The inverse relationship of farm size and productivity

29 August 2018

Since I am an intellectual raccoon, it was not a surprise that when Garett Jones dangled a shiny object called “the inverse farm-size productivity relationship” in front of me on Twitter, I grabbed hold with my dirty little paws and would not let go. The inverse farm-size productivity (IFSP) relationship...

Detecting changes in trend growth

24 August 2018

A quick aside before I start the main part of the post. My blogging has been sparse in the last few months, or even year. This was in large part a reaction to working on a book about the growth slowdown, and time that would have gone into posts got...

What determines value?

09 July 2018

I had the opportunity to read The Value of Everything, by Mariana Mazzucato, a few weeks ago, and have finally gotten around to writing up something of a review. This book made me think, so I count that as a positive recommendation. Sometimes I was thinking things like, “This is...

Sustained growth and the increase in work hours

11 June 2018

Back in March, I posted a summary of some research by Jane Humphries and Jacob Weisdorf on the onset of economic growth. Their paper documented annual labor contract terms in England over several centuries, and compared those to the typical day labor rates that have been used in economic history...

The paradox of markups, part 2

11 May 2018

I told you I wouldn’t leave you waiting on the next post concerning markups and the paper by David Baqaee and Emmanuel Fahri, so here you go. In the last post, I described the (at times) paradoxical nature of markups. When there is dispersion in markups, output is lower than...

07 May 2018

I’ve gotten the lag time between posts down from 6 months to six weeks. Progress. A topic that comes up often here is the effect of markups on aggregate productivity. And there is a recent-ish paper by David Baqaee and Emmanuel Fahri that has approached the relationship of markups (and...

When did sustained growth start?

30 March 2018

You know how when you get older, time seems to move faster? Well, imagine how that feels, and now pretend that you write a blog. It’s been about six months since I last posted something, and that was not a conscious decision, but just something that kind of happened as...

Where did all the investment go?

25 October 2017

The fact that economic growth has slowed in the last few decades is not news, at least not on this blog. And I’ve been through a series of possible explanations over the course of the last few years. One bit of data that I played around with a few years...

Why don't tax cuts boost growth?

03 October 2017

Relative to current events, this probably seems less important at the moment, and a week or so too late, but the tax cut proposed by th Trump administration is still kicking around. There have been any number of responses to it, and responses in particular to the claim that it...

Harvey

31 August 2017

You may or may not realize that the global headquarters of Growthecon.com is in Houston. So it’s been an interesting few days, to say the least. This post has nothing to do with economics. It’s just things that keep running through my head as we clean up. I live a...

Rising Markups and Falling Productivity

26 August 2017

In between checking weather updates here in Houston, I finally got around to reading the new working paper by Jan De Loecker and Jan Eeckhout (DE), on “The Rise of Market Power and the Macroeconomic Implications”. The authors find that the markup of price over marginal cost charged by public...

Are some places "More Malthusian" than other?

27 July 2017

I’ve got a new working paper out (pdf or repec), co-authored with Ryan Johnson, on Malthusian constraints. There is some material that we’re cutting from the paper, because it is already getting too long, but I kind of like the graphs and the results, so I figured I would write...

The Return of Peasant Mentality?

28 June 2017

Without intending to, I ended up taking a blog hiatus (blacation?) for about a month. But in that month I built up a whole reserve of speculative energy that I now need to disgorge all at once. So strap in, because this one gets hairy towards the end. A thing...

Understanding the Cost Disease of Services

15 May 2017

As my internal clock is not on internet time, I’m only now getting up a post in reaction to the death of William Baumol, who has been a consistent reference on this blog over the years. My topic page on the productivity slowdown is in many ways an extended riff...

Sigh....No, tax cuts won't boost growth

02 May 2017

I guess we need to go over this again. No, cuts to corporate tax rates and/or the reforms/cuts proposed on individual income taxes will not boost economic growth in any appreciable way. Not to 4%, nor 4.5%, nor 5%. There is no evidence supporting this claim. And even theoretically, there...

Topics in Economic Growth

21 April 2017

Less of a post, and more of an announcement. I just created some new pages here at Growthecon.com that collect resources and materials related to specific topics regarding growth. See the Topics link in the header of the webpage. This was an exercise in intellectual housecleaning, and a way to...

Aggregate Productivity versus Aggregate Technology ... Again

18 April 2017

You can file this as another example of how measured aggregate TFP growth is like a trash can. It happens to include aggregate technology (which got tossed in there by accident while cleaning up kitchen), but also all sorts of other junk (like leftover coffee grounds). Today’s example shows that...

An Update on the Profits from Housing

28 March 2017

In the last post I used some findings by Simcha Barkai and the BLS to infer that housing may a major source of the rise in the share of profits in GDP. I got an e-mail from Simcha regarding the post, and the upshot is that I’m wrong. First, and...

Is Housing Driving the Rise in Profits?

24 March 2017

Um, this has nothing to do with health care or repealing the ACA. Sorry. My last post was on the profit share in GDP. I drew on some work by Barkai, who calculated that the profit share in GDP had been rising steadily over the last thirty years. To save...

Who are you calling Malthusian?

08 February 2017

I recently had a student ask me if I was a “Malthusian”. It’s not the first time someone has asked me that, and I’m never quite sure what to make of it. It’s always asked in a way that implies it is a belief system, similar to “Christian”, “Muslim”, or...

Yes, ideas are harder to find. Don't panic yet.

24 January 2017

Nick Bloom, Chad Jones, John van Reenen, and Michael Webb have a new paper on how productive we are at producing “ideas”, which one can argue are the ultimate source of all economic growth. The splash graphic from the paper, which I believe made a brief tour of the Twitter-verse...

The returns to societal capital

26 December 2016

Brad DeLong had a recent post that contained a number of ideas regarding how we view redistribution in a market economy. I picked up on some comments he made towards the end of that post, in which he points out that much of our prosperity comes from a stock of...

Can you do historical counter-factuals?

16 December 2016

Warning: rank speculation lies ahead Last weekend I fell hopelessly behind in an on-going Twitter-storm surrounding history and economics, and how the two fields think of causality and counterfactuals. The culprits filling up my notifications page included Pseudoerasmus, Leah Platt Boustan, Richard Jones, and Kevin O’Rourke. This is my uber-Tweet...

12 December 2016

A quick post to vent some of the pressure from my reading list before it explodes: Greg Ip has an extensive piece in the WSJ on being “out of big ideas”. One quality of this article is that it gives some plausible ideas for why the pace of innovation may...

Would you pay to save a job?

03 December 2016

Mike Konczal has a nice article about how important it is to distinguish “jobs” from “the economy”, and how Trump used that to his advantage. Noah Smith had a summary of the idea that a job is “more than a paycheck”. In my head, this is a complement to the...

Employment Going South. Literally.

30 November 2016

From 1990 to 2015, the US economy as a whole increased employment by about 30 million (30,056,664 according to the BLS). Employment in 1990 was 118,900,000, so that meant that there was a roughly 25% increase in employment over that 25 year period, with a little more than 1 million...

Ethnic fractionalization and growth

15 November 2016

This is not a post about Donald Trump or the election, except tangentially. I have thoughts on Trump - so, so many thoughts - but most of them have been said, meaning I will provide little value added. Garett Jones did a podcast with The Economics Detective recently on the...

