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on Financial Development and Growth |
| By: | Nelson, Harumi T.; Roe, Terry L.; Diao, Xinshen |
| Keywords: | Income distribution, economic growth, Development strategies, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:931&r=fdg |
| By: | Charalambos G. Tsangarides; Alin Mirestean |
| Abstract: | This paper revisits the cross-country growth empirics debate using a novel Limited Information Bayesian Model Averaging framework to address model uncertainty in the context of a dynamic growth model in panel data with endogenous regressors. Our empirical findings suggest that once model uncertainty is accounted for there is strong evidence that initial income, investment, life expectancy, and population growth are robustly correlated with economic growth. We also find evidence that debt, openness, and inflation are robust growth determinants. Overall, the set of our robust growth determinants differs from those identified by other studies that incorporate model uncertainty, but ignore dynamics and/or endogeneity. This underscores the importance of accounting for model uncertainty and endogeneity in the investigation of growth determinants. |
| Keywords: | Cross country analysis , Economic conditions , Economic growth , Economic models , Human capital , |
| Date: | 2009–12–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/268&r=fdg |
| By: | César Calderón; Rodrigo Fuentes.; Rodrigo Fuentes. |
| Abstract: | One strand of the empirical growth literature has cast doubt on the ability of the policy recommendations from Washington Consensus in enhancing growth. They argue that not only the design but also the policy mix has an important country-specific component (e.g. Hausmann, Rodrik and Velasco, 2005 and Zettelmeyer, 2006). We argue that the effectiveness of policies in promoting growth depends upon the set of structural policies implemented or already existing in the country. This paper empirically examines the role of policy complementarities in explaining growth and development from two dimensions. First, we construct a regression-based policy index in the same vein of Burnside and Dollar (2000), and we decompose this index afterwards into domestic and outward policy indices. Second, we evaluate the role of policy complementarities in the growth process by interacting our policy index with specific country characteristics that affect growth. We repeat the same exercise with the domestic and outward policy indices. We found that outward oriented and domestic policies are highly complements to each other. Specifically, the growth effects of trade and financial openness are enhanced when domestic policies are correct and, moreover, financial and trade openness are also complements. Regarding structural factors, we found that human capital increase growth as expected but it is neither a complement nor a substitute of economic policy. On the other hand institutions and financial depth are complements with economic policy. This could be an explanation why some countries have stabilized their economies but they are not growing faster, this could be due to low financial development or bad institutions. Finally, we should remark that in addition to the Fatas and Mihov (2006) result that policy volatility hurts growth, we find that a good policy environment could propel growth by mitigating the negative effect of aggregate volatility and, more specifically, the volatility of external shocks. |
| Keywords: | Growth, Volatility, Economic Policy. |
| JEL: | O47 O40 E32 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:366&r=fdg |
| By: | Rodrigo Cerda. (Instituto de Economía. Pontificia Universidad Católica de Chile.) |
| Abstract: | We study the role of fiscal expenditure during episodes of economic crises using one century data from 20 Latin American countries. We use output drops as way of indicating the irruption of economic crises and we are able to document episodes of large output drops and large duration of economic crises, which are characteristics that vary considerably among countries. We study the duration of crises by means of count data and hazard models while we study the intensity of the crisis by means of growth regressions. Our main findings suggest that fiscal expenditure has low power to shorten economic crises but it might act as an effective instrument to smooth output-drops during crises. |
| Keywords: | Economic Crisis, Fiscal Expenditure, Latin America. |
| JEL: | E62 H50 N16 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:365&r=fdg |
| By: | Akhter Faroque (Department of Economics, Laurentian University); William Veloce (Department of Economics, Brock University); Jean-Francois Lamarche (Department of Economics, Brock University) |
| Abstract: | The paper evaluates the reliability of the information content of individual financial variables for Canada’s future output growth. We estimate the timing of structural changes in linear growth models and check robustness to specification changes, multiple breaks, and business cycle asymmetry. Our out-of-sample forecast evaluation using the MSE-F and the ENC-NEW tests show that the leading information content of most financial variables has deteriorated after 1984:4, but the 1-3 year term spread exhibits a consistently reliable predictive ability at the 1 and 2 quarter horizons and has significant forecasting ability at the 8 quarter horizon. Also, the real M1 money growth has regained its ability to forecast output growth since 1991:1. |
