We present a set of theoretical and empirical papers and briefly describe the specific contributions to the Macroeconomic Dynamics special issue on technology aspects in the process of development.

This paper develops a model positing a nonlinear relationship between public investment and growth. The model is then applied to a panel of African countries, using nonlinear estimating procedures. The growth-maximizing level of public investment is estimated at about 10% of GDP, based on System GMM estimation. The paper further runs simulations, obtaining the constant optimal public investment share that maximizes the sum of discounted consumption as between 8.1% and 9.6% of GDP. Compared with the observed end-of-panel mean value of no more than 7.26%, these estimates suggest that there has been significant public underinvestment in Africa.

This paper proposes a Bayesian approach to estimating a factor-augmented GDP per capita equation. We exploit the panel dimension of our data and distinguish between individual-specific and time-specific factors. On the basis of 21 technology, infrastructure, and institutional indicators from 82 countries over a 19-year period (1990 to 2008), we construct summary indicators of each of these three components in the cross-sectional dimension and an overall indicator of all 21 indicators in the time-series dimension and estimate their effects on growth and international differences in GDP per capita. For most countries, more than 50% of GDP per capita is explained by the four common factors we have introduced. Infrastructure is the greatest contributor to total factor productivity, followed by technology and institutions.

This paper analyzes periods of economic stagnation in a panel of countries. We test whether stagnation can be predicted by institutional characteristics and political shocks and compare the impacts of such variables with those of traditional macroeconomic variables. We examine the determinants of stagnation episodes using dynamic linear and nonlinear models. In addition, we analyze whether the effects of the included variables on the onset of stagnation differ from their effects on the continuation of stagnation. We find that inflation, negative regime changes, real exchange rate undervaluation, financial openness, and trade openness have significant effects on both the onset and the continuation of stagnation. Only for trade openness is there robust evidence of a differential impact. Open economies have a significantly lower probability of falling into stagnation, but once in stagnation they do not recover faster.

Since the seminal work of Becker, the dynamics of endogenous fertility has been based on the trade-off faced by parents between the quantity and the quality of their children. However, in developing countries, where child labor is an indispensable source of household income, parents actually incur a negative cost by having an extra child, so that the trade-off disappears. The purpose of this paper is to restore the Beckerian quantity–quality trade-off when intergenerational transfers are upstream, in order to keep fertility endogenous. We do that by adding a negative “sibship size effect” on human capital formation to the standard Becker model. With a simple specification, we obtain multiplicity of steady states or, more fundamentally, the possibility of a jump from a state with high fertility and low income to a state with low fertility and high income, triggered by a continuous increase in the productivity of human capital formation.

Several policies or interventions have been implemented in developing countries with the ultimate goal of improving educational outcomes and human capital. Although many empirical studies have pointed to mixed results of these interventions, the role of uncertainty arising from the state of nature about the educational environment and household characteristics in the efficiency of these interventions still lacks an economic mechanism. This paper aims at developing a theoretical framework that links policy interventions to educational outcomes. We characterize optimal policies and determine the conditions for enhancing social welfare.

We propose an endogenous growth model incorporating social capital. Social capital serves only as an input in the production of human capital and it involves a cost in terms of the final good. In contrast to alternative specifications, this model ensures that social capital enhances productivity gains by playing the role of a timing belt that drives the transmission and propagation of all productivity shocks. We find that, depending on the measure of social capital, the elasticity of human capital with respect to social capital varies from 6% to 10%. Finally, we investigate the short-term dynamics and imbalance effect properties of the model, depending on the value of this elasticity. In particular, we show that when the substitutability of social capital for human capital increases, the economy is better equipped to surmount initial imbalances, as individuals may allocate more working time to the final good sector without impeding economic growth.

This paper develops a stochastic growth model that reproduces the main stylized facts of Imperial China's dynastic cycle—in particular, the time path of taxation, public spending, and corruption and their attendant impacts on production and income distribution. In this model, the emperor uses part of his tax income to finance the building of public capital and administrative institutions. This “institutional capital” enhances the productivity of the economy and limits extortion by the county magistrates. The dynastic cycle is driven by random shocks to the authority of the emperor and his central administration, which change the efficiency of institutional capital.

We present a simple theoretical model that illustrates the benefits of regional connectivity and specialization for growth. Starting with one community, we show how welfare measured by utility per head increases as the number of connected communities increases. We assume a common connectivity infrastructure through which a central planner is able to add new communities to the pool of already connected communities, a costly but rewarding activity that is funded by levying a tax on those already connected. We find that increasing production costs lead to faster transitions toward the steady state, whereas increasing transportation and communication costs tend to lengthen the transition. The results point to reductions in transportation and communication costs, in particular, as a suitable vehicle for speeding up growth and underline the existence of a positive scale effect that induces integration and reinforces both transitional and steady state growth.

This paper considers an optimal endogenous growth model where the production function is assumed to exhibit increasing returns to scale and two types of resource (renewable and nonrenewable) are imperfect substitutes. Natural resources, labor, and physical capital are used in the final goods sector and in the accumulation of knowledge. Based on results in the calculus of variations, a direct proof of the existence of an optimal solution is provided. Analytical solutions for the planner case, balanced growth paths, and steady states are found for a specific CRRA utility and Cobb–Douglas production function. It is possible to have long-run growth where both energy resources are used simultaneously along the equilibrium path. As the law of motion of the technological change is not concave, reflecting the increasing returns to scale, so that the Arrow–Mangasarian sufficiency conditions do not apply, we provide a sufficient condition directly. Transitional dynamics to the steady state from the theoretical model are used to derive three convergence equations of output intensity growth rate, exhaustible resource growth rate, and renewable resource growth rate, which are tested based on OECD data on production and energy consumption.