GDP, Productivity, and Financial Performance

05 November 2016

In my last post, I got upset because people were using measures of productivity as measures of firm or industry financial performance. And as part of that, I made the point that GDP (which is part of measuring productivity) has nothing to do with profits, or financial success in any...

Productivity measures productivity ... that's it

27 October 2016

Justin Fox at Bloomberg put up a few articles (here, here) recently digging into trends in productivity in the US manufacturing sector. The overarching theme of the two articles is that claims regarding the success of the manufacturing sector in the US (he cites Binyamin Applebaum’s article specifically) are overstated....

Labor Recovery and the Productivity Slowdown

15 October 2016

Everyone loves talking about productivity, and how it doesn’t grow as fast as it used to. Very low productivity growth rates, in same cases negative, have been used very recently as evidence of this long-run slowdown and why perhaps it will get worse. But inferring something about long-run trends in...

Soooo...maybe the service sector isn't a drag on productivity growth after all?

21 September 2016

One of the running themes on this blog is that productivity (called total factor productivity or multi-factor productivity by those in the biz) is basically a garbage dump for all the stuff we do not know how to measure in the real economy. Today’s post provides another example of this....

Hobsbawm on relative decline and social disruption

14 September 2016

I recently re-read Eric Hobsbawm’s Industry and Empire. I didn’t have a reason, other than that it was shelved near something else I was looking for in the library, and caught my eye. It was definitely before graduate school that I last read it, so it seemed worth revisiting now...

Balanced growth in theory

07 September 2016

The last post was on the empirics behind balanced growth paths (BGP), the key organizing principle of economic growth models. I was skeptical of these empirics, and it looked like only weak evidence was there to support the idea of BGP’s. As I said in that post, essentially all the...

Is there evidence of balanced growth?

06 September 2016

I had the pleasure of attending the DEGIT conference in Nottingham, UK last week. One of the plenary speakers was Gene Grossman, who talked about a paper he is working on with Elhanan Helpman, Ezra Oberfield, and Thomas Sampson. The paper is about “balanced growth”. I spent a good portion...

More on Measured Productivity and the Labor Share

15 August 2016

Last week, Matt Yglesias dug up an old post of mine about labor’s share of output and the measurement of productivity. The short version was that the decline in labor’s share may be part of the explanation for why measured productivity growth has slowed down in the same period of...

Did Real Manufacturing Output Grow Faster than We Thought?

03 August 2016

Writing this post was kind of depressing, because all it did was highlight for me how many things I’ve got in my reading list to think about and digest. I was reading Brad DeLong’s recent post on manufacturing’s share in output, and realized that I’ve got about four more posts...

Evidence on Violence and Ethnic Groups in Africa

25 July 2016

At the rate I’m going this summer, I will soon be down to one blog post a year, and it will be about a paper that came out in 2008. I swear to my coauthors that this is because I’m working so damn hard on [fill in name of joint...

The Early Transformation of Britain's Economy

04 July 2016

There’s a nice working paper out by Patrick Wallis, Justin Colson, and David Chilosi called “Puncturing the Malthus Delusion: Structural Change in the British Economy before the Industrial Revolution, 1500-1800”. The big project they undertake here is to mine the probate inventories (along with several other sources) from Britain in...

Is productivity the victim of it's own success?

13 June 2016

I didn’t really intend to take such a long break from blogging, but I kind of looked up and realized it had been a month or so. There was (at least from my standpoint) a flurry of posts regarding productivity, the slowdown in productivity, reasons for the slowdown in productivity,...

21 May 2016

A quick follow-up to last December’s original Roman History Reading List, which turned out to be pretty popular. As before, this is “hobby reading” for me, and I make no claims about these lists being definitive. But if you are interested in dipping into this area, the lists will be...

Can we get rich by "Doing Business" better?

15 May 2016

John Cochrane wrote a piece for the Wall Street Journal’s Confirmation Bias Opinion page. It used the World Bank’s Doing Business index to suggest that the US could achieve massive gains in economic growth by adopting policies that pushed up our Doing Business score. Brad DeLong and Evan Soltas had...

More on Decomposing US Productivity Growth

11 May 2016

Tables, tables, tables. There are going to be lots of tables today. My last post was about the decomposition of aggregate productivity growth into different components. “Within” growth occurs because labor productivity within sectors is growing. “Across” growth occurs because workers move from one sector to another. For the US...

Technology versus the Distribution of Workers in Aggregate Productivity

01 May 2016

There was a recent post by an engineer rebutting Robert Gordon’s (and others) thesis that technological change was slowing down. The evidence cited is a series of plots and figures showing how specific technologies (battery storage, energy efficiency, computer speed, etc..) are advancing just as fast as they have for...

Concentration and Growth

18 April 2016

A whole raft of posts and articles (here, here, here, here) has shown up recently regarding “rent-seeking”. This is kind of a catch-all for increased concentration within industries, more lenient anti-trust enforcement, and the increasing share of corporate profits in output. This is then tied to the slowdown in wages...

Productivity versus Technology in American Growth

30 March 2016

I just reviewed Bob Gordon’s book on the rise and fall of American growth. A quick recap of Gordon’s thesis is that we experienced an anomalous burst of technological progress during the 1930’s and 1940’s, bleeding a little into the 1950’s and 60’s. Prior to that period, and since that...

Savings, Savings, and More Savings

29 March 2016

This post is about savings. It is also a plea with Nick Rowe to slow the )##@ down in posting things that get stuck in my head. I’m still working on this savings thing, and now he’s got a post up about capital that I’m chewing over too. I have...

Reviewing the Rise and Fall of American Growth

24 March 2016

I finished reading Robert Gordon’s The Rise and Fall of American Growth a while ago, but finally found the time to write down an extended review. I’m way behind the curve. Tyler Cowen has an excellent review, and Ryan Decker sort of live-tweeted his way through the book recently. To...

You Saved What?