| Keywords: | Financial indicators, structural change, nested model forecasts, minimum MSFE, encompassing tests |
| JEL: | C52 C53 E44 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:brk:wpaper:0910&r=fdg |
| By: | Nadeem Ilahi; Fahad Alturki; Jaime Espinosa-Bowen |
| Abstract: | We test the extent to which growth in the 11 CIS countries (excluding Russia) was associated with developments in Russia, overall, as well as through the trade, financial and remittance channels over the last decade or so. The results point to the continued existence of economic links between the CIS countries and Russia, though these links may have altered since the 1998 crisis. Russia appears to influence regional growth mainly through the remittance channel and somewhat less so through the financial channel. There is a shrinking role of the trade (exports to Russia) channel. Russian growth shocks are associated with sizable effects on Belarus, Kazakhstan, Kyrgyz Republic, Tajikistan, and, to some extent, Georgia. |
| Date: | 2009–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/277&r=fdg |
| By: | Lance Taylor |
| Abstract: | Policies seeking to directly help the poor have an important role to play. But without sustained growth in per capita output and significant job creation, they will not succeed. Policies promoting growth have been suggested, most notably by avoiding pro-cyclical responses to macroeconomic shocks (especially from abroad), steering macroeconomic prices, such as exchange and interest rates, to support developmental objectives, pursuing industrial and trade policies involving increasing returns, promoting financial development, and making productive use of foreign aid. Ensuring national economies have sufficient policy space to achieve sustained growth and structural change should be the over-riding policy concern. |
| Keywords: | Macroeconomic policy; development policy; economic growth; poverty reduction; employment; job creation. |
| JEL: | O10 I30 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:une:wpaper:90&r=fdg |
| By: | Charles Steindel |
| Abstract: | The scale of the recent collapse in asset values and the magnitude of the recession suggest that activities connected to the increase in values over the 2002-07 period--notably, expansion of the financial markets, homebuilding, and real estate--were overstated. If this is true, aggregate U.S. economic growth would have been overstated, implying that previous rates of potential gross domestic product (GDP) growth may also have been overstated and that the trajectory of potential GDP may be slower going forward. Slowing growth in the finance, homebuilding, and real estate sectors could hold back aggregate growth. A detailed examination of these sectors' direct contributions to GDP, however, suggests that overstatements of past growth would likely not have made a large difference in recorded GDP growth. Slower growth in these sectors would have, at most, a moderate direct effect on aggregate economic activity. The recent experience's longer term effects on GDP would seem to stem largely from factors other than the retrenchment in these sectors. |
| Keywords: | Gross domestic product ; Financial crises ; Economic conditions ; Construction industry ; Financial services industry ; Real estate development |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:408&r=fdg |
| By: | Siddiqui, Danish Ahmed; Ahmed, Qazi Masood |
| Abstract: | This paper presents an index of institutionalized social technologies for Pakistan, covering its two main dimensions namely Risk reducing technologies and Anti Rent seeking technologies and in turn covers several social, institutional, political and economic aspects. It is also analyzed empirically whether the overall index as well as sub-indexes constructed to measure the single dimensions affects economic growth. The results show that over all, institutions promote growth in long run for Pakistan. . Therefore for a policy implication, success of any policy could be influenced by the soundness of institutions. |
| Keywords: | institutions; social technologies; pakistan; index; GMM; social capital; growth; narmalization; weighting; aggregation; rent seeking; risk; |
| JEL: | C43 Z1 O43 Z13 P48 D72 |
| Date: | 2009–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19744&r=fdg |
| By: | Ibrahim A. Elbadawi; Linda Kaltani; Raimundo Soto |
| Abstract: | Generating sustained growth in Sub-Saharan Africa is one of the most pressing challenges in global development. As the region needs foreign assistance to jump start its development, foreign aid becomes crucial. However, aid booms can also lead to exchange rate overvaluation curtailing exports and growth. This paper provides new evidence on the impact of aid and overvaluation on growth and exports using a sample of 83 countries from 1970 to 2004. We find that aid fosters growth (with decreasing returns) but induces overvaluation. Overvaluation reduces growth but the effect is ameliorated by financial development. Finally, we find new evidence on the negative impact of overvaluation on export diversification and sophistication. |
