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on Economic Growth |
| By: | Alberto Bucci (University of Milan); Klaus Prettner (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | Fertility rates have declined dramatically across almost all high-income countries over the past decades. This has raised concerns about future economic prospects. Indeed, fully– and semi–endogenous growth models imply that a shrinking workforce would lead to declining income growth and perhaps even stagnation. We extend the previous analyses to explicitly incorporate an endogenous quantity/quality trade-off between fertility and human capital accumulation. This allows us to assess the extent to which a declining number of workers can be compensated by increasing education. Our analysis demonstrates that economic growth needs not necessarily to decline with a falling population. Under certain conditions, human capital investment can sustain technological progress and economic growth despite the demographic challenges we are facing. |
| Keywords: | Demographic Change, Fertility Decline, Economic Growth, Research and Development, Endogenous Fertility, Endogenous Education, Human Capital Accumulation |
| JEL: | J11 J13 O33 O41 I25 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp377 |
| By: | Isabella Maassen; Filip Mellgren; Jonas Overhage |
| Abstract: | Monopsonistic labor markets create misallocation of labor while generating profits. These in turn incentivize firms to innovate, which drives aggregate growth. This paper explores the trade-off between static efficiency and growth by developing a tractable endogenous growth model with heterogeneous firms and upward sloping labor supply curves. We show that monopsony can rationalize the prevalence of unproductive yet innovating firms that would otherwise be crowded out by more productive competitors. Our model calibrated to U.S. data confirms previous findings that imperfectly competitive labor markets distort static efficiency. However, we find that monopsony also leads to higher growth. On balance, we estimate that a 1% narrowing of the markdown increases the present value of output by about 1.08%. |
| Keywords: | monopsony power, creative destruction, productivity, innovation, economic growth. |
| JEL: | O31 O47 J42 E24 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11820 |
| By: | Timothy Besley; Dan Bogart; Jonathan Chapman; Nuno Palma |
| Abstract: | We show that state legal capacity contributed to economic development during the Industrial Revolution. The British parliament relied on local magistrates, known as Justices of the Peace (JPs), to enforce property rights, resolve disputes, and administer public services. Areas with greater legal capacity—more JPs—in 1700 experienced greater population growth and structural change over 140 years. More legal capacity also led to more human capital, fiscal capacity, and infrastructure development. Plausibly exogenous variation in the location of JPs supports a causal interpretation of the findings. These results illustrate the importance of street-level legal institutions for economic outcomes. |
| Keywords: | Legal Capacity, State Capacity, Industrial Revolution, Justices of the Peace, Historical Political Economy, Law and Economics, Britain |
| JEL: | H80 K40 N13 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:man:allwps:0011 |
| By: | Becker, Sascha O. (University of Warwick); Panin, Amma (Catholic University Louvain); Pfaff, Steven (Chapman University); Rubin, Jared (Chapman University) |
| Abstract: | This chapter examines the role of religion in economic development, both historically and today. Religion's influence varies globally, with high religiosity in countries like Pakistan and low rates in China. Despite declines in some Western countries, religion remains influential worldwide, with projected growth in Muslim populations due to higher fertility rates. Religion continues to shape societal norms and institutions, such as education and politics, even after its direct influence fades. The chapter explores how religious institutions and norms have impacted economic outcomes, focusing on both persistence and decline. It also examines cultural transmission, institutional entrenchment, networks, and religious competition as mechanisms sustaining religion's influence. We explore the relationship between religion and secularization, showing that economic development does not always reduce religiosity. Lastly, the chapter highlights gaps in the literature and suggests future research areas on the evolving role of religion in economic development. |
| Keywords: | networks, economic development, religiosity, cultural transmission, secularization, historical persistence, religion, religious competition, social norms |
| JEL: | D85 I25 J10 N30 O33 O43 P48 Z10 Z12 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17747 |
| By: | Tomohiro Hirano; Alexis Akira Toda |
| Abstract: | Historical trends suggest the decline in the importance of land as a production factor, as evidenced by the decline in the employment and GDP shares of land-intensive industries. However, land continues to be a prominent store of value, as over half of household wealth in major countries is real estate. To explain this apparent disconnection between land output and land value, in a plausible economic model with land and aggregate risk, we theoretically study the long-run behavior of land prices and identify economic conditions under which land becomes overvalued relative to the fundamentals defined by the present value of land rents. Unbalanced growth together with the elasticity of substitution between production factors plays a critical role. We establish the Land Overvaluation Theorem: when the elasticity of substitution between land and non-land factors exceeds 1 (which is natural because we can create more space by constructing taller buildings with fixed land) and technological progress is faster in nonland sectors, land overvaluation necessarily emerges. As applications of the Theorem, we present three examples. (i) Land overvaluation emerges along the long-run transition from the Malthusian agricultural economy to the modern knowledge- and service-based economy. (ii) With aggregate uncertainty, land prices exhibit recurrent stochastic fluctuations around the trend, with expansions and contractions in the size of land overvaluation. (iii) In modern economies, land use is also changing and urban land has high value. We present a model of urban land prices and show that land overvaluation emerges in the process of urban formation characterized by unbalanced growth. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:cnn:wpaper:25-011e |
| By: | Stelios Michalopoulos |
| Abstract: | In this Handbook chapter, I examine how integrating ethnographic and folklore records has shaped research on culture and economics in the 21st century. Advances in text analysis techniques and the incorporation of historical and satellite data have transformed the field. I explore how George Peter Murdock's ethnographic contributions and Yuri Berezkin's seminal folklore motif index have been utilized to shed light on the roots of comparative development. I conclude by proposing a methodology for leveraging Large Language Models to extract cultural insights from folklore motifs, demonstrating how ancestral narratives can complement ethnographic records and offer valuable perspectives on societal norms and the historical forces shaping economic behavior today. |
| JEL: | O10 Z10 Z13 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33700 |
| By: | Jakub Growiec (SGH Warsaw School of Economics); Klaus Prettner (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | Recent advances in artificial intelligence (AI) have led to a diverse set of predictions about its long-term impact on humanity. A central Focus is the potential emergence of transformative AI (TAI), eventually capable of outperforming humans in all economically valuable tasks and fully automating labor. Discussed scenarios range from human extinction after a misaligned TAI takes over ("AI doom") to unprecedented economic growth and abundance ("post-scarcity"). However, the probabilities and implications of these scenarios remain highly uncertain. Here, we organize the various scenarios and evaluate their associated existential risks and economic outcomes in terms of aggregate welfare. Our analysis shows that even low-probability catastrophic outcomes justify large investments in AI safety and alignment research. We find that the optimizing representative individual would rationally allocate substantial resources to mitigate extinction risk; in some cases, she would prefer not to develop TAI at all. This result highlights that current global efforts in AI safety and alignment research are vastly insufficient relative to the scale and urgency of existential risks posed by TAI. Our findings therefore underscore the need for stronger safeguards to balance the potential economic benefits of TAI with the prevention of irreversible harm. Addressing these risks is crucial for steering technological progress toward sustainable human prosperity. |
| Keywords: | Transformative Artificial Intelligence (TAI), Economic Growth, Technological Singularity, Growth Explosion, AI Takeover, AI Alignment, AI Doom |
| JEL: | I30 O11 O33 Q01 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp378 |