05 March 2016

Nick Rowe just had a post about the effect of savings on GDP. I’m paraphrasing, but a student asks him whether “saving an extra $100” raises GDP (or not), because the national income product accounts can be written as$Y = C + S + T$. I think Nick nails... Growth References 05 March 2016 A very quick post just to alert you that I’ve added a new page of references to the site. It is essentially a dump of my own BibTeX file, broken down by topic area. It’s incomplete, but as I clean up and add to the references over time, they’ll populate... How to Accelerate Growth Rates 27 February 2016 A good amount of discussion takes place about how to accelerate growth, with a lot of prominent examples coming from the US presidential primaries. Jeb! promised to get the growth rate of GDP to 4%. Gerald Friedman said that Sanders’ plans would raise growth to 5.3%, and the Romer’s have... Absolute Changes in Living Standards 18 February 2016 This may or may not be interesting, I’m not entirely sure myself. But I got a question from an undergrad in my economic growth course, and it was one of those questions that kind of catches you off guard because you hadn’t really thought about it. The question was -... Making Inferences about Tropics, Germs, and Crops 07 February 2016 One of the long-running arguments in growth is “geography versus institutions”. A lot of ink and a tiny amount of computing power was thrown at this question. The early stages of this involved a lot of cross-country regressions that attempted to figure out empirically whether measures of institutions or geography... Why Isn't the Whole World Developed? 04 February 2016 That’s the title of Greg Clark’s article from 1987 on cotton production in the early 20th century. Clark uses that specific industry to study the sources of variation across countries in real wages. I revisited it recently because I want to use it in my graduate course, and because I... Site Upgrades 31 January 2016 Thanks to the Cavs/Spurs game turning into a snorer, I distracted myself by fixing up a few things on the new site. Rocking Saturday night, I know. I’m old. SSL: The site is now using SSL, which means you’ll see “https” in the web address. You don’t need to do... The Persistence of Technology 30 January 2016 One of the papers I use to introduce several ideas into my graduate growth and development course is by Diego Comin, Bill Easterly, and Erick Gong, titled “Was the Wealth of Nations Determined in 1000BC?”. If we were being strict about things, the answer is no. But the longer answer... Welcome to GrowthEcon 28 January 2016 This is both a welcome message to my new site - growthecon.com - as well as a test that everything is working out alright. The Growth Economics Blog is now located here, but the old Wordpress site will linger on for a while. I know people have links set up... The Declining Marginal Product of Capital 20 January 2016 A few weeks ago I posted about the recent decline in capital per worker in the U.S. The short summary is that from 2009-2013 capital per worker has been shrinking, and this is at odds with most of historical experience. This shrinking capital per worker contributes to higher measured productivity... Do You Need More Money for Economic Growth to Occur? 15 January 2016 TL;DR version: No. This is another entry to file under "notes for undergrads" and/or "explaining things to your neighbor". A very common question I get about growth is: how does growth occur if there is not any "more money" in the economy. Another common question I get is: how is... Calculating Growth Rates 13 January 2016 I'm prepping for my undergraduate growth course this semester (which uses an AWESOME book, by the way). We don't require calc from our econ majors at UH, so I have to ease them into a few things during the course. One of those is using logs to both visualize and... IQ and Economic Growth 11 January 2016 I finally got around the writing up a review of Hive Mind, by Garett Jones. Short version is that the book is excellent, and well worth reading. I'll get into more detail below, but the book explores the importance of cognitive skills (as measured by IQ) for economic development. There... Beating a Dead Robotic Horse 31 December 2015 One of the recurring themes on this blog has been the consequences of robots, AI, or rapid technological change on labor demand. Will humans be put out of work by robots, and will this mean paradise or destitution? I've generally argued that we should be optimistic about robots and AI... Roman History Reading 10 December 2015 This really has nothing to do with economic growth, so feel free to dismiss it. My most recent "hobby reading" has been on the fall of the Roman Republic and the emergence of the empire under Augustus. I've got a nice little reading list if you are interested in the... Women and the Wealth of Nations 08 December 2015 I discussed a paper by David Cuberes and Marc Teigner at the SEA meetings in New Orleans a few weeks ago. It provides some interesting calculations on the economic cost of discrimination against women in developing countries. CT set up a simple model of occupational choice, a la Banerjee and... Describing the Decline of Capital per Worker 24 November 2015 The last post I did on the composition of productivity growth documented that recently we appear to be using productivity to reduce our capital/worker, as opposed to increasing the growth of output per worker. The BLS measure of${K/L}$is actually shrinking in 2011-2013. That is an anomaly in the... The Changing Composition of Productivity Growth 21 November 2015 After the post I did recently on profit shares and productivity calculations, I've been picking around the BLS, OECD, and Penn World Tables methodologies for calculating productivity growth. This has generated several interesting facts. Interesting in the sense that they raise even more questions than I had starting out. Today's... Tyler, Noah, and Bob walk into a Chinese bar... 04 November 2015 I know that in internet-time I'm light-years behind this discussion, but Tyler Cowen recently put up a post questioning whether Chinese growth could be explained by Solow catch-up growth, and Noah Smith had a reply that said, "Yes, it could". I just wanted to drop in on that to generally... More on the Effect of Social Policy on Innovation and Growth 28 October 2015 My last post was on the false trade-off between social policies and growth. In particular, I took a shot at an essay by Michael Strain, but his essay is simply a good example of an argument that gets made very often: social policies will lower growth. I said this was... Progressive Social Goals and Economic Growth 23 October 2015 Someone pointed me towards this Washington Post essay by Michael Strain, of the AEI, on "Why we need growth more than we need democratic socialism". It's something of a rebuttal to Bernie Sanders' positive statements regarding the social democratic systems that are in place in Denmark, Sweden, and several other... Chad Jones on Paul Romer's Contribution to Growth Theory 21 October 2015 I'm very pleased to host a guest post by Chad Jones celebrating the 25th anniversary of Romer (1990). Enjoy! If you add one computer, you make one worker more productive. If you add a new idea --- think of the the computer code for the first spreadsheet or word processor... Labor's Share, Profits, and the Productivity Slowdown 26 September 2015 There's been a slowdown in measured productivity growth, particularly in the last few years, but generally since about 2000. This is something that I've poked around at several times, and if you're reading economics blogs like this, then this shouldn't be a revelation to you. At the same time, there... Constant versus Balanced Growth 18 September 2015 Every theory of economic growth that I can think of is written to deliver "balanced growth" in the long run. Balanced growth means not only that the growth rate is constant as time goes off to infinity, but also that control variables (the savings rates, the fraction of labor allocated... What is the Neo-classical Growth Model good for? 28 August 2015 This is a long post. It is partly in response to some questions from first-year grad students, and so it can be considered as notes for a lecture that might potentially be given to them at some point in the near future. For all that, it isn't pitched at a... Study Slavery to Study the Impact of Robots on Workers 26 August 2015 I started writing a post that was collecting several recent pieces about robots/technology and their impact on workers. Let me quick post those: Robots appear to improve productivity, not cost jobs, from HBR. A World without Work, from the Atlantic. A response to that Atlantic article by Mike Konzcal. Deindustrialization... Why Information Industrial Classification Diversity Grows 20 August 2015 I read Cesar Hidalgo's Why Information Grows. Going into it, I really wanted to like it. I really wanted it to give me some insight into one of those fundamental growth questions: what drives the speed of knowledge acquisition? This is not that book. The beginning is fun for describing... Hip-Hop History of Macro 17 August 2015 Do you find yourself a little lost trying to keep up with the history of macro posts that Romer (here, here, here), DeLong (here, here), and others have been posting? What did Lucas do, or not do, to change macro? Was it that big of a change? What is this... Dumb Luck in Historical Development 12 August 2015 I took advantage of a week of vacation to read through some books that had been piling up (queuing up? Not sure the right idiom for a Kindle). One was Philip Hoffman's Why Did Europe Conquer the World? This, on its face, is another entry in a long line of... You Can't Reform Your Way to Rapid Growth 22 July 2015 One of the big advantages of having written this blog for a while is that I can start recycling old material. I'm going to do that in response to the small back-and-forth that Noah Smith (also here) and John Cochrane had regarding Jeb! Bush's suggestion/idea/hope to push the growth of... Understanding Diffusion Models of Growth 13 July 2015 There has been a recent bloom of research that studies the diffusion of ideas and economic growth. Alvarez, Buera, and Lucas (2013), Lucas (2009), Lucas and Moll (2014), and Perla and Tonetti (2014) are some of the most prominent examples. In each case, firms or individuals learn new techniques after... The Glacial Speed of Institutional Change 06 July 2015 I just finished reading "The Long Process of Development" by Jerry Hough and Robin Grier. The quick response is that you should read this book. If that's enough, then go get it. All the rest of this post is just some of my reactions to the book. The basic idea... Embedded Ideas and Economic Growth 19 June 2015 In the last post I laid out three conditions that could when describing how economic growth worked, and said we had to pick two. In short, I argued that we should pick (1) constant returns to scale in rival inputs, and (2) non-rival ideas earn some part of output. This... What Assumptions Matter for Growth Theory? 