| Keywords: | Africa, Sub Sahara, real exchange rate, misalignment, exports, growth |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:368&r=fdg |
| By: | Zhiwei Zhang (Research Department, Hong Kong Monetary Authority); Wenlang Zhang (Research Department, Hong Kong Monetary Authority) |
| Abstract: | The worst of the global financial crisis is probably behind us, but the trajectory to recovery may vary widely across economies. Employing a dynamic structural multi-country model with a financial accelerator, this paper studies the role of three important policy actions in economic recovery: fiscal stimulus, financial sector rehabilitation and exit from policy easing. The main finding is that while both fiscal stimulus and financial sector rehabilitation contribute to economic recovery, the former is likely to be less effective from a medium-term perspective and may generate some negative side effects. This finding suggests that policy priority (of advanced economies in particular) should be on continued financial sector rehabilitation. Moreover, international policy co-ordination is beneficial as it can generate spillovers to regional economies. We also study the effects of over-estimation of the post-crisis potential output by the monetary authorities in advanced economies in their policymaking. We find that this may affect economic recovery in the region through inflationary pressure and the consequent policy tightening. |
| Keywords: | GIMF model; Financial accelerator; Fiscal stimulus; Financial rehabilitation |
| JEL: | G30 H50 H60 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:hkg:wpaper:0918&r=fdg |
| By: | Siddiqui, Danish Ahmed; Ahmed, Qazi Masood |
| Abstract: | The role of institutions in promoting economic growth and development has generated considerable interest among researchers and practitioners in recent years. This paper explores the role of state institutions in promoting growth using a GMM econometric model. Specifically it attempted to test impact of two dimensions of institutions on growth using recently developed index of institutionalized social technologies and its sub indices namely Risk reducing technologies and Anti rent seeking technologies. The result suggests a strong causal link between institutional quality and economic performance, and also confirms conditional convergence as predicted in the modern theories of growth |
| Keywords: | institutions; social technologies; index; GMM; social capital; growth; rent seeking; rent seeking; risk; corruption; property rights |
| JEL: | Z1 O43 D72 P48 Z13 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19747&r=fdg |
| By: | Jerome Creel (Observatoire Français des Conjonctures Économiques); Francesco Saraceno (Observatoire Français des Conjonctures Économiques) |
| Abstract: | The debate on public finances’ sustainability has long focused on the conditions for the accumulation of debt. This implied that, empirically, the analyses revolved around estimations of dynamic versions of the debt accumulation equation, through unit root tests and cointegration tests between e.g. revenues and primary expenditures, or debt and deficit. Bohn [2007, Journal of Monetary Economics], has forcefully argued in favour of a stronger focus on theory. The model of this paper shows to which extent and under which conditions earlier results considering fiscal policy in an endogenous growth setting are modified if government spending is not entirely tax-financed. Therefore the model uses Barro’s [1990, Journal of Political Economy] production function and Blanchard [1985, Journal of Political Economy]-type consumers to assess fiscal sustainability and the determinants of long-run (or potential) growth, in presence of productive capital services. The main conclusion is that, provided public spending is not too high, it will be growth-enhancing. This feature does not hurt fiscal sustainability if taxes are adjusted appropriately. We also calibrate the model to show that the current level of public capital is low in France, the UK and the USA. |
| Keywords: | Endogenous Growth, Government Spending, Public Investment, Debt Sustainability |
| JEL: | H11 H54 O40 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:0935&r=fdg |
| By: | Siddiqui, Danish Ahmed; Ahmed, Qazi Masood |
| Abstract: | This paper investigates relationship between institutional quality and economic performance in Pakistan using the Johansen-Juselius cointegration technique and the Granger causality test. The study results indicate that Institutions and growth are cointegrated and thus exhibit a reliable long run relationship. The Granger causality test findings indicate that the causality between Institutions and growth is uni-directional. However, there is no short run causality from Institutions to growth and vice versa. Therefore, as a policy implication that institutional quality may cause to the sustainable increase in country’s income in the long run, and success of any policy could be influenced by the soundness of institutions. |
