nep-gro New Economics Papers
on Economic Growth
Issue of 2023‒10‒30
eight papers chosen by
Marc Klemp, University of Copenhagen

  1. Explosive growth from AI automation: A review of the arguments By Ege Erdil; Tamay Besiroglu
  2. On the promises and perils of Smithian growth – from pin factory to AI By Miller, Marcus
  3. Unveiling the Hidden Impact of Urban Land Rents on Total Factor Productivity By Mr. Bas B. Bakker
  4. Long Run Consequences of Ethnic Conflict On Social Capital: Evidence from South Africa By Paz, Santiago
  5. Enhancing the Knowledge Economy: A Cross-Country Study of Knowledge Creation By Moid, Md Zubab Ibne; Buaka, Emefa; Link, Albert
  6. Is Corruption Perception Index Biased? An Ethnicity Based Analysis By Abida Naurin
  7. A Classical Marxian Two-Sector Endogenous Cycle Model: Integrating Marx, Dutt, and Goodwin By Cajas Guijarro, John
  8. Alberto Alesina (1957-2020): Man, Researcher, Professor of Economics, Popularizer By Vindigni, Andrea

  1. By: Ege Erdil; Tamay Besiroglu
    Abstract: We examine whether substantial AI automation could accelerate global economic growth by about an order of magnitude, akin to the economic growth effects of the Industrial Revolution. We identify three primary drivers for such growth: 1) the scalability of an AI ``labor force" restoring a regime of increasing returns to scale, 2) the rapid expansion of an AI labor force, and 3) a massive increase in output from rapid automation occurring over a brief period of time. Against this backdrop, we evaluate nine counterarguments, including regulatory hurdles, production bottlenecks, alignment issues, and the pace of automation. We tentatively assess these arguments, finding most are unlikely deciders. We conclude that explosive growth seems plausible with AI capable of broadly substituting for human labor, but high confidence in this claim seems currently unwarranted. Key questions remain about the intensity of regulatory responses to AI, physical bottlenecks in production, the economic value of superhuman abilities, and the rate at which AI automation could occur.
    Date: 2023–09
  2. By: Miller, Marcus (University of Warwick, CAGE and CEPR)
    Abstract: For path-breaking insights on how prices can guide the efficient allocation of resources and on how innovation and investment can spur economic growth, Adam Smith is justly renowned. He was, however, well aware of problems posed by market dominance - specifically in banking and, more generally, wherever getting to the scale that delivers increasing returns leads to monopolistic behaviour. For the historical record, we draw on the recent wide-ranging survey by Acemoglu and Johnson on how the benefits of innovation have been spread across society since the Industrial Revolution. We also consider these issues in the context of geo-political competition.
    Keywords: The Wealth of Nations by Adam Smith; Increasing Returns to Scale; monopoly; excess risk-taking; case studies of economic history; geo-political competition JEL Classification: B12, D61, E25, L12, O33, P51
    Date: 2023
  3. By: Mr. Bas B. Bakker
    Abstract: This paper addresses the puzzling decline of Total Factor Productivity (TFP) levels in rapidly growing economies, such as Singapore, despite advancements in technology and high GDP per capita growth. The paper proposes that TFP growth is not negative; instead, standard growth decompositions have underestimated TFP growth by overestimating the contribution of capital, failing to account for the substantial part of capital income directed to urban land rents. This leads to an overestimation of changes in capital stock's contribution to growth and thereby an underestimation of TFP growth. A revised decomposition suggests that TFP growth in economies with high land rents and rapid capital stock growth, such as Singapore, has been considerably underestimated: TFP levels have not declined but increased rapidly.
    Keywords: Total Factor Productivity; Economic Growth; Capital Stock; Land Rents; Growth Decomposition; Urban Economics; Population Density; Diminishing Returns to Scale; Technological Progress; Singapore; TFP level; re-estimating TFP; land rent; decline of total factor productivity; Capital income; Stocks; Land prices; Asia and Pacific
    Date: 2023–08–25
  4. By: Paz, Santiago (Universidad de los Andes)
    Abstract: This paper studies the following research question: What are the consequences of historical ethnic conflict on contemporary levels of social capital? This question is relevant, since understanding the consequences of historical ethnic violence on contemporary social capital can provide useful inputs to design effective State-building policies. I exploit Mfecane, a period of ethnic upheaval in South African history, as a setting to examine the causal effects of historical ethnic conflict on contemporary levels of social capital. For this end, I use a combination of a historical approximation of the Mfecane warzone with geocoded data from the Afrobarometer project (2000-2016). Using an instrumental variables strategy, I find that historical ethnic conflict decreases contemporary trust in people among individuals living within the borders of Mfecane, while increasing trust in relatives and neighbors. Increases in in-group trust appear to be driven by the long run persistence of parochial altruism. Conversely, lower levels of betweengroup trust can be explained by the lack of economic incentives to cooperate with strangers in former warzones. These results are suggestive of a degree of substitutability between in-group and between-group social capital, at the community level.