13 June 2015 The whole "mathiness" debate that Paul Romer started tumbled onwards this week while I spent four days in a car driving from Houston to Quechee, Vermont. I was able to keep up with several new entries (Harford, Rowe, Andolfatto, Romer) regarding the specifics of growth theory when it was my... Market Power versus Price-taking in Economic Growth 05 June 2015 I'm sure you've been breathlessly following along with the discussion on "mathiness" that Paul Romer kicked off (see here, here, here). Romer used several growth models to illustrate his point about "mathiness", and his critique centered around the assumption of price-taking by firms and/or individuals in these papers. His argument... Monday Growth Links 01 June 2015 Time to clear the decks on the reading list: Jerry Hough and Robin Grier have a new book on "The Long Process of Development". They stress that institutional change, and the economic development that may or may not follow, takes a looooooooong time. It is in the reading pile for... More on Mathiness 29 May 2015 I managed to not float away this week in the flood in Houston, so I'm back with everyone's favorite topic: mathiness. I hit on this last week, and there continues to be an on-going discussion about Paul Romer's original paper on this. For me, there are two interesting conversations to... Mathiness versus Science in Growth Economics 21 May 2015 Paul Romer created a bit of a firestorm over the last week or so with his paper and posts regarding "Mathiness in the Theory of Economic Growth". I finally was able to sit down and think harder about his piece (and several reactions to it). Before I get to the... Trend, Cycles, and Assumptions about Fluctuations 18 May 2015 I am kind of veering off of the typical growth topic in this post (although not as badly as the last post). I was playing around trying to write questions for the first-year macro comp next month, and ended up thinking about how we distinguish trend from cycle in GDP.... So I Wrote a Book 13 May 2015 This is going to be the king of off-topic posts. I wrote a book. A fiction book for kids. You can find it on Amazon here, in either Kindle or paperback form. I didn't go through a publisher, and just used Amazon's self-publishing option. I get enough rejection letters from... Do Agricultural Conditions Matter for Institutions? 08 May 2015 Last weekend there was a conference at Brown University on long-run determinants of growth (see program here). I unfortunately did not get to attend this year, so I am vicariously attending by reading some of the papers. One that particularly caught my eye is by Roy Elis and Stephen Haber,... The Connection of Urbanization with Growth 05 May 2015 Paul Romer has a nice post up about how urbanization "passes the Pritchett test" for development. Pritchett's test is that urbanization (in this case) is related both in the cross-section and the time-series to living standards, and positive shocks to urbanization are associated with higher living standards. So Romer argues... There is More to Life than Manufacturing 29 April 2015 One of my continuing questions about research in economic growth is why it insists on remaining so focused on manufacturing to the exclusion of the other 70-95% of economic activity in most economies. I'll pick on two particular papers here, mainly because they are widely known. The first is Chad... All Institutions, All the Time? 23 April 2015 Wolfgang Keller and Carol Shiue just released a working paper on "Market Integration as a Mechanism for Growth". They are looking at growth in Germany during the 19th century, and proxy for growth by using city population growth, on the presumption that people only flood into cities that are booming... Trust and the Benefit of the Doubt 20 April 2015 This is going to go off the rails quickly, so hang on. First, read this classic Douglas Adams story, and pay attention to what you think this tells you about English culture: This actually did happen to a real person, and the real person was me. I had gone to... Growth Effects, Level Effects, and Transitional Growth 15 April 2015 This post is about a metaphor for explaining growth dynamics to people. It might be useful if you are either trying to learn growth theory, or teach growth theory. I think the metaphor works nicely for explaining what we mean when we talk about level and growth differences by putting... Do You Have to Choose Growth or Development? Part Deux 11 April 2015 In my last post I talked about Lant Pritchett's recent article which questioned the focus of the World Bank on only the extreme poor. He wondered whether the Bank was the right partner for developing countries hoping to grow to middle- or high-income living standards. I agreed with Pritchett that... Do You Have to Choose Growth or Development? 07 April 2015 A number of posts/comments have been floating around the last few days that deal with the goals or the World Bank. Lant Pritchett published a piece that asks whether rich countries are in fact good partners for poor countries looking to develop. Pritchett is worried that rich-country development agencies (including... Did We Evolve the Capacity for Sustained Growth? 30 March 2015 I posted a few pieces (here and here) recently on genetics and growth. The Economist even picked up on Justin Cook's work on lactose tolerance and development. Justin's work on both lactose and the HLA system are about very specific genes, while the other research I mentioned is about genetic... Tuesday Growth Links 24 March 2015 Non-economics note: I finished the Souther Reach Trilogy (Annihilation, Authority , and Acceptance) by Jeff VanderMeer. I had been worried about a "Lost" situation, where the story doesn't tie off nicely at the end, and....the books do not tie off nicely. BUT the writing is hypnotic, and the stories weave... Great Britain and Laissez Not-so-Faire Economics 18 March 2015 I recently finished State, Economy, and the Great Divergence by Peer Vries. It's a comparison of the activities of the state in Great Britain and China in the period running up to and including the Industrial Revolution, roughly 1650-1850. Vries critiques the standard view on the role of the state... Plows were the Robots of the 13th Century 17 March 2015 Jury duty this morning, which meant lots of quiet reading time and in the end no *actual* jury duty (yeah for settlements!). I am reading Rural Economy and Country Life in the Medieval West, by Georges Duby. I came across the following description of how the development of improved harnesses... Genetic Origins of Economic Development 16 March 2015 I recently posted about the genetic component of savings behavior. The paper I reviewed there said that one could account for about 1/3 of variation in savings behavior by appealing to genetic differences. Whatever the authors of this study found (rightly or wrongly), they did not identify the gene(s) for... Forecasting Future Growth 12 March 2015 In a post a few days ago I made a distinction between looking at "measured growth over a few decades" and "the long-run growth rate of GDP". The point was that while we can calculate the former, the latter is something that we have to be more speculative about. As... Genetic Factors in Savings Behavior 08 March 2015 There is a recent article by Henrik Cronqvist and Stephan Siegel on the origins of savings behavior (published in JPE, but link is for working paper). They use the Swedish Twin Registry, which gives them data on roughly 15,000 twins, and link that to the deep Swedish data on income,... Has the Long-run Growth Rate Changed? 