| Keywords: | institutions; social capital; growth; cointegration; index;granger; error correction; Johansen; pakistan |
| JEL: | Z1 O43 P48 Z13 |
| Date: | 2009–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19745&r=fdg |
| By: | Digdowiseiso, Kumba |
| Abstract: | Abstract This paper examines the determinants of economic growth, income inequality, and their relationship in the context of education inequality. The econometric results from a cross-section analysis of 23 provinces in the period of 1996-2005 indicate that a higher level of human capital and the relative dispersion of human capital have a disequalizing effect on the income distribution. It also confirms that economic growth has strongly and significantly equalizing effect on the income distribution, supporting the complementarity relationship between equity and growth. In addition, human capital investment contributes significantly to the growth of economy. Therefore, in a bid to achieve egalitarian society with a more equitable distribution of income, economic policies should be more targeted at not only more education but also equal access to education. |
| Keywords: | Education; Growth; Inequality; and Indonesia |
| JEL: | I30 I21 O40 |
| Date: | 2009–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:17792&r=fdg |
| By: | S.J. Rubio (University of Valencia); J.R. García (University of Valencia); J.L. Hueso (University of Valencia) |
| Abstract: | The paper investigates socially optimal patterns of economic growth and environmental quality in a neoclassical growth model with endogenous technological progress. In the model, the environmental quality affects positively not only to utility but also to production. However, cleaner technologies can be used in the economy whether a part of the output is used in environmentally oriented R&D. In this framework, if the initial level of capital is low then the shadow price of a cleaner technology is low relative to the cost of developing it given by the marginal utility of consumption and it is not worth investing in R&D. Thus, there will be a first stage of growth based only on the accumulation of capital with a decreasing environmental quality until the moment that pollution is great enough to make profitable the investment in R&D. After this turning point, if the new technologies are efficient enough, the economy can evolve along a balanced growth path with an increasing environmental quality. The result is that the optimal investment pattern supports an environmental Kuznets curve. |
| Keywords: | Neoclassical Growth Model, Endogenous Technological Progress, External Effects, Environmental Kuznets Curve |
| JEL: | O33 O41 Q55 Q56 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2009.125&r=fdg |
| By: | Scherer, F. M. (Harvard University) |
| Abstract: | This paper, written for a larger compendium edited by Dennis Mueller, examines key dynamic features of capitalistic economies and how prominent economists such as Schumpeter, Marx, Keynes, and von Mises perceived them. The emphasis is on the growth in real per capita income achieved by capitalistic economies during the past two centuries. A Gedankenexperiment exploring what might have happened if the growth experience began earlier, in the year 800, shows how astonishing the record has been. Technological innovation, in large part endogenous to the capitalist system, is a key explanation for the growth achieved. A briefer discursion deals with breaks in growth trajectories, notably, in the form of business downturns and business fluctuations more generally. They are shown to be small relative to the longer-term growth pattern. An equally important issue is how the gains from growth have been distributed. Contrary to Marx's "immiserization" prediction, the gains have for the most part been widely shared among capitalists and workers alike. However, stagnation of real income growth for American production workers since the 1970s introduces new and troubling questions, several of whose provisional explanations are investigated. |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp10-001&r=fdg |
| By: | Gabriel Di Bella; Martin Cerisola |
| Abstract: | By the end of 2007, Chile's total factor productivity was lower than ten years earlier, a performance that contrasted sharply with the previous decade, when productivity grew by a cumulative 30 percent. This paper assesses productivity trends in Chile, by decomposing productivity into investment-specific technological change (associated with improvements in the quality of capital) and neutral technological change (related to the organization of productive activities). It concludes that investment-specific technological improvements have contributed significantly to long-term growth in Chile, in line with trends observed in other net commodity exporters, while neutral technological change has been slow. |
| Keywords: | Capital , Chile , Cross country analysis , Economic growth , Economic models , Investment , Labor productivity , Productivity , |
| Date: | 2009–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/264&r=fdg |
| By: | Xavier Pautrel (Nantes Atlantique Université Laboratoire d’Économie et de Management de Nantes (LEMNA), Institut d’Économie et de Management de Nantes - IEA) |
