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Browsing by Subject "Economic growth"

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Automation and demographic change
(2017) Abeliansky, Ana; Prettner, Klaus
We analyze the effects of declining population growth on the adoption of automation technology. A standard theoretical framework of the accumulation of traditional physical capital and of automation capital predicts that countries with a lower population growth rate are the ones that innovate and/or adopt new automation technologies faster. We test the theoretical prediction by means of panel data for 60 countries over the time span from 1993 to 2013. Regression estimates provide empirical support for the theoretical prediction and suggest that a 1% increase in population growth is associated with approximately a 2% reduction in the growth rate of robot density. Our results are robust to the inclusion of standard control variables, the use of different estimation methods, the consideration of a dynamic framework with the lagged dependent variable as regressor, and changing the measurement of the stock of robots.
Children’s health, human capital accumulation, and R&D-based economic growth
(2017) Baldanzi, Annarita; Bucci, Alberto; Prettner, Klaus
We analyze the effects of childrens health on human capital accumulation and on long-run economic growth. For this purpose we design an R&D-based growth model in which the stock of human capital of the next generation is determined by parental education and health investments. We show that i) there is a complementarity between education and health: if parents want to have better educated children, they also raise health investments and vice versa; ii) parental health investments exert an unambiguously positive effect on long-run economic growth, iii) faster population growth reduces long-run economic growth. These results are consistent with the empirical evidence for modern economies in the twentieth century.
Essays on demographic change and R&D-based economic growth
(2020) Tscheuschner, Paul; Prettner, Klaus
This dissertation analyzes the economic growth effects of demographic change embedded in a framework of endogenous R&D. Substantial changes in fertility and longevity are the two main demographic features that all industrialized countries have experienced during the twentieth century and are still experiencing until today. Although the individual gains of higher life expectancy and better education, initiated by a quantity-quality tradeoff, are huge, there exist concerns about the macroeconomic effects. To improve the understanding about the aforementioned relationships, this work extends the existing literature on the growth effects of population aging by 1) introducing exogenous longevity into a growth framework with vertical innovations; 2) by endogenizing life expectancy in a growth framework with horizontal innovations; and 3) by examining the growth effects of basic scientific knowledge over the very long run. Chapter two contains the first paper titled “Longevity-induced Vertical Innovation and the Tradeoff Between Life and Growth”, which is joint work with Annarita Baldanzi and Klaus Prettner. In this paper, the positive effect of a longer retirement period on individual savings is utilized. A higher exogenous probability to survive to old age raises savings, placing a downward pressure on the market interest rate. On the production side, a lower interest rate increases the present value of holding a patent, which, in turn, makes R&D more profitable. As a result, R&D employment increases, leading to a higher frequency of quality improving ideas and, with it, faster economic growth. It is shown that the relationship between life expectancy and economic growth is strictly positive. In a welfare analysis, the utility gains of living longer are disentangled from the longevity-induced utility gains of higher consumption. The analysis concludes that the direct welfare gains of higher life expectancy, usually, outweigh the indirect welfare gains of faster economic growth. Chapter three contains a single-authored paper and is titled “Endogenous Life Expectancy and R&D-based Economic Growth”. As the title suggests, life expectancy is endogenized and increases in the public resources devoted toward health. Again, the longevity-saving-channel is present. Additionally, a quantity-quality tradeoff is introduced, such that parents have to decide on the number of children to have and on the childrens level of education. Besides the positive saving effect, life expectancy impacts positively on the labor force participation rate and negatively on the fertility rate. The reason is that adults need to work more (at the expense of having fewer children), to compensate for a prolonged retirement period. The feedback effects with production, characterized by horizontal innovation, are then analyzed in a calibrated version of the model. Using U.S. data, the model suggests that the overall effect of life expectancy on economic growth is positive and amounts to 11.9 % of the increases in the real GDP p.c. over the period 1960-2017. From a welfare perspective, the results indicate that the growth-maximizing size of the health care sector might lie beyond what is observed in most industrialized countries, nowadays. The finding that the size of the health care sector that maximizes life expectancy is substantially larger than the growth-maximizing size supports the view to not only consider the growth effects of health care. Chapter four contains the third paper which is co-authored with Klaus Prettner and is titled “The Scientific Revolution and Its Role in the Transition to Sustained Economic Growth”. Basic scientific knowledge is introduced as a necessary input in applied R&D and increases in the number of tinkerers in the economy and in their education. For low levels of development, fertility is high and educational investments are zero. Once income surpasses a certain threshold, education turns positive. Together with the consequent fertility transition, this marks the takeoff to sustained economic growth. It is shown that the growth rate of as well as the access to basic scientific knowledge is crucial in determining the timing and the magnitude of the takeoff. For low growth rates and low access, the takeoff is delayed by up to one generation because applied R&D takes longer to become profitable. In the extreme case of zero basic scientific knowledge, no takeoff might occur at all. The results improve the understanding of economic growth processes over the very long run and provide one possible explanation why some regions experienced the takeoff to sustained economic growth earlier than others.
