translates to improving GDP per capita and reducing the corruption index. Our findings highlight the importance of historical factors associated with state origin when formulating policies to address the resource curse.
    Keywords: Resource Curse; Colonialism; Institutions; Petroleum-resources
    JEL: F54 E02 O43 Q35
  4. By: Xindong Xue; W. Robert Reed (University of Canterbury); Robbie C.M. van Aert
    Abstract: This research provides a comprehensive, quantitative synthesis of the empirical literature on social capital and economic growth. It assesses 993 estimates from 81 studies. Utilizing a variety of estimation procedures, we draw the following conclusions: There is strong evidence to indicate that publication bias distorts the empirical literature, causing estimates of social capital's effects to be overstated. Initial, unadjusted estimates are positive, generally moderately sized, and consistently statistically significant. Correcting for publication bias reduces these estimates by half or more. Our preferred estimates indicate that the effects of social capital on economic growth, though statistically significant, are very small. This highlights that an uncritical acceptance of the empirical literature can lead to an inflated perception of the importance of social capital. Analysis of the different types of social capital (cognitive, structural, other) finds little evidence of differences in growth effects. Further investigation of moderating factors finds that most have estimated effects that are generally small to negligible, though social capital appears to have a substantially smaller effect on economic growth in the US compared to other parts of the world.
    Keywords: Social capital, Economic growth, Cognitive social capital, Structural social capital, Meta-analysis, Meta-regression, Publication Bias
    JEL: B40 O31 O40 O47 R11 Z10
    Date: 2023–08–01
  5. By: Bakari, Sayef
    Abstract: In this paper, we try to search the effect of unemployment on the relationship between domestic investment and economic growth. Data for MENA countries over the period 1998 – 2022 are applied for panel data analysis. Empirical analysis validates that domestic investment impact positively on economic growth. However, unemployment has a negative incidence on economic growth. Also, the outcome of domestic investment on economic growth attests to be influenced negatively by unemployment.
    Keywords: Domestic Investment, Economic Growth, unemployment, MENA Countries, Panel Data Analysis
    JEL: E22 E24 G31 O47 O50
    Date: 2023
  6. By: Magnus Neubert (Leibniz Institute of Agricultural Development in Transition Economies, Martin-Luther-Universität Halle-Wittenberg)
    Abstract: What is the effect of state capacity on economic development? I argue that strong and centralised states are capable of mobilising the resources required to establish an efficient administration and provide public goods, which are preconditions for modern economic growth. To test this hypothesis, I consider the long-lasting division of Yugoslavia between the Habsburg and the Ottoman empire whose state capacity diverged enormously. I introduce a novel dataset of decomposed GDP, industrial labour force shares and state capacity of 344 micro-regions in Yugoslavia shortly after the dissolution of those empires. By applying a spatial regression discontinuity design along the imperial border, I find that the Habsburg empire had a substantial positive effect on economic development and state capacity. Three types of causal mechanism analysis allow me to estimate the causal effect of state capacity on economic development. I find that a one standard deviation increase in state capacity enhances GDP per capita by 8-11% and the industrial labour force by 21-29%. My results shed new light on the medium-term effects of state capacity on economic development and the mechanisms at work.
    Keywords: State Capacity, Economic Development, Habsburg Empire, Yugoslavia
    JEL: H41 H70 N14 O18 O43 R12
    Date: 2023–02
  7. By: Daniel Gallardo-Albarrán (Wageningen University)
    Abstract: This article reviews the proximate factors of human welfare since 1870 by discussing two strands of the economic history literature and identifying various key areas for further research. The first strand focuses on level accounting studies that attribute between-country economic inequality to differences in capital and productivity. I argue that most income gaps in the late 19th century were due to variation in physical and human capital endowments, while widening productivity differentials account for most of rising cross-country inequality during the 20th century. These patterns are likely explained by waves of skill- and capital- biased technological innovation, but additional research is needed to underpin these findings in, at least, three ways: capital and income series should be deflated by appropriate price indices, samples should include many more lower-income countries and methodologies could explore more realistic production functions. The second strand of the literature I review considers the measurement of long-run human development. Three approaches are popular among practitioners (capability, data-driven and utility frameworks), although there is still no consensus on which one to use. This makes it challenging to interpret broad trends in human welfare, as different well-being indices show contrasting patterns of growth and inequality. I argue that the field needs a more solid theoretical foundation to guide our choice of measurement frameworks. In this respect, utility-based indicators may be especially useful, as they address relevant issues raised in the literature, such as how to weight different dimensions, how individuals trade off between them, and how to interpret the results.
    Keywords: capital, productivity, human development, well-being, economic history
    JEL: I31 N00 N10 N30 O47
    Date: 2023–08
  8. By: Minniti, Maria (SMU Cox School of Business); Naudé, Wim (RWTH Aachen University); Stam, Erik (Utrecht University)
    Abstract: We review Baumol's typology of productive, unproductive and destructive entrepreneurship. We argue that the typology is relevant for explaining the secular decline in business dynamics. To the existing explanations for this decline, we put forward the thesis that entrepreneurship has become less productive, due to the unintended effects of entrepreneurship policies adopted widely in Western economies. These have straight-jacketed, distracted and zombified entrepreneurship. Removing these constraints on productive entrepreneurship would require that the decline in level-two institutions, such as democracy and science, be halted and reversed.
    Keywords: entrepreneurship, economic growth, economic development, institutions, Baumol
    JEL: L26 L21 L53 O40
    Date: 2023–08
  9. By: Sakib, S M Nazmuz
    Abstract: This research introduces a novel integrated measure of economic growth and development called the Super Advanced S M Nazmuz Sakib's Economic Growth and Development Index (SASEGDI). SASEGDI incorporates 12 key dimensions including GDP per capita, human development, productivity, CO2 emissions, income inequality, economic freedom, corruption, competitiveness, political stability, social welfare, innovation, and environmental sustainability. Quantitative correlation analysis among 180 countries shows SASEGDI has strong positive correlation with human rights protection but negative correlation with civil liberties, political rights, and press freedom. Case studies of Norway, China, Saudi Arabia, and Venezuela using SASEGDI values imply a potential trade-off between economic development and human freedoms. Triangulation with qualitative analysis suggests policies enhancing SASEGDI may also restrict human rights and liberties. The SASEGDI provides a multidimensional tool to evaluate and compare country performance on economic growth and development while highlighting the complex interlinkages with human rights and freedoms. Further research could apply SASEGDI to study impacts of culture, institutions, and regimes on developmental outcomes.
    Date: 2023–05–02
  10. By: Oded Galor; Marc Klemp; Daniel C. Wainstock
    Abstract: Why does inequality vary across societies? We advance the hypothesis that in a market economy, where earning differentials reflect variations in productive traits, a significant component of the differences in income inequality across societies can be attributed to variation in societal interpersonal diversity, shaped during the prehistoric Out-of-Africa Migration. The roots of income inequality within the US population provide supporting evidence for the hypothesis. It suggests that variation in income inequality across groups of individuals originating from different ancestral backgrounds can be traced to the degree of diversity of their ancestral populations as was carved in the course of the dispersal of humanity from Africa.
    JEL: O10 Z10
    Date: 2023–08

This nep-gro issue is ©2023 by Marc Klemp. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.