07 March 2015 My actual job bothered to intrude on my life over the last week, so I've got a bit of material stored up for the blog. Today, I'm going to hit on a definitional issue that creates lots of problems in talking about growth. I see it all the time in... Handy Book of Economic Growth 27 February 2015 I thought it would be nice to post some overview articles of significant research in economic growth. Culture, Entrepreneurship, and Growth. Doepke and Zilibotti Trust, Growth, and Well-Being, Algann and Cahuc Long-term Barriers to Economic Development, Spolaore and Wacziarg Family Ties, Alesina and Giuliano The Industrial Revolution, Clark Twentieth-Century Growth,... Friday Growth Links 27 February 2015 Things that I pretend I will have smart things to say about in the future: Lemin Wu on whether we are thinking about Malthusianism correctly. A general point from this paper is that once you stop thinking of output as a single homogenous good, how you choose to weight different... These are Not the (Modeling Assumptions About) Droids You are Looking For 19 February 2015 Let me start by saying that all future arguments about robots should use the word "droids" instead so that we can use more Star Wars references. Benzell, Kotlikoff, LaGarda, and Sachs (BKLS) have a new NBER working paper out on robots (sorry, I don't see an ungated version). They are... Significant Changes in GDP Growth 18 February 2015 A relatively quick post to highlight two other posts that recently came out regarding GDP growth. First, David Papell and Ruxandra Prodan have a guest post up at Econbrowser regarding the long-run effects of the Great Recession. They use the CBO projections of GDP into the future (similar to what... When an Op-Ed About Growth Fails 13 February 2015 There's a column in the NYT today by Daniel Cohen, titled "When the Growth Model Fails". It is...well, I don't know what it is. A lament? A rant? Daniel Cohen is a good economist, so it is a shame that the column reads like the work of a politician who... Is the U.S. Really Below Potential GDP? 10 February 2015 The CBO just released a new projection of both GDP and the budget out to 2024. In short, the CBO sees the U.S. staying below potential GDP for several years. Menzie Chinn just did a short review of how people use inflation and/or unemployment to try and figure out the... Harry Potter and the Residual of Doom 06 February 2015 The productivity term in an aggregate production function is tough to get one's head around. When I write down $$Y = K^{\alpha}(AL)^{1-\alpha}$$ for aggregate GDP, the term${A}$is the measure of (labor-augmenting) productivity. What exactly does${A}$mean, though? Sure, mathematically speaking if${A}$goes up then... Geography is Kinda-Sorta Destiny 04 February 2015 I spent last weekend in Orlando with my wife and kids at Universal Studios. This had two effects. The first was to confirm everything I hate about large groups of people. The second was that it allowed me to read a number of books. So this is another post that... Markets, Institutions, and Underpants 03 February 2015 The title of this post is my proposed re-naming of Sven Beckert's Empire of Cotton: A Global History. Grabs the attention, right? The short recommendation is that you should read this book if you are interested in economic history and growth. The long recommendation is that Beckert's is an entry... Techno-neutrality 26 January 2015 I've had a few posts in the past few months (here and here) about the consequences of mechanization for the future of work. In short, what will we do when the robots take our jobs? I wouldn't call myself a techno-optimist. I don't think the arrival of robots necessarily makes... Market Failures in Developing Countries 22 January 2015 I just came across a new World Bank paper by Brian Dillon and Chris Barrett about agricultural factor markets in Africa. Dillon and Barrett have written an "old school" development paper, meaning it reminds me of papers written in the 1980's and 1990's. They use observational data, and appeal to... Unified Growth Theory is not the Enemy 21 January 2015 In a recent post I compared and contrasted Joel Mokyr's and Bob Allen's viewpoints on the origins of the British Industrial Revolution (IR). One failure was to not link to a review paper by Nick Crafts. His is an in-depth review of their two positions, and you should read it.... Technology and "Good Jobs" 19 January 2015 I got a number of comments and e-mails regarding a recent post on technological change, jobs that produce goods, and "good jobs". This is a follow up meant to clarify some points and solidify others. The entire point of my post was to say that the exact tasks people do... Research on Persistent Roots of Development 15 January 2015 A few papers of interest regarding the persistent effect of historical conditions (geographic or not) on subsequent development: Marcella Aslan's paper on the TseTse fly and African development is now out in the American Economic Review. I believe I've mentioned this paper before, so go read it finally. Develops an... The Industrial Revolution and Modern Development 13 January 2015 I'm not an economic historian, but like most growth economists I am an avid consumer of economic history. Maybe it's our version of "physics envy". Regardless, it isn't always obvious why growth economists look backwards so much for motivation, examples, and inspiration. Let me try to give an example of... Trust, Familes, and Growth 09 January 2015 Warning: this post is too long and wildly speculative. Culture has (re)-emerged as one of the proposed "deep determinants" of economic development. A good place to get a feel for this literature is a piece in J. of Economic Perspectives by Guiso, Sapienza, and Zingales (GSZ). They define culture as... Please Don't Write Well, Write Clearly 08 January 2015 Chris Blattman just published a piece about the 10 things he'd tell college kids. I think they're all generally great pieces of advice, but I want to expand on one point in particular. His #3 piece of advice is "Learn to write well". As a general concept, I'm all for... Job Quality is about Policies, not Technology 05 January 2015 Nouriel Roubini posted an article titled "Where Will All the Workers Go?". A few pulls: "The risk is that robotics and automation will displace workers in blue-collar manufacturing jobs before the dust of the Third Industrial Revolution settles." "But, unless the proper policies to nurture job growth are put in... Populations, not Nations, Dictate Development 02 January 2015 One of the more intriguing empirical regularities in recent growth research involves population origins. Rather than thinking about rich and poor countries, work by Louis Putterman and David Weil tells us to think about rich and poor population groups (Europeans and Native Americans, for example). Countries are rich if their... Last Links of 2014 31 December 2014 So now that I've yanked myself out of the nanaimo bar-induced coma of last week to return to the living, I've got a stack of links that have been piling up. So here is a last post of 2014 for you to scan through on your phone while you watch... Mean-Reversion in Growth Rates and Convergence 18 December 2014 Brad DeLong posted about the recent paper by Pritchett and Summers (PS) on "Asiaphoria" and mean-reversion in growth rates. PS found several things: Growth rates are not persistent. The growth rate over the last 10 years has very little information about the growth rate over the next 10 years. Growth... Why Did Consumption TFP Stagnate? 17 December 2014 I've been trying to think more about why consumption-sector TFP flatlined from about 1980 forward. What I mentioned in the last post about this was that the fact that TFP was constant does not imply that technology was constant. I then speculated that technology in the service sector may not... What Should I Teach First-years? 16 December 2014 I'm doing a little post-mortem on this semesters first-year graduate macro class. I'm thinking about what I should be teaching in this course. The big meta-question is what is the right kind of material to be teaching? I see two perspectives here: Teach the big questions. They need to understand... You've Got Potential 15 December 2014 A couple things I read this week, along with a frustrating parking-lot conversation with someone who asked me about the economy, got me thinking about how we talk about GDP. I think we can and should be a little more clear in economics about what we mean by "Potential GDP".... A Few Growth Links 15 December 2014 Kelly and O'Grada on sustained economic growth in England berfore 1700. That growth was slow relative to modern rates, but they argue it was appreciable and associated with increasing human capital and high wages. They give several examples of significant division of labor within industry in this pre-IR era. Via... I Love the Smell of TFP in the Morning 11 December 2014 Very recently John Fernald of the SF Fed released a quarterly series on total factor productivity (TFP) in the US. One of the neat things about his series is that you can look separately at investment (equipment and consumer durables) and consumption (everything else). When you plot these out, you... The Limited Effect of Reforms on Growth 08 December 2014 I said in my last post that transitional growth is slow, and therefore changing potential GDP - as many of the recent Cato Growth proposals would do - could not add much to the growth rate of GDP in the near term. There were several questions that came up in... [insert policy here] Won't Boost Growth Rates 03 December 2014 Over at the Cato Institute, they hosted an online forum about reviving economic growth. There are lots of smart people involved. The web page has lots of big pictures of their heads, I guess to indicate that their brains are like, totally huge. Anyway, each one wrote up some proposed... New Growth Resources 01 December 2014 First, great reading lists from Anton Howes and Pseudoerasmus on economic history, often from a very broad perspective. These are all books that I (and you, if you're reading this) should have read already, but I promise I'll be good next year and get to it. Anton's Amazon wishlist Pseudoerasmus'... Blattman on Institutions 26 November 2014 Chris Blattman has put up a very nice response to my institutions posts, including a number of good points on what the institutions literature in economics tends to overlook. You should go read that right now. He's also added about 10 things to my "to be read" list. So thanks,... The Skeptics Guide to Institutions - Part 4 26 November 2014 The final installment of my series on the empirical institutions literature. Quick summary of the prior posts: Part 1: cross-country studies of institutions are inherently flawed by lack of identification and ordinal institutional indexes treated as cardinal Part 2: instrumental variable approaches - settler mortality included - are flawed due... The Skeptics Guide to Institutions - Part 3 23 November 2014 This is the third in a series of posts regarding the institutions literature. The first two posts dealt with original cross-country work on institutions and the attempt to identify the effects using settler mortality. The third generation of institutions work is, in large part, a response to the empirical problems... The Skeptics Guide to Institutions - Part 2 20 November 2014 This is the second of a series of posts on the empirical institutions literature that I am covering in my graduate growth and development course. In Part 1, I looked at how the 1st generation of this literature misused cross-country measures of institutions in their poorly identified regressions. The second... The Skeptics Guide to Institutions - Part 1 18 November 2014 I'm starting a run of several lectures on institutions in my growth and development course. By revealed preference, so to speak, I take the institutions literature seriously. But there are some issues with it, and so I'm going to teach this literature from a particularly skeptical viewpoint and see what... Perfect Competition is Bad for Growth 15 November 2014 You have to be careful in confusing "free markets" with "perfect competition". By "free markets", I think we mean free entry for new firms and/or products into the market. We don't want restrictions on innovators from bringing their ideas to the market. We typically *assume* that free entry exists in... Latitude and Income per Capita in Comparative Development 10 November 2014 New paper out by Holger Strulik and Carl-Johan Dalgaard (who I predict is at this moment taking a smoke break). The paper looks at the reversal of the latitude/income relationship over history, and propose a physiological reason for it. For starters, if you are familiar at all with basic development... What He Said... 09 November 2014 When I grow up, I want to be Lant Pritchett. He gives an excellent summary of issues that I've tried to get my head around before. Lant's big question is "Are interventions being evaluated important for development?". I think the answer is no. The interventions - bed nets, micro-credit, deworming... I Won't Forget You All When I'm Famous.... 06 November 2014 Thanks to Brad DeLong for the shout-out, "You should be reading Dietrich–not just for this piece, but in general…" You should be reading, and you should be believing everything I say without question. Focused or Broad-based Growth? 06 November 2014 Do we care if productivity growth is "broad-based", meaning that all sectors or firms tend to be getting more productive? Or is it better to have a few sectors or firms experience massive productivity increases, even at the expense of other sectors? Think of it as an allocation problem -... Growth Links for Halloween 31 October 2014 I don't know if these are scary or not. Anyway, they've been sitting as open tabs in Chrome for too long, and I haven't thought of anything clever to say about them, so here they are straight. Our World in Data. This site has some really top-notch graphics on a... Scale, Profits, and Inequality 25 October 2014 After my post last week on inequality, I got a number of (surprisingly reasonable) responses. I pulled one line out of a recent comment, not to call out that particular commenter, but because it encapsulates an argument for *not* caring about inequality. "Gates and the Waltons really did probably add... Random Growth Links 15 October 2014 Just a few interesting things to think about: I feel like the Einstellung effect is something that could be worked into some sort of model of technology adoption. "...the Einstellung effect operates by biasing attention towards problem features that are associated with the familiar solution rather than the optimal solution."... Why I Care about Inequality 14 October 2014 "Inequality" is a term that has been tossed about quite a bit. The Occupy movement, to Piketty's book, to debates over the minimum wage, to Greg Mankiw's defense of the 1%. Just today Mark Thoma published an op-ed on inequality. A few days ago John Cochrane had a post about... The Slowdown in Reallocation in the U.S. 09 October 2014 One of the components of productivity growth is reallocation. From one perspective, we can think about the reallocation of homogenous factors (labor, capital) from low-productivity firms to high-productivity firms, which includes low-productivity firms going out of business, and new firms getting started. A different perspective is to look more closely... Meta-post on Robots and Jobs 03 October 2014 I don't know that I have anything particularly original to say on the worry that robots will soon replace humans in many more tasks, and what implications this has for wages, living conditions, income distribution, the introduction of the Matrix or Skynet, or anything else. So here I've just collected... Re-basing GDP and Estimating Growth Rates 01 October 2014 Leandro Prado de la Escosura recently posted a voxeu column about splicing real GDP series after re-basing. Re-basing of real GDP means adopting a new set of reference prices to value output in each year. Think of what Nigeria did last year, when they re-based from 1990 prices to using... Age Structure, Experience, Productivity...... and France! 01 October 2014 Miles Kimball posted a link to a relatively old Scott Sumner post that was discussing a Paul Krugman post from 2011. Which means I am only about 3 years behind, which is good, because I would have estimated I was about 5 years behind. Anyway, Scott's post deals with some... Measuring Misallocation across Firms 25 September 2014 One of the most active area of research in macro development (let's not call it growth economics, I guess) is on misallocations. This is the concept that a major explanation for why some countries are rich, while others are poor, is that rich countries do a good job of allocating... Productivity Pessimism from Productivity Optimists 23 September 2014 The projected future path of labor productivity in the U.S. is perhaps the most important input to the projected future path of GDP in the U.S. There are lots of estimates floating around, many of them pessimistic in the sense that they project labor productivity growth to be relatively slow... Bad Population Reporting 18 September 2014 So I spotted this article in the Guardian, by one Damian Carrington, who gives us an example of how not to write about new research. The article is about the release of this paper in Science, by Gerland et al. Let's take a little walk through the article to see... Slow Growth in Potential GDP for the U.S.? 16 September 2014 Robert Gordon released a paper recently where he presents his estimates of potential GDP for the U.S. going forward. I had planned on writing a longer post discussing about why you should take his projections seriously, and maybe some speculation about what would have to happen to reverse his conclusions.... Taxes and Growth 12 September 2014 William Gale and Andy Samwick have a new Brookings paper out on the relationship of tax rates and economic growth in the U.S. [Apologies to whichever blog/site led me to the paper, I can't remember.] Short answer, there is no relationship. They do not identify any change in the trend... Is Progress Bad? 09 September 2014 I saw this article on the Atlantic by Jeremy Caradonna, a professor of history at the U. of Alberta. It's about whether "progress" is good for humanity. The article takes particular aim at "progress" as a concept associated with sustained economic growth since the Industrial Revolution. The first point to... Robots as Factor-Eliminating Technical Change 04 September 2014 A really common thread running through the comments I've gotten on the blog involve the replacement of labor. This is tied into the question of the impact of robots/IT on labor market outcomes, and the stagnation of wages for lots of laborers. An intuition that a lot of people have... Total Factor Productivity as a Measure of Welfare 03 September 2014 In response to my post regarding innovation and GDP, Areendam Chanda left a comment that hit at a key question: Interesting – but if innovation frees up resources, what are we doing with the extra resources? To follow Mokyr’s own argument- driverless cars will reduce commuting times. What happens with... What does Real GDP Measure? 29 August 2014 Nearly all cross-country work on growth and development uses, if only for motivation, Penn World Table (PWT) estimates of real GDP for countries. And the PWT generates a single measure of "real GDP" for each country. How do they do this? Before I answer, let me say that much of... Housing, Productivity, and Nerds 26 August 2014 A quick comment about Krugman's last NYT op-ed about housing costs, mobility, and productivity. He starts with several facts that are, I think, uncontroversial at least in a broad sense. 