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on Economic Growth |
| By: | Daron Acemoglu |
| Abstract: | Does capital accumulation increase labor demand and wages? Neoclassical production functions, where capital and labor are q-complements, ensure that the answer is yes, so long as labor markets are competitive. This result critically depends on the assumption that capital accumulation does not change the technologies being developed and used. I adapt the theory of endogenous technological change to investigate this question when technology also responds to capital accumulation. I show that there are strong parallels between the relationship between capital and wages and existing results on the conditions under which equilibrium factor demands are upward-sloping (e.g., Acemoglu, 2007). Extending this framework, I provide intuitive conditions and simple examples where a greater capital stock leads to lower wages, because it triggers more automation. I then offer an endogenous growth model with a menu of technologies where equilibrium involves choices over both the extent of automation and the rate of growth of labor-augmenting productivity. In this framework, capital accumulation and technological change in the long run are associated with wage growth, but an increase in the saving rate increases the extent of automation, and at first reduces the wage rate and subsequently depresses its long-run growth rate. |
| JEL: | C65 O31 O33 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32190&r=gro |
| By: | Gilad Sorek |
| Abstract: | I study Schumpeterian growth under Variable Demand Elasticity preferences in a canonical Two-R&D-sector model with both vertical and horizontal innovation. Within this framework, I show how the departure from the traditional CES specification alters both the positive and normative characteristics of the Schumpeterian growth dynamics: (a) for a sufficiently high population growth rate relative to the innovation opportunity, there is a balanced growth path -"BGP"- of drastic innovation where the innovation size is determined by the population growth rate, that is growth is semi-endogenous. However, for a sufficiently low population growth rate, the model economy converges to the limit values of demand elasticity and to fully endogenous growth (b) Along the BGP with innovation size equal to the population growth rate, welfare is maximized with a higher ratio of product varieties per consumer and a lower per-variety output. |
| Keywords: | Schumpeterian Growth; Variable Demand Elasticity; Population Growth and Technological Progress |
| JEL: | O30 O40 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:abn:wpaper:auwp2024-04&r=gro |
| By: | Matthew J. Delventhal (Claremont McKenna College); Jesús Fernández-Villaverde (University of Pennsylvania); Nezih Guner (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | The demographic transition -the move from a high fertility/high mortality regime into a low fertility/low mortality regime- is one of the most fundamental transformations that countries undertake. To study demographic transitions across time and space, we compile a data set of birth and death rates for 186 countries spanning more than 250 years. We document that (i) a demographic transition has been completed or is ongoing in nearly every country; (ii) the speed of transition has increased over time; and (iii) having more neighbors that have started the transition is associated with a higher probability of a country beginning its own transition. To account for these observations, we build a quantitative model in which parents choose child quantity and educational quality. Countries differ in geographic location, and improved production and medical technologies diffuse outward from Great Britain, the technological leader. Our framework replicates well the timing and increasing speed of transitions. It also produces a strong correlation between the speeds of fertility transition and increases in schooling similar to the one in the data. |
| Keywords: | Demographic transition, skill-biased technological change, diffusion. |
| JEL: | J13 N3 O11 O33 O40 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2024_2402&r=gro |
| By: | Faguet, Jean-Paul (London School of Economics); Matajira, Camilo (Independent); Sanchez Torres, Fabio (Universidad de los Andes) |
| Abstract: | The Spanish encomienda, a colonial forced-labour institution that lasted three centuries, killed many indigenous people and caused others to flee into nomadism. What were its long-term effects? We digitize a great deal of historical data from the mid-1500s onwards and reconstruct the Spanish conquerors’ route through Colombia using detailed topographical features to calculate their least-cost path. We show that Colombian municipalities with encomiendas in 1560 enjoy better outcomes today across multiple dimensions of development than those without: higher municipal GDP per capita, tax receipts, and educational attainment; lower infant mortality, poverty, and unsatisfied basic needs; larger populations; and superior fiscal performance and bureaucratic efficiency, but also higher inequality. Why? Two mediation exercises using data on local institutions, populations and racial composition in 1794 shows that encomiendas affected development primarily by helping build the local state. Deep historical evidence fleshes out how encomenderos founded local institutions early on in the places they settled. Places lacking encomiendas also lacked local states for 3-4 centuries. Local institutions mobilized public investment in ways that doubtless suited encomenderos, but, over time, spurred greater economic and human development. |
