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on Economic Growth |
| By: | Oded Galor; Marc Klemp; Daniel C. Wainstock |
| Abstract: | What gave rise to the mosaic of cultural expressions across the globe? Why are some societies more culturally diverse than others? This study develops a unified theory of cultural evolution, characterizing the forces that have governed this process over the course of human existence. The research advances the hypothesis that population movements and socioeconomic transformations generated a mismatch between inherited cultural traits and prevailing ecological and societal conditions, setting in motion an evolutionary process governed by adaptation-based vertical transmission, horizontal diffusion, and fitness-based evolutionary selection. The theory generates novel testable predictions concerning the origins of the global cultural mosaic and the cross-societal variation in cultural diversity. First, greater ecological distance between ancestral environments generated greater cultural distance across societies. Second, prehistoric differences in ancestral diversity contributed to divergent adaptive capacity and greater cultural distance. Third, societies descended from more diverse prehistoric populations exhibit greater cultural diversity despite convergence induced by adaptation to a common environment and societal norms. Drawing on measures of cultural distance and diversity derived from folkloric and musical traditions among ethnic groups, visual representations of common concepts, and the dispersion of norms, values, and attitudes, the empirical analysis lends credence to the predictions of the theory. |
| JEL: | O10 Z10 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35656 |
| By: | Adrien Bilal; Thibault Ingrand; Diego R. Känzig |
| Abstract: | This paper develops a theory of balanced growth and optimal climate policy in an integrated assessment framework. Balanced growth is possible despite climate change, but at a slower rate. Two distinct policy regimes emerge because emissions permanently raise carbon stocks. For low damages, optimal growth coincides with the laissez-faire and carbon is priced at a constant rate. For high damages, optimal policy caps temperature growth to prevent escalating losses and achieve faster economic growth than in the laissez-faire by pricing carbon at an increasing rate. We quantify our model and show that empirical damage estimates span both regimes. For low damages, optimal policy achieves a 1% welfare gain with 3 to 8°C of warming per century and no change in long-run growth. For high damages, optimal policy raises annual growth by 0.8 percentage points and achieves a 26% welfare gain by capping warming at 0.4°C per century. |
| JEL: | E23 H23 O44 Q54 Q56 Q58 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35573 |
| By: | Michael Callen; Gregory Levy; Saipremnath Muthukumaran; Jonathan L. Weigel; Noam Yuchtman |
| Abstract: | Explaining why some countries grow rich while others remain poor requires knowing how — and when — institutions change. A large body of research argues that institutional change often occurs at critical junctures: moments when multiple institutional futures are possible, including a return to the status quo. Yet most empirical work examines critical junctures only in retrospect, risking the omission of pivotal moments when institutions were in flux but ultimately remained unchanged. We develop a new empirical approach to detect critical junctures as they unfold. Our key insight is to understand critical junctures as moments of uncertainty about institutions, which provides a text classifier with a theoretically motivated object to detect in contemporaneous discourse. In this chapter, we apply this idea to the study of historical critical junctures using newspaper text as a rich source of information regarding contemporary beliefs about institutional uncertainty. We translate this insight into a measurement strategy by training a large language model-based classifier, which we apply to the Times of London archive — 11.95 million articles spanning 1800 to 2019 — while focusing our main empirical analysis on 120 years of reporting from 1900 to 2019. This produces the first long-run, text-based measure of institutional uncertainty grounded in the concept of critical junctures. Compared to established indices of geopolitical and economic risk, our measure innovates on several fronts: (i) it captures high uncertainty even in periods without formal institutional change, consistent with ex-ante definitions of critical junctures; (ii) it provides earlier signals of major global convulsions, such as World War I; (iii) it evaluates candidate critical junctures using a common ex ante measure; and (iv) it opens new avenues for studying how critical junctures shape institutions and long-run development. Today, our Times-based index suggests that institutional uncertainty in the US and UK is as elevated as it was in the early 1940s — a signal missed by other leading measures of risk. |
| JEL: | D70 O10 P00 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35545 |
| By: | Michael Seewald (Universität Witten/Herdecke) |
| Abstract: | Economic innovation and transformation are future-oriented fields where financial risk-return and economic growth considerations permeate with visions of technological progress and cultural determinants of human behavior. This case study about the evolution of the entrepreneurial persona in the history of economic thought demonstrates how narrative research can contribute to understanding the growth dynamics of economic ecosystems. Rather than being indicators of flaws in otherwise rational economic processes, narrative twists and turns reflect the institutional and cultural preconditions of economic growth and innovation.Since the early days of industrialization, economic thought takes recourse to the institutional persona of the entrepreneur to explain dynamics of innovation and transformative growth. The descriptions of the entrepreneur in the works of Robert Cantillon, Joseph Schumpeter and Frank Knight show how the parameters of innovation, cristallized in the features of entrepreneurial activity, change along the trajectories of, and reflect, industrial and economic development. What these descriptions have in common are the fundamental features of innovative activity in otherwise steady economic ecosystems: the ability to embrace the uncertainty of a future venture through an informed