1) On net, people are moving from NY and SF to Atlanta and Houston 2) Housing prices are higher in... Innovation does not equal GDP Growth 25 August 2014 I'm way behind on this (it came out August 8th), but Joel Mokyr posted an op-ed in the Wall Street Journal about being optimistic regarding growth. I liked this particular passage: The responsibility of economic historians is to remind the world what things were like before 1800. Growth was imperceptibly... Lower Skill Demand in the 21st Century 23 August 2014 Having just posted something on de-skilling in the Industrial Revolution, I saw this post by Nick Bunker regarding the skills gap (or perceived skills gap) as an explanation for the current low employment rate in the U.S. currently. He links to a paper from last year by Paul Beaudry, David... The Loss of Skill in the Industrial Revolution 19 August 2014 There's a recent working paper by Alexandra de Pleijt and Jacob Weisdorf that looks at skill composition of the English workforce from 1550 through 1850. They do this by looking at the occupational titles recorded in English parish records over that period, and code each observed worker by the skill... Farming Doesn't Pay....For a Reason 14 August 2014 An op-ed in the NYT showed up the other day, by Bren Smith, a farmer who lamented the fact that farmers like him (small, local suppliers) were having trouble making money. This despite the surge in farm-to-table restaurants and the "locavore" movement. Why? Why haven't the new crop of small,... Avoid Cliches like the Plague 11 August 2014 I move to expunge the phrase "We examine XXXXXX through the lens of a XXXXXX model" from common usage in economics papers. Three for three on the latest referee requests I received. Cyclones and Economic Growth 11 August 2014 I finally got a chance to read through a recent paper by Solomon Hsiang and Amir Jina on "The Causal Effect of Environmental Catastrophe on Long-Run Economic Growth: Evidence From 6,700 Cyclones". The paper essentially does what it says on the tin - regresses the growth rate of GDP on... Economic Dynamism and Productivity Growth 31 July 2014 There's a paper out in the latest Journal of Economic Perspectives by Decker, Haltiwanger, Jarmin, and Miranda (DHJM) on "The Role of Entrepreneurship in US Job Creation and Economic Dynamism". They document, in more detail than an earlier Brookings report I talked about recently, that the proportion of firms that... Wall Art for the Growth Nerd 29 July 2014 Prints of classic patent diagrams (and by classic, I mean Lego and Edison's telegraph) available at Etsy. Good deal at only 7 bucks a pop. Perfect for your favorite "technology is the key to long-run growth" economists. (h/t Gizmodo). The Perils of "Instant" Communication 28 July 2014 The Atlantic has a short piece about people's horrified response to the demonic speed of the....telegraph. Classic "Get off my lawn" response to technological innovation. From the New York Times, 1858 So far as the influence of the newspaper upon the mind and morals of the people is concerned, there... Patents, Bargaining, and Innovation 28 July 2014 The economics of endogenous growth imply a non-linear relationship between intellectual property rights (IPR) and innovative activity. Very low patent protections (or other types of IPR) and no one will want to bother innovating because they will not be able to reap any benefits before someone comes along and copies... Solitary, Poor, Nasty, Brutish, Short...and Happy? 25 July 2014 In response to my recent post on geography/institutions, Thornton Hall posted some comments that led us to go back and forth regarding whether pre-historic/pre-agricultural humans led "long, happy lives" (Hall) or relatively short, dismal lives (me). Yes, this is tangential to the whole geography/institutions thing. It's the internet, what do... Geography Matters Even if it Doesn't 22 July 2014 Acemoglu and Robinson have been running a series of posts on the work of James Scott. Their latest regards the role of geography versus institutions. Their post is an explanation for why the dispersion of population away from navigable rivers and coasts in Africa and Asia is likely the result... Growth Class Slides 22 July 2014 I've posted up slides for use with Introduction to Economic Growth on the Class Materials page. I am a bit of a slide minimalist, so they are not done with Beamer, but they were created using TEX. They contain all the important equations and figures from the book, but there... Empirical Institutions Reading List 18 July 2014 The next installment of reading lists for my grad growth and development class this fall has to do with one explanation for the fundamental source of cross-country differences: institutions. "institutions" is a very nebulous concept, and so most of the recent, empirically sound, research on institutions focuses not on "institutions"... Cochrane on Growth and Macro 17 July 2014 John Cochrane recently ran a little review of his experience at NBER (h/t to Noah Smith). It's got a really interesting observation on growth versus macro. A last thought. Economic Fluctuations merged with Growth in the mid 1990s. At the time there was a great confluence of method as well... Why Don't Growth Economists Study Growth Anymore? 15 July 2014 John Seater (NC State) left a really interesting comment on one of my recaps of the NBER Growth session papers. It appears from the summaries in this blog that none of the other five papers was a growth paper. Now, literally anything in economics can have an effect on growth,... Hsieh and Moretti on Allocations across Cities 13 July 2014 Last post on the NBER growth session. Chang-Tai Hsieh (Chicago) and Enrico Moretti (Berkeley) presented a paper on wage dispersion across cities in the U.S. Wage dispersion (New Yorkers earn more than people in Cleveland) either represents compensation for living costs (housing in New York is more expensive than in... Herrendorf and Schoellman on Labor Allocations 13 July 2014 The next post on the NBER growth session. Berthold Herrendorf (ASU) and Todd Schoellman (ASU) looked at the (surprise!) misallocation of labor between agriculture and non-agriculture. They look at the wage gap between ag and non-ag in a panel of 39 countries. The question is how much of the gap... Restuccia and Santaeulalia-Llopis on Land Misallocation 13 July 2014 Next entry in the NBER growth session recap. Diego Restuccia (Toronto) and Raul Santaeulalia-Llopis (Wash. U.) presented their paper on land misallocation and productivity. Essentially, what Diego and Raul are trying to do is apply the firm-level study of Hsieh and Klenow (2009) methodology to farms (you might be starting... David, Hopenhayn, and Venkateswaran on Misallocation 13 July 2014 Next installment of the NBER growth session recap. The second paper was by Joel David (USC), Hugo Hopenhayn (USC), and Venky Venkateswaran (NYU Stern). Their jumping off point is the apparent mis-allocation of factors of production across firms. The standard of comparison here is Hsieh and Klenow (2009), who find... Oberfield and Raval on Capital/Labor Elasticity of Substitution 13 July 2014 I was in Boston for the NBER summer institute on Friday, sitting in on what it typically called either "Growth day" or "Jones/Klenow" after the organizers. Regardless, here's the program. It's a chance to see what is some of the cutting/bleeding edge research in economic growth. The first paper I... Subsistence and Self-perpetuating Inequality 09 July 2014 It's common in development or growth to think about subsistence constraints. From a macro perspective, we think of them as an explanation for the low income-elasticity of food expenditures, and therefore a cause of structural change away from agriculture. The idea has there in development for years. I don't know... Pricing Power and Lower Potential GDP 02 July 2014 One of the results of the Great Recession has been a severe downward revision in potential GDP across many countries. Laurence Ball just had a Vox post on this (h/t to Mark Thoma), finding that potential GDP is lower by 8.4% on average across the OECD, and up to 30%... Should Developing Countries Try to Create a Business Elite? 26 June 2014 La Porta and Shleifer released a working paper recently on the informal economy (which I believe is a draft for a future issue of the Journal of Economic Perspectives, but I could be wrong). They give an overview of what we currently know about the size and characteristics of informal... Some Self-Promotion 26 June 2014 The CSAE blog has put up a research summary about my paper with Markus Eberhardt, on agricultural technology and agricultural productivity (which are different things). Does Culture Matter for Economic Growth? Part Deux. 25 June 2014 I ended up getting a lot of feedback (pushback?) on my post regarding culture and economic growth. The TL;DR version is this: if culture influences utility functions, then comparing economic development levels between cultures not very interesting because it doesn't ultimately inform us about welfare. Several people got back to... Measuring Real GDP 23 June 2014 This morning Angus Deaton and Bettina Aten released an NBER working paper (gated, sorry) about understanding changes to international measures of real GDP and poverty that occurred following the release of a new round of price indices from the International Comparison Project (ICP). Price indices? Methodological nuance? I know, ideal... Does Culture Matter for Economic Growth? 18 June 2014 There's been an increasing number of papers concerned with culture and its relationship to economic growth. I happened to just see this working paper by Di Tella and MacCulloch (2014), but the idea of culture being an important determinant of economic development levels has been hanging out there in the... Potential "Potential Output" Levels 17 June 2014 John Fernald has a new working paper out at the San Fran Fed on "Productivity and Potential Output Before, During, and After the Great Recession". The main take-away from the paper is that productivity growth started to slow down even before 2008, particularly in industries that produce IT products or... Development Accounting Reading List 05 June 2014 This group of papers is one of the first that I cover in class, because it's useful to frame much of the growth/development research. The concept is that real GDP per capita is produced using a function something like${y = A F(k,h)}$. Real GDP thus depends on total factor... Wealth and Capital are Different Things 02 June 2014 Piketty's book is like a giant attention-sucking vortex. I can't seem to escape it. This time I'm thinking about the criticism of Piketty's analysis that has to do with rates of return on capital. Piketty says that if${r > g}$, where${r}$is the return to capital, and${g}\$...

