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on Economic Growth |
| By: | Yu, Po-yang; Lai, Ching-Chong |
| Abstract: | This paper develops a monetary R&D-driven endogenous growth model featuring endogenous innovation scales and the price-marginal cost markup. To endogenize the step size of quality improvement, we propose a trade-off mechanism between the risk of innovation failure and the benefit of innovation success in R&D firms. Several findings emerge from the analysis. First, a rise in the nominal interest rate decreases economic growth; however, its relationship with social welfare is ambiguous. Second, either strengthening patent protection or raising the professional knowledge of R&D firms leads to an ambiguous effect on economic growth. Third, the Friedman rule of a zero nominal interest rate fails to be optimal in view of the social welfare maximum. Finally, our numerical analysis indicates that the extent of patent protection and the level of an R&D firm’s professional knowledge play a crucial role in determining the optimal interest rate. |
| Keywords: | intellectual property rights; economic growth; endogenous innovation scales; endogenous markups; inflation |
| JEL: | E41 L11 O30 O40 |
| Date: | 2022–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119381&r=gro |
| By: | Jesús Fernández-Villaverde; Gustavo Ventura; Wen Yao |
| Abstract: | Due to population aging, GDP growth per capita and GDP growth per working-age adult have become quite different among many advanced economies over the last several decades. Countries whose GDP growth per capita performance has been lackluster, like Japan, have done surprisingly well in terms of GDP growth per working-age adult. Indeed, from 1998 to 2019, Japan has grown slightly faster than the U.S. in terms of per working-age adult: an accumulated 31.9% vs. 29.5%. Furthermore, many advanced economies appear to be on parallel balanced growth trajectories in terms of working-age adults despite important differences in levels. Motivated by this observation, we calibrate a standard neoclassical growth model in which the growth of the working-age adult population varies in line with the data for each economy. Despite the underlying demographic differences, the calibrated model tracks output per working-age adult in most economies of our sample. Our results imply that the growth behavior of mature, aging economies is not puzzling from a theoretical perspective. |
| JEL: | E20 J10 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31914&r=gro |
| By: | Miriam Fritzsche; Nikolaus Wolf |
| Abstract: | Fossil fuels have shaped the European economy since the industrial revolution. We use new long-run panel data to analyse the effect of both, coal and oil on economic growth between 1900 and 2015, exploiting variation at the level of European NUTS2 and NUTS3 regions. We show that the reversal of fortune of coal regions resulted from the second energy transition. Specifically, an “oil invasion” in the early 1960s turned regional coal abundance from a blessing into a curse. Human capital accumulation contributed to this reversal of fortune and fully explains the negative effects until today. Moreover, we find substantial heterogeneity between former coal regions that is in line with Glaeser’s “reinvention hypothesis”: regions with a higher skill-level adjusted much better to the decline of coal. In particular, we show that coal regions with a higher urban density before 1800 were much more resilient than others. |
| Keywords: | coal, oil invasion, second energy transition, education, reinvention, growth |
| JEL: | O13 O44 Q32 N14 R10 I25 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10805&r=gro |
| By: | Felix S.F. Schaff (European University Institute) |
| Abstract: | This paper studies the impact of the Protestant Reformation on wealth distribution and inequality in confessionally divided Germany, between 1400 and 1800. The Reformation expanded social welfare, but provided it in a particularistic way to insiders only. This gave Protestantism an ambiguous character in terms of redistribution and its impact on inequality. I develop a theoretical framework of this trade-off between welfare expansion and particula- ristic provision, and test its implications empirically, using a Difference-in-Differences and an Instrumental Variable strategy. In line with the theoretical framework, I document that the Reformation exacerbated inequality overall, by making marginal poor people relatively poorer. The result is driven by the introduction of new particularistic poor relief policies in Protestant communities. Protestantism is an underappreciated driver of preindustrial inequality, long before the onset of industrialisation and modern economic growth. |
| Keywords: | Wealth, Poverty, Inequality, Political Economy, Protestantism, Welfare, Germany |
| JEL: | D31 H23 I38 N33 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:hes:wpaper:0239&r=gro |
| By: | Duong, Khanh; Nguyen Phuc Van |
