nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2009‒07‒17
eight papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Growth Accounting for the Chinese Provinces 1990-2000: Incorporating Human Capital Accumulation By Xiaolei Qian; Russell Smyth
  3. Fiscal Stimulus: A Neoclassical Perspective By Strulik, Holger; Trimborn, Timo
  4. Education and Economic Growth: A Review of Literature By Akram, Naeem; Pada, Itsham ul Haq
  6. Inflation and Growth: New Evidence From a Dynamic Panel Threshold Analysis By Stephanie Kremer; Alexander Bick; Dieter Nautz
  7. The Banking Crisis - A Rational Interpretation By Minford, Patrick
  8. CAN WE TAX THE DESIRE FOR TAX EVASION? By Ratbek Dzhumashev; Emin Gahramanov

  1. By: Xiaolei Qian; Russell Smyth
    Abstract: This paper examines the linkage between aggregate real output, capital, labour, education, and productivity within a growth accounting framework for 27 Chinese provinces between 1990 and 2000. The results suggest that human capital has had a significant role in facilitating economic growth of all of the provinces throughout the 1990s. Regional disparities in factor accumulation are also considered. The results suggest that uneven distribution of resources between the coastal and inland provinces increased the regional gap in economic growth throughout the 1990s.
    Keywords: China, Economic growth, Human capital, Reform
    JEL: O40 O15 O53
    Date: 2009–05
  2. By: Jakob Madsen
    Abstract: Using a long dataset on openness and productivity this paper tests the influence of openness on TFP growth and per capita growth since 1870 for 16 industrialized countries. It is shown, in simple regressions, that growth is by and large independent of openness. However, once the interaction between openness and foreign knowledge is allowed for, productivity is positively affected by openness.
    Keywords: Openness, TFP growth, trade barriers, imports of technology, panel estimates.
    JEL: F13 F14 F32
    Date: 2009–06
  3. By: Strulik, Holger; Trimborn, Timo
    Abstract: Can a large-scale defcit spending program speed up recovery after recession? To answer that question we calibrate a standard neoclassical growth model with US data and assume that an exogenous shock has driven aggregate output far below steady-state level. We calibrate the model such that a permanent increase of government expenditure is effective in raising output. We then show that "fiscal stimulus", i.e. a temporary increase of government expenditure is not only ineffective but detrimental. Even before the spending program expires, aggregate output is lower than it could be without fiscal stimulus. We show the generality of this result w.r.t. size and persistence of the shock, size of the government spending multiplier, and the scale and duration of the stimulus program. Using a phase diagram we provide the economic intuition for our unpleasant finding and explain why, generally, private capital stock reaches its lowest level when a deficit spending program expires. We also show how an accompanying temporary cut of capital income taxes helps to prevent the negative repercussion of deficit spending on economic recovery.
    Keywords: deficit spending, government spending multiplier, economic recovery, economic growth
    JEL: E60 H30 H50 O40
    Date: 2009–07
  4. By: Akram, Naeem; Pada, Itsham ul Haq
    Abstract: Human Capital plays pivotal role for economic growth process. The aim of this paper is to present a brief overview of the studies conducted on the relationship between education and economic growth. Most of the studies are cross-sectional, including developing and developed countries and single country studies are very few in numbers. A general consensus emerges from the review of literature is that there exists a positive relationship between education and economic growth. However in cross section of countries it is assumed that data for each country is same but this assumption become void when studies uses data from opposing conditions of countries. So there is a need for a study on Pakistan that will account fall the impacts of traditional and nontraditional educational systems on economic growth.
    Keywords: Education; Growth; Human capital
    JEL: H5 J24 O4
    Date: 2009–07–12
  5. By: Jakob Madsen; Shishir Saxena; James Ang
    Abstract: Using over half a century of R&D data for India, this paper examines the extent to which India’s recent growth experience can be explained by R&D, international R&D spillovers, catch-up to the technology frontier and financial liberalization. Furthermore, the paper also tests whether any of the competing second-generation endogenous growth theories can explain India’s growth experience. The findings provide support for Schumpeterian growth theory and indicate that the recent high growth rates in India are likely to continue well into the future.
    Keywords: Schumpeterian growth; semi-endogenous growth; R&D,
    JEL: O3 O4
    Date: 2009–06
  6. By: Stephanie Kremer; Alexander Bick; Dieter Nautz
    Abstract: We introduce a dynamic panel threshold model to shed new light on the impact of inflation on long-term economic growth. The empirical analysis is based on a large panel-data set including 124 countries during the period from 1950 to 2004. For industrialized countries, our results confirm the inflation targets of about 2% set by many central banks. For non-industrialized countries, we estimate that inflation hampers growth if it exceeds 17%. Below this threshold, however, the impact of inflation on growth remains insignificant. Therefore, our results do not support growth-enhancing effects of inflation in developing countries.
    Keywords: Inflation Thresholds, Inflation and Growth, Dynamic Panel Threshold Model
    JEL: E31 C23 O40
    Date: 2009–07
  7. By: Minford, Patrick (Cardiff Business School)
    Abstract: Modern macroeconomic models have been widely criticised as relying too much on rationality and market efficiency. However, basically their predictions about this crisis are being borne out by events. 'Crashes' are an integral part of an 'efficient market' capitalism and are brought on by swings in the news about productivity growth; this time nearly two decades of strong computer-based productivity growth were brought to a crashing halt by raw material shortages. This presages a slow recovery until innovation in material use frees growth up again as it did in the 1990s after the shortages of the 1970s.
    Keywords: Macroeconomic models; Banking Crisis
    JEL: E0
    Date: 2009–07
  8. By: Ratbek Dzhumashev; Emin Gahramanov
    Abstract: A static income tax evasion model à la Yitzhaki (1974) predicts that an increase in the tax rate causes taxpayers to increase their income declaration. In an important contribution, Lin and Yang (2001) obtained exactly the opposite result by extending the Yitzhaki (1974) model to a dynamic one with Ak(t) production technology. In this paper we show that once the Lin and Yang (2001) model becomes fully compatible with the Yitzhaki’s (1974) setting, the negative relationship between taxes and evasion still prevails. We then enrich the dynamic model with a productive public sector, and obtain an ambiguous relationship between taxes and evasion incentives as in Allingham and Sandmo (1972). We also prove that the growth-maximizing share of public expenditures in total output satisfies the natural efficiency condition even in the presence of tax evasion. However, the latter result is not robust to the introduction of the costs associated with income declaration and concealment activities.
    Keywords: Tax Evasion, Optimal Taxation, Economic Growth
    JEL: H26 H21 D91
    Date: 2009–06

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