| Keywords: | Encomienda; institutions; forced labour; state capacity; extraction; colonialism; development; Colombia |
| JEL: | N36 N96 O10 O43 |
| Date: | 2024–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:021078&r=gro |
| By: | Benny Kleinman (University of Chicago); Ernest Liu (Princeton University and NBER); Stephen J. Redding (Princeton University, NBER and CEPR); Motohiro Yogo (Princeton University and NBER) |
| 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 Flow |
| JEL: | F10 F21 F60 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:318&r=gro |
| By: | OECD |
| Abstract: | Despite women’s increased participation in the labour market significantly contributing to past economic growth, persistent gender gaps across OECD labour markets hinder full realization of the potential gains of women’s economic participation. This paper analyses the economic implications of these gaps and evaluates the potential for future growth through greater gender equality in labour market outcomes. Utilising two methodological frameworks, the paper first employs growth accounting to measure the contribution of women's employment to past economic growth. The paper then uses a simplified version of the OECD Long-Term Model in conjunction with projections on future labour force dynamics to estimate the impact of greater gender equality on the labour market. These analyses provide insight into the potentially significant economic benefits of closing persistent gender gaps across OECD countries. |
| JEL: | J16 J21 O47 |
| Date: | 2024–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:304-en&r=gro |
| By: | Charlotte Bartels; Simon Jäger; Natalie Obergruber |
| Abstract: | What are the long-term economic effects of a more equal distribution of wealth? We investigate consequences of land inequality, exploiting variation in land inheritance rules that traverse political, linguistic, geological, and religious borders in Germany. In some German areas, inherited land was to be shared or divided equally among children, while in others land was ruled to be indivisible. Using a geographic regression discontinuity design, we first show a more equal land distribution in areas with equal division; other potential drivers of growth are smooth at the boundary and equal division areas were not historically more developed. Today, equal division areas feature higher average incomes and more entrepreneurship which goes in hand with a right-shifted skill, income, and wealth distribution. We show evidence consistent with the more even distribution of land leading to more innovative industrial by-employment during Germany’s transition from an agrarian to an industrial economy that, in the long-run, led to more entrepreneurship. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10936&r=gro |
| By: | John D. Huber; Laura Mayoral |
| Abstract: | We develop a novel methodology that uses machine learning to produce accurate estimates of consumption per capita and poverty in 10x10km cells in sub-Saharan Africa over time. Using the new data, we revisit two prominent papers that examine the effect of institutions on economic development, both of which use “nightlights” as a proxy for development. The conclusions from these papers are reversed when we substitute the new consumption data for nightlights. We argue that the different conclusions about institutions are due to a previously unrecognized problem that is endemic when nightlights are used as a proxy for spatial economic well-being: nightlights suffer from nonclassical measurement error. This error will typically lead to biased estimates in standard statistical models that use nightlights as a spatially disaggregated measure of economic development. The bias can be either positive or negative, and it can appear when nightlights are used as either a dependent or an independent variable. Our research therefore underscores an important limitation in the use of nightlights, which has become the standard measure of spatial economic well-being for studies focusing on developing parts of the world. It also demonstrates how machine learning models can generate a useful alternative to nightlights, with important implications for the conclusions we draw from the analyses in which such data are employed. |
| Keywords: | economic develpment, poverty, institutions, nightlights, nonclassical measurement error, machine learning |
| JEL: | C01 P46 P48 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1433&r=gro |