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on Economic Growth |
| By: | Nuno Garoupa; Rok Spruk |
| Abstract: | This paper examines whether major political institutional disruptions produce temporary shocks or structural breaks in long-term development. Using the 1979 Iranian Revolution as a natural experiment, we apply the synthetic control method to estimate its causal effect on economic growth and institutional quality. Drawing on a panel of 66 countries from 1950 to 2015, we construct counterfactual trajectories for Iran in the absence of revolutionary change. Our results show a persistent and statistically significant divergence in per capita GDP, institutional quality, and legal constraints on executive power. We perform in-space and in-time placebo tests to rule out confounding events, such as the Iran-Iraq War and international sanctions, and propose confidence interval estimation to address uncertainty in treatment effects. The findings identify the Iranian Revolution as a structural institutional rupture, with implications for the classification of institutional change more broadly. We contribute a generalizable empirical framework for distinguishing between temporary and structural institutional shocks in long-run development. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.02425 |
| By: | Lambert, Thomas |
| Abstract: | This research note/paper examines several factors that have been mentioned and debated as determinants of how Britain moves from feudalism to mercantilism and then to capitalism by way of agricultural and industrial innovations and also how it arrives at the cusp of the industrial revolution. Of special interest are somewhat recent conjectures of macroeconomic data, investment estimates, and data on horses, serfs, and slaves of previous centuries that perhaps can better contribute to and add some clarification to the debates over the transition from feudalism to capitalism and the transition from an early form a capitalism or mercantilism to the industrial revolution. The estimates, empirical notes, and exploratory analyses in this paper partially support the Brenner thesis or concept of the transition from feudalism to capitalism and also support the notion that the proceeds of slave sales and slave production provide a substantive portion of British investment amounts leading up to the industrial revolution of the 18th Century. The mainstream economic notions of property rights, thrift, free markets, and free trade are only part of the picture of how Britain achieves economic prominence in the 19th Century. Exploitation of people and animals play a very significant role that has been ignored or minimized in many history and economic history accounts. |
| Keywords: | Baran ratio, economic surplus, investment, slave trade, slavery, serfs, horses, Great Britain |
| JEL: | B51 B52 N13 N33 N44 |
| Date: | 2024–11–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124978 |
| By: | Ufuk Akcigit; Harun Alp; Jeremy Pearce; Marta Prato |
| Abstract: | This paper explores the symbiotic relationship between transformative entrepreneurs and inventors, which is crucial for economic growth. We utilize microdata from Denmark to demonstrate that while the relationship between IQ and general entrepreneurship tends to be negative, it is strongly positive among transformative entrepreneurs. Transformative entrepreneurs, often with higher IQ and education levels, significantly drive R&D and business growth, thereby providing substantial opportunities for inventors. In contrast, average entrepreneurs are more influenced by their family’s entrepreneurship background. Our economic model links these dynamics to overall economic progress, highlighting how higher education influences career paths in entrepreneurship and invention. We identify talent misallocation caused by unequal education access, particularly affecting lower-income families. Our findings indicates the most effective policies strengthen the interplay between higher education, innovation, and entrepreneurship to foster transformative businesses and achieve long-run economic growth. |
| JEL: | J24 O31 O38 O47 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33766 |
| By: | Christian Callaghan |