Who cares how fast GDP grows?

29 May 2014

I came across an interesting post by Ed Dolan, on what we should do about slowing growth in the U.S. His answer is "Nothing", and he gives a very capable explanation of why this is the case. His argument is that while GDP and human welfare (the general concept, not...

Piketty and Income Shares

27 May 2014

Doug Gollin, Oxford University econ. professor, my coauthor, and an amateur ninja (I may have made up that last one), left a great reply to my post on Piketty and Growth Economics. Let's start with the first point Doug makes: But for the record, it is not at all straightforward...

23 May 2014

Back with another set of readings for my grad class this fall. As before, a PDF and BibTeX file of the papers I teach in this area are located under the Papers page. One of the more active areas in growth right now is studying the allocation of factors of...

Is Robert Gordon Right about U.S. Growth?

20 May 2014

Robert Gordon has a recent set of papers (2012, 2014) claiming that the growth rate of GDP per capita in the U.S. is going to slow down from roughly 2% per year to 0.9% per year, starting in 2007. The argument is based on a combination of factors including: an...

18 May 2014

I will be teaching graduate growth and development this fall, and I'm trying to get a head start on my reading list. Today's effort is looking at the relationship of agriculture to overall economic development. I think a really convenient way to see the main issues in this literature is...

Declining U.S. Dynamism?

14 May 2014

There's a research report from Brookings that's making it's way around the inter-tubes. The title is "Declining Business Dynamism in the Untied States", by Ian Hathaway and Robert Litan. The upshot is that business dynamism is declining. The firm entry rate (i.e. the number of firms less than one year...

Persistence in Economic Development

12 May 2014

Last weekend I attended a conference at Brown University on "Deep-Rooted Factors in Economic Development". The key theme that came out of that weekend was persistence. Nearly all of the papers gave evidence that economic shocks or initial differences in economic outcomes dissipate very, very slowly, if at all. Oded...

Piketty and Growth Economics

07 May 2014

Reviews of Thomas Piketty's "Capital in the 21st Century" are second only to cat videos on the internet, it seems. Not having any cats, I am unable to make a video, so you're stuck with a review of Piketty's book. I was particulary struck by the implications of this work...

Empirics and Institutions

25 April 2014

I just completed a section in class on institutions and growth. This had led me to re-read several papers, including Acemoglu, Johnson, and Robinson (2005) on "The Rise of Europe: Atlantic Trade, Institutional Change, and Economic Growth." The idea in the paper is that the places that grew most quickly...

Examples of Institutional Failure

24 April 2014

Miles Kimball posted a link this article from the WSJ on the mess that is Nigeria's electricity grid. A key factoid is that Nigeria produces as much electricity as Montana, yet Nigeria has about 170 million people while Montana has only 1 million. The author (Drew Hinshaw) has comparisons for...

Defining Development Economics

18 April 2014

Trying to precisely define an area of study is impossible, but thinking through the definition of development economics'' is an interesting diversion. As with most fields, the definition is tied closely to the people doing research in that area. So today, development economics'' is the kind of research done by...

Technology and Scale

08 April 2014

This is a neat write-up by Matt Ridley regarding some research done by anthropologists Michelle Kline and Rob Boyd (ungated original paper here). They collected information on marine foraging technology used by 10 different Pacific Islander tribes at the time they first met Western explorers/colonizers. According to Ridley they assigned...

Growth in Sea Transportation

03 April 2014

I saw these incredibly cool images of shipping routes over time (original source is assistant professor Ben Schmidt from Northeastern). They map actual voyages taken, ship by ship, so you can see not just the routes but the density of usage. First, one showing routes from mid-19th century Second, here...

Markets and Industrialization

01 April 2014

I just finished reading Karl Polanyi's The Great Transformation, part of an effort to actually read through some classic texts in economics. He gives an account of the rise of capitalism in order to set himself up to describe the crisis in capitalism that he sees around him (he is...

Are We Doomed?

24 March 2014

The Guardian ran a piece on a forthcoming paper in Ecological Economics by Safa Motesharrei, Jorge Rivas, Eugenia Kalnay. The article is titled Human and Nature Dynamics (HANDY): Modeling Inequality and Use of Resources in the Collapse or Sustainability of Species''. The model they construct has the feature that under...

The Solow Model

10 March 2014

This is another idea for modifying how to teach the Solow model. One thing I'd like to do is go immediately to including productivity - it follows cleanly from the simplest growth model. Second, I think it might be nice to work with the K/Y ratio immediately. In this way,...