nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2009‒02‒22
seven papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Source of Finance, Growth and Firm Size ? Evidence from China By Du, Jun; Girma, Sourafel
  2. What is the relationship between Unofficial and Official Economy? An analysis in Latin American Countries. By Roberto Dell'Anno
  3. The Financial Crisis of 2008 and the Developing Countries By Naude, Wim
  4. Bargaining structures, rent-seeking effect and endogenous growth. By Isabelle TERRAZ
  5. The Contribution of Highways to GDP Growth By Barbara M. Fraumeni
  6. Inculusive growth: What is so exclusive about it? By M.H. Suryanarayana
  7. Conditioned Export-Led Growth Hypothesis: A Panel Threshold Regressions Approach By Galimberti, Jaqueson K.

  1. By: Du, Jun; Girma, Sourafel
    Abstract: Using a comprehensive firm-level dataset spanning the period 1998-2005, this paper provides a thorough investigation of the relationship between firm size, total factor productivity growth and financial structure in China, controlling for the endogeneity of the latter. Generally, it finds financing source matters for firms of different size, and the extent to which financing source matters for firm growth is greater for small firms than big firms. Self-raised finance appears to be most effective in promoting small firms to grow, and bank loan seems to be more supportive to big firms. The relationship between size, finance and growth also depends on ownership. In addition, there exist strong complementarities between formal and informal finance, as well as between indigenous and foreign finance.
    Keywords: China, finance, firm size, growth
    Date: 2009
  2. By: Roberto Dell'Anno
    Abstract: This paper analyzes the relationship between unofficial economy (UE) and official GDP. Through the study of the UE within an institutional comprehensive empirical framework, a positive correlation is found between unofficial and official GDP. Empirical evidence on the procyclicality of UE supports the conclusion that the two sectors are rather complements than substitutes for Latin American countries. Then UE is considered as beneficial to sustain economic growth. Suggestions for economic policy and hints for further research are also offered.
    Keywords: Unofficial economy, Economic Development, Latin America, Institutions.
    Date: 2008–12
  3. By: Naude, Wim
    Abstract: Following the financial crisis that broke in the US and other Western economies in late 2008, there is now serious concern about its impact on the developing countries. The world media almost daily reports scenarios of gloom and doom, with many predicting a deep global recession. This paper critically discusses this and concludes that as far as the developing countries are concerned, a bit more optimism may be warranted. Although without doubt there are particular countries that will be adversely affected, there will also be countries that may be less affected, may avoid recession, and may recover sooner than expected. Six major reasons for this conclusion are discussed. Without this resilience in the developing world, prospects for the world?s richer countries would be much bleaker. Finally, some options available to the developing countries for minimizing the impact of the crisis are discussed. The crisis accentuates the urgent need for accelerating financial development in developing countries, both through domestic financial deepening, domestic resource mobilization, and reform of the international financial system.
    Keywords: financial crisis, developing countries, development finance, financial development
    Date: 2009
  4. By: Isabelle TERRAZ
    Abstract: Market power of workers on wages is bound to affect economic performances. This paper focuses on this issue and analyse the influence of bargaining structures on growth and labor market functioning. To achieve this, we construct an endogenous growth model where growth appears as the result of a learning-by-doing process whereas imperfect information in the labor market implies matching frictions in the hiring process. If investment occurs before wage bargaining, the growth process can be durably altered. In this case, a higher bargaining power of worker does not give a clear-cut effect on growth.
    Keywords: Bargaining structures; Equilibrium Unemployment; Endogenous growth; Learning-by-doing.
    JEL: E24 J50 J64 O40
    Date: 2009
  5. By: Barbara M. Fraumeni
    Abstract: This paper constructs updated measures of productive highway capital stocks at the total, Interstate, Non-interstate, and Local System levels to estimate the contribution of all highways (all public roads) to GDP growth. It presents three types of contribution to GDP growth estimates and an experimental structure estimate reflecting the quality of bridges. These three contributions, estimated from the viewpoint of a national income accountant, are: 1) The contribution of highway investment to growth in GDP, 2) The contribution of highway capital input to growth in adjusted GDP, and 3) The contribution of highways gross output to growth in adjusted U.S. gross output. The data effort moves beyond productive capital stocks in order to assess the contribution of highways to economic growth; measures of capital input (which requires rates of return), highway “industry†gross output, and U.S. gross output estimates are needed. These contribution estimates provide a different perspective on the importance of highways for economic growth from those produced using different methodologies, which commonly employ econometric techniques.
    JEL: O47
    Date: 2009–02
  6. By: M.H. Suryanarayana (Indira Gandhi Institute of Development Research; Indira Gandhi Institute of Development Research)
    Abstract: In the wake of the economic reform programme undertaken since 1991, distributional issues have received considerable attention and policy concern. In pursuit of such concerns, the government has worked out an approach to the Eleventh Five Year Plan, which lays emphasis on, though without defining, a strategy of inclusive growth. In fact, this form of pursuit of inclusive growth has become virtually a universal concern with even the UNDP harping on it without knowing answers for what it calls a "million dollar question- what inclusive growth is and how to achieve it?" This paper proposes to define inclusion/exclusion for an outcome scenario on broad based growth from three different perspectives, viz., production, income, and consumption distribution. It also provides some illustrations based on the National Accounts Statistics and the National Sample Survey consumer expenditure distributions for the year 2004-05.
    Keywords: Consumer expenditure, Distribution, Economic reform, Eleventh Five Year Plan
    JEL: D31 I32 I38
    Date: 2008–10
  7. By: Galimberti, Jaqueson K.
    Abstract: This paper proposes a reassessment of the export-led growth hypothesis focusing on conditioning effects from countries initial level of GDP per worker, human capital stock, and exports share in GDP. For this purpose a panel threshold regression technique was applied over selected cross-country panel data, covering a broad sample of 72 countries and two sub-samples over the period from 1974 to 2003. Special attention was given to the 5-years data averaging procedure, using panel unit root tests, and to the variables measures choice, where a sensitivity analysis is proposed. Overall, the evidence reported favors the export-led growth hypothesis, where the relationship between exports and growth was showed to be not as trivial as linear specifications would indicate.
    Keywords: Export-led growth; panel threshold regressions; trade and growth.
    JEL: O11 O50 O40 F43
    Date: 2009–02–11

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