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on Economic Growth |
| By: | Liam Brunt (Norvegian school of Economics); Cecilia García-Peñalosa (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | A large literature characterises urbanisation as resulting from productivity growth attracting rural workers to cities. Incorporating economic geography elements into a growth model, we suggest that causation runs the other way: when rural workers move to cities, the resulting urbanisation produces technological change and productivity growth. Urban density leads to knowledge exchange and innovation, thus creating a positive feedback loop between city size and productivity that initiates sustained economic growth. This model is consistent with the fact that urbanisation rates in western Europe, most notably England, reached unprecedented levels by the mid-eighteenth century, the eve of the Industrial Revolution. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03630965&r=gro |
| By: | Pablo A. Guerron-Quintana (Boston College); Tomohiro Hirano (Royal Holloway, University of London; Centre for Macroeconomics (CFM); Canon Institute for Global Studies); Ryo Jinnai (Hitotsubashi University) |
| Abstract: | We analyze the ups and downs in economic growth in recent decades by constructing a model with recurrent bubbles, crashes, and endogenous growth that can be easily taken to the data for structural estimation. Infinitely lived households expect future bubbles, which crowds out investment and reduces economic growth. For realized bubbles crowd in investment, their overall impact on economic growth and welfare crucially depends on both the level of financial development and the frequency of bubbles. We examine the US economic data through the lens of our model and identify bubbly episodes. Counterfactual simulations suggest that 1) the IT and housing bubbles not only caused economic booms but also lifted U.S. GDP by almost 2 percentage points permanently; and 2) the U.S. economy could have grown even faster in the long run if people had believed that asset bubbles would never arise. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:2119&r=gro |
| By: | Pablo A. Guerron-Quintana (Boston College); Tomohiro Hirano (Royal Holloway, University of London; Centre for Macroeconomics (CFM); Canon Institute for Global Studies); Ryo Jinnai (Hitotsubashi University) |
| Abstract: | We analyze the ups and downs in economic growth in recent decades by constructing a model with recurrent bubbles, crashes, and endogenous growth. Once realized, bubbles crowd in investment and stimulate economic growth, but expectation about future bubbles crowds out investment and reduces economic growth. We identify bubbly episodes by estimating the model using the U.S. data. Counterfactual simulations suggest that the IT and housing bubbles not only caused economic booms but also lifted U.S. GDP by almost 2 percentage points permanently, but the economy could have grown even faster if people had believed that asset bubbles would never arise. |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:2215&r=gro |
| By: | Giacomo Novelli (Prometeia) |
| Abstract: | We investigate whether the degree of energy dependency of countries influences their macroeconomic performance in terms of long-run growth. Specifically, we study whether the impact of energy price changes on economic growth differs depending on a country’s degree of energy dependency. There are two novel aspects in this paper. First, all energy commodities are considered, not only oil, and second, our work goes beyond the standard distinction between energy importing and exporting countries. We claim that energy importing and exporting countries are too heterogeneous in terms of net energy imports, energy consumption, and level of development to be clustered and analysed together. Relying on a sample clusterization in groups of countries with a similar degree of energy dependency and using a cross-sectionally augmented panel autoregressive distributed lag (CS-ARDL) approach, we show that countries with a high degree of energy dependency are associated with a negative and significant long-run energy price elasticity of GDP, while countries with a low degree experience the opposite effect, and more balanced countries are less or not significantly affected. Moreover, we contribute to the resource curse paradox showing that the energy price volatility negatively affects the long-run economic growth of countries with a low degree of energy dependency, but it does not hamper the long-run growth of other countries. We argue that the impact of energy price changes differs across countries with a different degree of energy dependency and that a balanced degree of energy dependency is preferable. Therefore, we suggest major energy importers should reduce their degree of energy dependency, while major energy exporters may differentiate their energy production, avoiding to rely only on fossil sources. Renewable sources may be a key driver to improve the management of the degree of energy dependency. |
| Keywords: | Energy Price, Volatility, Energy Security, Economic Growth, Heterogeneous Panel, Institutions, Resource Curse |
| JEL: | C23 C33 O43 Q33 Q43 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2022.42&r=gro |
| By: | Marek Ignaszak (Goethe University Frankfurt); Petr Sedlacek (University of Oxford; Centre for Economic Policy Research (CEPR)) |
| Abstract: | Recent empirical evidence suggests that firm selection and growth are largely demand-driven. We incorporate this feature into a model of endogenous growth in which heterogeneous firms innovate and survive based on profitability, rather than productivity alone. We show analytically that firm-level demand variation impacts aggregate growth by changing firms’ incentives to innovate. Estimating our model on U.S. Census firm data, we quantify that 20% of aggregate growth is demand-driven and that the macroeconomic impact of growth policies is fundamentally different compared to a model driven by productivity variation alone. We find empirical support for our model mechanism in firm-level data. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:2115&r=gro |
| By: | Manuel Funke (Kiel Institute for the World Economy - Kiel Institute for the World Economy); Moritz Schularick (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, University of Bonn, CEPR - Center for Economic Policy Research - CEPR); Christoph Trebesch (Kiel Institute for the World Economy - Kiel Institute for the World Economy, Kiel University, CEPR - Center for Economic Policy Research - CEPR) |
| Abstract: | Populism at the country level is at an all-time high, with more than 25% of nations currently governed by populists. How do economies perform under populist leaders? We build a new longrun cross-country database to study the macroeconomic history of populism. We identify 51 populist presidents and prime ministers from 1900 to 2020 and show that the economic cost of populism is high. After 15 years, GDP per capita is 10% lower compared to a plausible nonpopulist counterfactual. Economic disintegration, decreasing macroeconomic stability, and the erosion of institutions typically go hand in hand with populist rule. |
| Keywords: | Populism, Protectionism, Institutions |
| Date: | 2022–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:spmain:hal-03881225&r=gro |