| Abstract: | This paper introduces Experiential Matrix Theory (EMT), a general theory of growth, employment, and technological change for the age of artificial intelligence (AI). EMT redefines utility as the alignment between production and an evolving, infinite-dimensional matrix of human experiential needs, thereby extending classical utility frameworks and integrating ideas from the capabilities approach of Sen and Nussbaum into formal economic optimisation modelling. We model the economy as a dynamic control system in which AI collapses ideation and coordination costs, transforming production into a real-time vector of experience-aligned outputs. Under this structure, the production function becomes a continuously learning map from goods to experiential utility, and economic success is redefined as convergence toward an asymptotic utility frontier. Using Pontryagin's Maximum Principle in an infinite-dimensional setting, we derive conditions under which AI-aligned output paths are asymptotically optimal, and prove that unemployment is Pareto-inefficient wherever unmet needs and idle human capacities persist. On this foundation, we establish Alignment Economics as a new research field dedicated to understanding and designing economic systems in which technological, institutional, and ethical architectures co-evolve. EMT thereby reframes policy, welfare, and coordination as problems of dynamic alignment, not static allocation, and provides a mathematically defensible framework for realigning economic production with human flourishing. As ideation costs collapse and new experiential needs become addressable, EMT shows that economic growth can evolve into an inclusive, meaning-centred process -- formally grounded, ethically structured, and AI-enabled. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.19045 |
| By: | Ping Wang; Tsz-Nga Wong |
| Abstract: | How large is the impact of artificial intelligence (AI) on labor productivity and unemployment? This paper introduces a labor-search model of technological unemployment, conceptualizing the generative aspect of AI as a learning-by-using technology. AI capability improves through machine learning from workers and in turn enhances their labor productivity, but eventually displaces workers if wage renegotiation fails. Three distinct equilibria emerge: no AI, some AI with higher unemployment, or unbounded AI with sustained endogenous growth and little impact on employment. By calibrating to the U.S. data, our model predicts more than threefold improvements in productivity in some-AI steady state, alongside a long-run employment loss of 23%, with half this loss occurring over the initial five-year transition. Plausible change in parameter values could lead to global and local indeterminacy. The mechanism highlights the considerable uncertainty of AI's impacts in the presence of labor-market frictions. In the unbounded-AI equilibrium, technological unemployment would not occur. We further show that equilibria are inefficient despite adherence to the Hosios condition. By improving job-finding rate and labor productivity, the optimal subsidy to jobs facing the replacement risk of AI can generate a welfare gain from 26.6% in the short run to over 50% in the long run. |
| JEL: | E2 J2 O30 O40 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33867 |
| By: | Ruixue Jia; James Kai-sing Kung |
| Abstract: | This study reviews the culture and institutions of Confucianism and explores their implications for the trajectory of China’s historical development. We trace the origins and evolution of the core elements of Confucianism and synthesize research on its relationship to clan culture, state institutions, and a broad array of societal values. We also highlight promising but underexplored directions for future research. While Confucianism is often invoked to explain China’s absence from the Industrial Revolution and its lack of democratization, we caution against such retrospective determinism. As a multidimensional and abstract tradition, Confucianism likely allows for varied interpretations and institutional adaptations across time and context. |
| JEL: | N15 O43 P51 Z10 Z13 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33883 |
| By: | Derek Lemoine |
| Abstract: | I show that the nature of the energy resources available to an economy qualitatively determines long-run growth outcomes. A harvested resource such as biomass drags on growth, a mined resource such as coal enables output per capita to hold constant, and both a tapped resource such as oil and a manufactured resource such as solar panels risk degrowth if energy return on energy invested (EROI) cannot stay above a threshold. The only energy resource that can fuel long-run growth is a manufactured resource such as solar panels. Either that resource must rely on substitutable energy inputs that have a sufficiently large EROI, or it must be produced by robots that are themselves produced from robots and energy. Even in these cases, coal and oil economies may have been necessary stages on the way from a biomass economy to a solar economy. |
| JEL: | O13 O41 Q43 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33864 |
| By: | Aleksandar Keseljevic; Stefan Nikolic; Rok Spruk |