Financial development and its effects on the structure of banking systems, economic growth, and inequality
(2022) Gehrung, Marcel; Burghof, Hans-Peter
Besides the well-known factors for economic growth and income inequality such as globalization, technological progress, demographic change, or human capital acquisition, financial development is often overlooked. This dissertation uses the case of the Single Banking License on the harmonized European Financial Market to show how financial liberalization and the abolishment of financing constraints improve economic growth and closes the gap between top and bottom income shares in the European Union. In the second part of the thesis, with the use of a worldwide data set, we show that the actual access to financial services through a widespread network of bank branches and ATM machines is one of the major channels through which financial development affects economic growth and inequality. These two examples argue in favor of the supply-leading hypothesis of financial development. The third part of the thesis then gives proof for the demand-following side of financial development. By means of a novel and hand-picked data set of historical contracts for contractual saving for housing (Bausparen) from one of the first building societies in the Weimar Republic, the Gemeinschaft der Freunde Wüstenrot, we show how this new financial product spread geographically across the German Empire and across social classes. The fact that especially the upper lower class and lower middle class used CSH most frequently shows that CSH is a prime example of financial development. Meanwhile, the need for this new form of housing finance stems from an insufficient credit supply of common banks and only little subsidies by the state.
Inequality and guard labor, or prohibition and guard labor?
(2017) Kufenko, Vadim; Geloso, Vincent
In this paper, we consider whether or not inequality forces society to expend more resources on supervision which imposes an extra cost to doing business. Some argue that since inequality deteriorates social capital, there is a greater need for supervisory labor which is a costly burden to bear. We propose an alternative (but not mutually exclusive) explanation. We argue that the war on drugs leads to institutional decay and lower levels of trust which, in turn, force private actors to deploy resources to supervise workers and protect themselves. Our explanation complements the argument regarding the link between inequality and guard labor.
On the possibility of automation-induced stagnation
(2017) Gasteiger, Emanuel; Prettner, Klaus
We analyze the long-run growth effects of automation in the standard overlapping generations framework. We show that, in contrast to other neoclassical models of capital accumulation, automation does not promote growth but induces economic stagnation. The reason is that automation suppresses wages, which are the only source of investment in the overlapping generations framework.
Structural shift and increasing variety in Korea, 1960–2010 : empirical evidence of the economic development model by the creation of new sectors
(2016) Kim, Tai-Yoo; Pyka, Andreas; Yeon, Jung-In
In this paper, we examine the experiences of the Korean economy alongside theoretical knowledge of economic development and structural change. To demonstrate the generalized hypotheses on structural change, input–output tables of Korea, from 1960 to 2010, were analyzed. Our interest in taking time series of input–output tables originates from the following two issues. Firstly, we raise the question of whether Korean industrial structure changes have followed a certain pattern of structural shifts as well as increasing variety. Secondly, if so, it is questioned how the meso-level conditions for economic development could be explained from such a pattern. To search for answers, we adopt a model of the economic development by the creation of new sectors, named TEVECON, as our theoretical framework. Using this growth model, we derive hypotheses about how the structural change could affect economic development, and then we determine how the empirical analysis of the Korean economy verifies and deepens our understanding of structural change and economic development. This paper contributes to the empirical validation of the theoretical knowledge of economic development by the emergence of key sectors and the creation of new industries.
Structural transformation and its relevance for economic growth in sub-Saharan Africa
(2017) Busse, Matthias; Erdogan, Ceren; Mühlen, Henning
In this paper, we analyse the role of structural transformation in view of the remarkable growth performance of sub-Saharan African countries since the mid-1990s. Our analysis covers 41 African countries over the period 1980 to 2014 and accounts for structural transformation by employing the analytical frameworks of (1) growth decomposition and (2) growth regression. Even though the low-productive agricultural sector continues to employ most of the African workforce, our results reveal that structural transformation has taken place and that it has contributed significantly to African growth in the past decades.
You can't always get what you want? Estimator choice and the speed of convergence
(2016) Kufenko, Vadim; Prettner, Klaus
We propose theory-based Monte Carlo simulations to quantify the extent to which the estimated speed of convergence depends on the underlying econometric techniques. Based on a theoretical growth model as the data generating process, we find that, given a true speed of convergence of around 5%, the estimated values range from 0.2% to 7.72%. This corresponds to a range of the half life of a given gap from around 9 years up to several hundred years. With the exception of the (very inefficient) system GMM estimator with the collapsed matrix of instruments, the true speed of convergence is outside of the 95% confidence intervals of all investigated state-of-the-art estimators. In terms of the squared percent error, the between estimator and the system GMM estimator with the non-collapsed matrix of instruments perform worst, while the system GMM estimator with the collapsed matrix of instruments and the corrected least squares dummy variable estimator perform best. Based on these results we argue that it is not a good strategy to rely on only one or two different estimators when assessing the speed of convergence, even if these estimators are seen as suitable for the given sources of biases and inefficiencies. Instead one should compare the outcomes of different estimators carefully in light of the results of Monte Carlo simulation studies.

Browsing by Subject "Economic growth"

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