nep-gro New Economics Papers
on Economic Growth
Issue of 2023‒10‒09
eight papers chosen by
Marc Klemp, University of Copenhagen

  1. Population Aging and Economic Growth: From Demographic Dividend to Demographic Drag? By Kotschy, Rainer; Bloom, David E.
  2. Rethinking “Distance From”: Lessons from Wittenberg and Mainz By Zhao, Qiyi C.
  3. Demographic Dividend and Economic Growth: Exploring the Case of India By Ro, Yoon Jae; Park, Jiwon
  4. The Impact of Venture Capital on Economic Growth By Steven Poelhekke; Benjamin Wache
  5. Agriculture Credit and Economic Growth in Bangladesh: A Time Series Analysis By Md. Toaha; Laboni Mondal
  6. The Ultimate Resource is Peaking By Charles Kenny
  7. Optimal Government Debt Policy in the Overlapping Generations Model with Idiosyncratic Capital Return Risk By HIRAGUCHI Ryoji
  8. Replication of Dickens (2022) "Understanding Ethnolinguistic Differences: The Roles of Geography and Trade" By Gonzalez, Javier; Özak, Ömer

  1. By: Kotschy, Rainer (Harvard School of Public Health); Bloom, David E. (Harvard School of Public Health)
    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: 2023–08
  2. By: Zhao, Qiyi C.
    Abstract: An influential literature in early modern economic history uses “distance from” as an instrumental or a control variable. I show that “distance from Wittenberg” and “distance from Mainz, ” two prominent instruments for the adoption of Protestantism and printing technology, have historical and econometric drawbacks that engender misleading conclusions. Historical data challenge the assumption that distance determined access to ideas or technology. Placebo tests and simulations reveal that “distance from” variables frequently produce falsely significant estimates in first stage and OLS regressions. My findings suggest caution in using “distance from” instruments for the adoption of ideas and technologies.
    Keywords: distance from, Reformation, printing, religion, Protestantism, idea and technology diffusion, instrumental variable, early modern economic history
    JEL: C18 C36 N0 N10 N13 N3 N30 N33 N70 N73 N93 O14 O15 O30 O33 O43
    Date: 2023–06–28
    Abstract: This study investigates the significance of India's emergence as the world's most populous nation in 2023, surpassing China, and its consequential implications for economic growth. With a focus on the demographic dividend driven by working-age and prime-age populations, we analyze the effects of shifting age distribution on India's labor force, labor market, and economic drivers. Extending the study period by integrating additional datasets, we examine per capita GDP growth, sectoral value-added, and employment shifts at the state level. Results reveal limited influence on per capita output, but significant sectoral effects. Notably, prime age composition within the working-age population emerges as a key driver of economic growth.
    Keywords: Demographic Dividend; India; Population
    Date: 2023–09–08
  4. By: Steven Poelhekke (Vrije Universiteit Amsterdam); Benjamin Wache (CPB Netherlands)
    Abstract: Does venture capital (VC) investment yield economic growth? A large literature studies the effect of VC investments on firm-level activity, but its effects on economic growth are less well understood. We identify the effect of VC investment flows on destination county employment, wages, and establishment creation, using a novel instrument that captures the ‘social connectedness’ of counties to major sources of VC investment. Using detailed data on VC flows from investors to companies, we find a large positive impact of VC investment, suggesting that strong social connections to large venture capital hubs are an important contributor to regional economic growth.
    Keywords: Growth, venture capital, social connectedness
    JEL: R11 G24 G41
    Date: 2023–08–30
  5. By: Md. Toaha; Laboni Mondal
    Abstract: The paper examined the impact of agricultural credit on economic growth in Bangladesh. The annual data of agriculture credit were collected from annual reports of the Bangladesh Bank and other data were collected from the world development indicator (WDI) of the World Bank. By employing Johansen cointegration test and vector error correction model (VECM), the study revealed that there exists a long run relationship between the variables. The results of the study showed that agriculture credit had a positive impact on GDP growth in Bangladesh. The study also found that gross capital formation had a positive, while inflation had a negative association with economic growth in Bangladesh. Therefore, the government and policymakers should continue their effort to increase the volume of agriculture credit to achieve sustainable economic growth.
    Date: 2023–09
  6. By: Charles Kenny (Center for Global Development)
    Abstract: Julian Simon argued that more people were associated with more prosperity: human talents were the “ultimate resource” and the force behind rising living standards. The last 30 years have been consistent with that view. But, globally, we are making fewer workers—and, more importantly, fewer potential innovators. In rich countries, human capital is growing considerably more slowly than in the past. Meanwhile innovation per researcher appears to be dropping as the population of researchers ages, while it takes longer to get to the knowledge frontier and more collaboration to expand it. Combined with the fact we are increasingly intolerant of risk and increasingly desirous of innovations in sectors where it is particularly hard to increase productivity, it is little surprise that productivity growth is indeed declining. To extend our two-century era of comparatively rapid progress, we need radically reduced discrimination in the global opportunity to innovate.
    Keywords: technology, demographics, economic growth
    JEL: E10 F01
    Date: 2023–01–25
  7. By: HIRAGUCHI Ryoji
    Abstract: In this paper, we study the two-period overlapping generations model in which individuals are subject to idiosyncratic risks and study the optimal provision of government debt. In our model, individuals are ex ante homogeneous, and hold risky capital and safe government bonds in the first period. They are subject to idiosyncratic capital return risk in the second period. It is well-known that in deterministic overlapping generations models, when government debt is provided to maximize steady state welfare, the interest rate (r) is equal to the economic growth rate (g). However, in our model with idiosyncratic risks, the risk-free rate is less than the economic growth rate in the optimal steady state. This implies that even when the rollover of government debt is sustainable, increases in debt may reduce welfare. When the return on capital accumulation is risky, the level of safe assets the individuals hold is inefficiently high. Setting the risk-free rate below the economic growth rate reduces demand for government bonds and enhances capital accumulation, which is welfare-improving.
    Date: 2023–09
  8. By: Gonzalez, Javier; Özak, Ömer
    Abstract: Dickens (2022) studies the role of trade on long-run inter-ethnic linguistic differences. He establishes that neighboring ethnolinguistic groups have smaller (lexicostatistical) linguistic distances when there is a larger agricultural productivity variation between them. Specifically, he establishes that pre-1500 land productivity variation (CSI SD) and its change due to Columbian Exchange in the post-1500 (CSI SD CHANGE) era decrease linguistic distances between groups. In what can be considered his main specification, which includes geographical controls, spatial controls, and language family fixed effects (Table 1 column 5), he estimates that a one standard deviation increase in the change in land productivity variation (post-1500) decreases linguistic distances by 0.11 standard deviations (p-value
    Keywords: Replication, Linguistic Distances, Trade
    JEL: F10 O10 Z10
    Date: 2023

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