| Abstract: | We investigate the long-term impact of civil war on subnational economic growth across 78 regions in five former Yugoslav republics from 1950 to 2015. Leveraging the outbreak of ethnic tensions and the onset of conflict, we construct counterfactual growth trajectories using a robust region-level donor pool from 28 conflict-free countries. Applying a hybrid synthetic control and difference-in-differences approach, we find that the war in former Yugoslavia inflicted unprecedented regional per capita GDP losses estimated at 38 percent, with substantial regional heterogeneity. The most war-affected regions suffered prolonged and permanent economic declines, while capital cities experienced more transitory effects. Our results are robust to extensive variety of specification tests, placebo analyses, and falsification exercises. Notably, ethnic tensions between Serbs and Croats explain up to 40 percent of the observed variation in economic losses, underscoring the deep and lasting influence of ethnic divisions on economic impacts of the armed conflicts. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.02431 |
| By: | Wallace P. Marcelino (UFPA); Fabrício Missio (Cedeplar/UFMG); Frederico G. Jayme Jr (Cedeplar/UFMG) |
| Abstract: | This paper revisits Kaldor's Laws, considering that both manufacturing and services, as well as their interaction (symbiosis), contribute to economic growth. To investigate this question, we constructed a symbiosis indicator and tested it econometrically using panel data models for a sample of 41 countries between 2000 and 2014. The results show that the services sector and the symbiosis between manufacturing and modern services are subject to Kaldor's Laws. It is concluded that the modern services sector is important for economic growth during this period and that the new stage of structural change is characterized by increased returns to scale (expanded Kaldor-Verdoorn Law). |
| Keywords: | Modern services; Increasing Returns; Kaldor's Laws; Symbiosis; Economic Growth |
| JEL: | O1 O4 L80 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cdp:texdis:td681 |
| By: | Anton Korinek (University of Virginia); Joseph Stiglitz (Columbia University) |
| Abstract: | Rapid progress in new technologies such as AI has led to widespread anxiety about adverse labor market impacts. This paper asks how to guide innovative efforts so as to increase labor demand and create better-paying jobs while also evaluating the limitations of such an approach. We develop a theoretical framework to identify the properties that make an innovation desirable from the perspective of workers, including its technological complementarity to labor, the factor share of labor in producing the goods involved, and the relative income of the affected workers. Applications include robot taxation, factor-augmenting progress, and task automation. We find that steering technology becomes more desirable the less efficient social safety nets are. If technological progress devalues labor, the desirability of steering is at first increased, but beyond a critical threshold, it becomes less effective, and policy should shift toward greater redistribution. If labor's economic value diminishes in the future, progress should increasingly focus on enhancing human well-being rather than labor productivity. |
| Keywords: | technological progress, AI, inequality redistribution |
| JEL: | E64 D63 O3 |
| Date: | 2025–05–05 |
| URL: | https://d.repec.org/n?u=RePEc:thk:wpaper:inetwp232 |
| By: | Kurz Heinz D.; Strohmaier Rita; Knell Mark |
| Abstract: | Technological change, an overwhelming fact in recent socioeconomic history, involves, as Joseph A. Schumpeter famously put it, âcreative destructionâ on a large scale: it gives rise to new goods, production methods, firms, organisations, and jobs, while rendering some received ones obsolete. Its impact extends beyond the economy and affects society, culture, politics, and the mind-set of people. While it allows solving certain problems, it causes new ones, inducing further technological change. Against this background, the paper attempts to provide a detailed, yet concise exploration of the historical evolution and measurement of technological change in economics. It touches upon various questions that have been raised since Adam Smith and by economic and social theorists after him until today living through several waves of new technologies. These questions include: (1) Which concepts and theories did the leading authors elaborate to describe and analyse the various forms of technological progress they observed? (2) Did they think that different forms of technological progress requested the elaboration of different concepts and theories â horses for courses, so to speak? (3) How do different forms of technological progress affect and are shaped by various strata and classes of society? Issues such as these have become particularly crucial in the context of the digitisation of the economy and the widespread use of AI. Finally, the paper explores the impact of emerging technologies on the established theoretical frameworks and empirical measurements of technological change, points to new measurements linked to the rise of these technologies, and evaluates their pros and cons vis-Ã -vis traditional approaches. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:laedte:202503 |