view about future market demand; the stamina to impose change to incumbent structures and processes; and the acumen to mobilize ample financial funding to realize an innovative venture.The current debate around artificial intelligence and its potential to generate unprecedented future growth goes along with a messianic turn in the discourse about entrepreneurial activity. In the current debate about AI-led innovation, the entrepreneurial narrative, unchanged at its core, takes on a quasi-spiritual dimension. Entrepreneurs appear as saviour-like personae, able to break through a state of general stagnation and decline in order to enable not less than a new, technology-fuelled chapter for humanity. While the jury is out whether this scenario will unfold, the messianic turn of the entrepreneurial discourse shows that the instruments of mainstream economics do not seem to be suited to assess the growth dynamics of AI-led innovation. To assess this messianic turn of the entrepreneur and its bearings for future economic growth trajectories, a narrative turn in economic research appears warranted. |
| Date: | 2026–08–21 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05238679 |
| By: | Matthew Collins; Patrick Wing McHale; Devon Spika |
| Abstract: | Education is widely seen as a key driver of economic growth, yet social institutions may mediate efforts to improve outcomes. We study how age-set organisation---where societies are structured into age-based social groups---shapes parental human capital investments and children’s educational attainment. Children in age-set societies receive greater investments, improving health and schooling at younger ages. Yet effects on education dissipate between the ages of 13-16, coinciding with the timing of age-set initiation. We also find that universal secondary education raised schooling only in non-age-set societies. These findings highlight how the impacts of social institutions can vary across the life-cycle. |
| Keywords: | social organisation, parental investment, human capital, child development |
| JEL: | I25 J24 O15 Z13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12940 |
| By: | Hanming Fang; Chang Liu |
| Abstract: | Total fertility rates in East Asia have fallen to levels without historical precedent, even though the region’s Confucian heritage long placed extraordinary emphasis on family continuity and large families. We argue that this “Confucian Fertility Paradox” dissolves once we separate two strands of the tradition and recognize that modernization affected them very differently. The pro-natal strand, built on lineage continuity, ancestor worship, and reliance on sons for old-age support, was gradually switched off as child mortality fell, incomes rose, women entered the labor force, and state pensions replaced the family as the main source of security in old age. What survived was the second strand: the veneration of education and of status won through examination success, rooted in the imperial examination tradition. Under modern conditions this surviving strand reverses sign with respect to its effect on fertility. Where the historical examination system rewarded having many sons so that one might succeed, the modern single-ranking tournament rewards concentrating resources on one or two intensively educated children, and the quantity–quality tradeoff turns a once pro-natal culture into a powerful engine of low fertility. Drawing on recent empirical evidence from China and Korea, we show how education competition becomes the channel through which traditional values now suppress childbearing. We explain why standard pro-natalist policies, such as removing birth restrictions or offering cash subsidies, accomplish little when the underlying problem is a competitive equilibrium in parental investment, and we argue that policies aimed at the source of the distortion, such as structural reform of educational pathways, hold more promise. |
| JEL: | J1 J10 J13 J18 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35532 |
| By: | Desierto, Desiree; Koyama, Mark |
| Abstract: | How does institutional change take place? This question poses a number of challenges for scholars working in the New Institutional tradition. We discuss both functionalist approaches to institutional change and our preferred framework based on cooperation and conflict. We illustrate the latter approach through some applications taken from recent scholarship in economic history. |
| Keywords: | Institutions; Institutional change; Conflict; Cooperation; Efficiency |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19285 |
| By: | Ina Ganguli; Jeffrey Lin; Vitaly Meursault; Nicholas F. Reynolds |
| Abstract: | Over nearly two centuries, US inventions have become increasingly dissimilar: not just fewer head-to-head collisions between inventors, but growing distance between neighboring inventions. We document this secular decline in similarity using validated neural language models applied to the full text of claims in over 11 million US patents (1836–2023), corroborated by a 98% decline in patent interference rates, a measure of independent simultaneous invention. Measuring this correctly requires validation, since different representations of the same patent text can yield opposite conclusions about whether inventions are converging or spreading out. Our validation framework, the first systematic comparison for patent text, selects among these representations. We develop a spatial competition model in which inventors choose locations in idea space. The model explains spreading out and connects it to several independently documented patterns — rising R&D investment per inventor, increasing patent values, weakening knowledge spillovers, and declining research productivity. The mechanism is spatial; as inventors spread out to capture new territory, inventions become more valuable but also more costly for others to absorb. In doing so, the model turns spillover intensity, innovation step size, and research productivity from fixed primitives into outcomes of inventor positioning. A calibrated decomposition attributes roughly 40% of the long-run decline in US research productivity to these spatial forces, alongside traditional explanations such as fishing out and the burden of knowledge. Where inventors stand relative to each other in idea space matters as much for growth as how many of them there are. |
| JEL: | C55 O31 O41 O47 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35499 |