| Abstract: | This study reexamines the relationship between economic growth and inequality, challenging the conventional view that regards inequality solely as an impediment to development. While recognizing the essential role of economic growth in development plans, our analysis extends beyond this traditional focus, acknowledging that development encompasses more than just growth. We explore how inequality interplays with pressing global challenges like climate change and pandemics, areas that have garnered significant scholarly and political attention recently. Contrary to the prevalent belief, often reinforced by income redistribution policies, that inequality invariably hinders economic progress, our findings suggest a more nuanced reality. In the short term, an increase in inequality appears to boost growth in economies reliant on physical capital, whereas its impact on growth in human capital-intensive economies remains ambiguous. Over the long term, however, sustained inequality negatively affects both affluent and less affluent countries through the human capital channel, with a more pronounced impact on the latter. Our research indicates that short-term increases in inequality (within a five-year span) do not adversely affect economic growth, calling into question the necessity of stringent taxation measures. Nevertheless, persistent high inequality over longer periods (exceeding ten years) is linked to social instability. Hence, we advocate for the aggressive implementation of socially inclusive measures, such as enhanced education, healthcare, and fertility control, particularly in developing countries, to address these long-term challenges. |
| Keywords: | Inequality, Economic growth, Human capital, Physical capital |
| JEL: | D63 O15 O50 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1356&r=gro |
| By: | Arnaud Deseau (Aix-Marseille Univ., CNRS, AMSE, Marseille, France) |
| Abstract: | The Malthusian trap is a well recognized source of stagnation in per capita income prior to industrialization. However, previous studies have found mixed evidence about its exact strength. This article contributes to this ongoing debate, by estimating the speed of convergence for a wide range of economies and a large part of the Malthusian era. I build a simple Malthusian growth model and derive the speed of convergence to the steady state. A calibration exercise for the English Malthusian economy reveals a relatively weak Malthusian trap, or weak homeostasis, with a half-life of 112 years. I then use β-convergence regressions and historical panel data on per capita income and population to empirically estimate the speed of convergence for a large set of countries. I find consistent evidence of weak homeostasis, with the mode of half-lives around 120 years. The weak homeostasis pattern is stable from the 11th to the 18th century. However, I highlight significant differences in the strength of the Malthusian trap, with some economies converging significantly faster or slower than others. |
| Keywords: | Convergence, Homeostasis, Malthusian trap, Preventive checks, marriage, fertility, Malthusian model, Beta-convergence |
| JEL: | J1 N1 N3 O1 O47 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2326&r=gro |
| By: | Bajo-Rubio, Oscar; Ramos-Herrera, María del Carmen |
| Abstract: | In this paper, we analyse the relationship between international trade and economic growth in an unbalanced panel of 20 European countries in a long-term perspective, since the mid-19th century to present days, differentiating between the periods before and after the start of the Second World War. To this end, we perform Granger-causality tests between exports and GDP, and between imports and GDP, following the novel methodology of Juodis et al. (2021) for panel data models with large cross-sectional and time series dimensions. Our results support the existence of a bi-directional relationship between both trade variables and GDP, for the whole period and across subperiods. |
| Keywords: | International trade, Economic growth, Europe, Granger-causality |
| JEL: | F41 F43 N10 O47 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1358&r=gro |
| By: | Benny Kleinman; Ernest Liu; Stephen J. Redding; Motohiro Yogo |
| Abstract: | We generalize the closed-economy neoclassical growth model (CNGM) to allow for costly goods trade and capital flows with imperfect substitutability between countries. We develop a tractable, multi-country, quantitative model that matches key features of the observed data (e.g., gravity equations for trade and capital holdings) and is well suited for analyzing counterfactual policies that affect both goods and capital market integration (e.g., U.S.-China decoupling). We show that goods and capital market integration interact in non-trivial ways to shape impulse responses to counterfactual changes in productivity and goods and capital market frictions and the speed of convergence to steady-state. |
| Keywords: | economic growth, international trade, capital flows |
| Date: | 2023–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1965&r=gro |
| By: | Duong, Khanh; Nguyen Phuc Van |
| Abstract: | Technological advancements are often viewed as drivers of green growth, but they also carry the potential to widen social inequality, particularly in job automation and the transformation of work routines. This study delves into the relationship between technology and inclusive growth, drawing on global data. We introduce a new concept called 'Inequality-Stabilizing Growth' (ISG), which balances economic progress with social equity. The ISG is calculated by combining factors that both decrease and increase inequality within total growth. Our findings indicate that technology or innovation alone does not necessarily lead to greater social equality or inclusive growth. In developed countries, the transfer of technology supports growth that includes more people, but this is not consistently the case in developing nations. The research also highlights a crucial point: focusing solely on growth without inclusive policies may worsen inequality, hindering future economic development. To counter this, we recommend policies that enhance education and financial growth, adapted to different stages of national development, and include fertility control measures in less developed areas. These factors promote social mobility, which is considered a 'key to curbing inequality.' |
| Keywords: | innovation, globalisation, inclusive growth, unified growth theory |
| JEL: | C33 D63 F63 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1357&r=gro |