    Keywords: Violence; Social Capital; Trust; Ethnic Conflict; South Africa
    JEL: D74 N00 O10 O12 O13 Q34
    Date: 2023–09–21
  5. By: Moid, Md Zubab Ibne (University of North Carolina at Greensboro, Department of Economics); Buaka, Emefa (University of North Carolina at Greensboro, Department of Economics); Link, Albert (University of North Carolina at Greensboro, Department of Economics)
    Abstract: We identify quantitatively, using cross-country data from the Global Innovation Index, a path through which R&D (research and development) operates to affect economic growth and development. The path we consider is one that relates to enhancing the knowledge economy. Specifically, we contribute to the literature through the quantification of the antecedents and consequences of newly created knowledge: R&D creation of new knowledge economic growth and development. And, we show statistically that the R&D creation of new knowledge relationship is enhanced when businesses collaborate with universities. Not only is this collaborative indirect relationship new to the knowledge creation literature, but also it is based on the estimation of a model specification that has not previously been considered.
    Keywords: Global Innovation Index; knowledge economy; R&D; business-university collaboration;
    JEL: O33 O47 O50
    Date: 2023–10–18
  6. By: Abida Naurin (Pakistan Institute of Development Economics, Islamabad)
    Abstract: Corruption is a widespread problem that affects many countries across the world. Ethnicity and economic growth are two important factors that can influence corruption levels in a country. Corruption has a negative impact on economic growth, investment, and social development in several ways. This research aims to investigate the relationship between economic growth, ethnicity, and panel-country corruption levels. Specifically, it seeks to answer the question: do economic growth and ethnicity explain the differences in panel-country corruption levels? Most recently the IMF in its conditionality has used the Corruption Perception Index (CPI) to put conditions that are non-economic on Pakistan.
    Keywords: CORRUPTION, Cross-Country Panel Data, Economic Growth, Ethnicity, PCSE regression
    Date: 2023
  7. By: Cajas Guijarro, John
    Abstract: This paper introduces a Classical Marxian Two-Sector Endogenous Cycle (CMTSEC) model, merging Dutt's (1988) two-sector model of Classical convergence with labor dynamics inspired by Goodwin (1967) and an endogenous labor supply inspired by Harris (1983). Empirical support fortifies these assumptions. Utilizing the Hopf bifurcation theorem and numerical simulations, we demonstrate the model's capacity to produce stable limit cycles encompassing wage share, employment rate, and sectoral capital distribution. Notably, sectoral profit rates exhibit cyclic fluctuations, prompting a reevaluation of long-run equilibrium. The model underscores the role of investment sensitivity to sectoral profit rate disparities in determining cycle stability. Hence, the CMTSEC model extends Goodwin’s (1967) endogenous cycle model, encapsulating the conflict between capital and labor while delving into the intricate dynamics of capitalist reproduction in a two-sector economy.
    Keywords: two-sector model; labor market dynamics; endogenous cycles; sensitivity of investment to profit rate differentials; long-run equilibrium
    JEL: C61 E11 E32 O41
    Date: 2023–09–22
  8. By: Vindigni, Andrea (University of Genova)
    Abstract: This paper offers an overview of Alberto Alesina's life and of his scholarly work (§ 1 and 2). It will be argued, that Alberto would have entirely deserved the award of the Nobel Prize for Economic Science, except only for his premature passing away. His foundational contribution was the creation, and the development of modern political economy since the mid 1980s (§ 3). This is a highly eclectic discipline at the cross-road of economics and political science. I will briefly attempt to explain what political economy is mainly about, and what political economy is nowadays understood to mean: its basic assumptions, its methodology, its goals, its main relations with modern economics (§ 4). I will then focus on the general introduction (§ 5), and the analytical discussion (§ 5.1) of one of Alberto's most important and impactful contributions: his 1994 work with Dani Rodrik on redistributive politics and economic growth. In my opinion, this is not only one of the many path-breaking and extremely impactful contributions of Alberto, but it best illustrates his scholarly traits and his research agenda. This paper has indeed influenced a large subsequent body of literature; I will mention a few highly celebrated among such contributions (§ 5.2). I will then very briefly discuss a few other relatively early works of Alberto, that have also contributed to the foundation and to the establishment of modern political economy (§ 6). These early works could have been part of a hard core of contributions, potentially more than justifying the assignment of the Nobel Prize in Economics to Alberto Alesina. Finally, I will briefly discuss some of his late work (§ 7), as well as my own personal relation with Alberto (§ 8), a truly unique human being, and master of all the Italian economists (and of many other social scientists). Some acknowledgments (§ 9), and a short but essential bibliography (§ 10) conclude this paper.
    Keywords: economic growth, inequality, public debt, government, political economy, redistribution, culture
    JEL: O11 O43
    Date: 2023–09

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