| Abstract: | Using a time-separable utility function where leisure is introduced through the disutility of working time and is adjusted for quality, as measured by human capital to capture home production, we demonstrate that the environmental policy is harmful for growth. A tighter environmental tax reduces the incentives to educate by increasing leisure time and lowers the steady-state growth rate and lifetime welfare, whatever the source of pollution. We also demonstrate that the intertemporal elasticity of substitution in labor supply plays a crucial role in the marginal impact of the environmental tax on growth and welfare. When the positive influence of human capital is added into preferences (by explicitly modelling the home production sector), we find that the environmental policy promotes steady-state growth. This result challenges the finding by Hettich (1998) according to which, in the presence of leisure, the environmental tax does not affect human capital accumulation if the source of pollution is output. |
| Keywords: | Leisure, Human Capital, Environmental Tax |
| JEL: | C Q56 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2009.104&r=fdg |
| By: | Md Shoaib Ahmed, Shoaib |
| Abstract: | This is a study to investigate the exchange rate volatility and it impacts on international trade growth: evidence from Bangladesh. To establish the empirical relationship between exchange rate volatility and impact on international trade growth in Bangladesh, different quantitative techniques are used by considering the data from May 2003 to December 2008. In the analysis co-integration and error correction methods have been used to do the analysis the relationship between exchange rate volatility and international trade growth in Bangladesh. From the investigation, the result shows that the exchange rate volatility has a negative and major effect both in short run and long run with Western European and North American countries. There is a negative and significant relationship has been observed between exchange rate volatility and the international trade growth. |
| Keywords: | Key words: Co-integration; Error Correction; Exchange Rate; Volatility; Export growth; Trade growth. |
| JEL: | C0 C22 C01 |
| Date: | 2009–01–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19466&r=fdg |
| By: | Alper Duman (Department of Economics, Izmir University of Economics); Arne Heise (Department of Socioeconomics, Hamburg University; Department of Economics, Izmir University of Economics) |
| Abstract: | The world is experiencing its worst recession in 80 years. What started as US sub-prime financial turmoil has developed into the first global recession since the infamous ‘Great Depression’ of the early 1930s. However gloomy the perspectives for the very short term are, there will be a recovery eventually. South Africa, Brazil and Turkey (SABT) are among those countries that may be expected as emerging market economies (EME) not only to continue to converge towards per-capita income levels of highly developed nations but also to be the best candidates – next to China and India – of serving as the locomotives of world GDP- and trade growth after the depression. Of course, whether SABT are not merely potentially in a position to create a brighter future for their people and the world economy but can transform such potentials into reality, depends on economic governance pursued by governments and collective actors in these countries. Therefore, it appears interesting to inquire into the macroeconomic governance structures of SABT in order to assess their capabilities for enhancing growth and employment and to converge to the OECD average in the medium to long run. |
| Keywords: | Market constellations, policy regimes, institutions, Post Keynesianism, comparative economic systems |
| JEL: | O11 O17 P51 P52 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:izm:wpaper:0909&r=fdg |
| By: | Giorgio Bellettini (University of Bologna); Carlotta Berti Ceroni (University of Bologna); Giovanni Prarolo (University of Bologna) |
| Abstract: | Using data on a panel of 56 democratic countries in the period 1975-2004, we find evidence of a negative association between political stability and economic growth which is stronger and empirically more robust in countries with high bureaucratic costs. Motivated by these results, which contrast with previous contributions, we develop a model of growth with quality improvements where political connections with long-term politicians can be exploited by low-quality producers to defend their monopoly position and prevent innovation and entry of high-quality competitors. This requires that the incumbent politician remains in office and that the red-tape cost advantage granted by political connections is large relative to the quality upgrade related to innovation. Consistently with our empirical findings, the model delivers a negative association between the probability that the incumbent politician remains in office and average economic growth in the presence of high bureaucratic costs. |
| Keywords: | Political Persistence, Growth, Innovation |
| JEL: | O43 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2009.107&r=fdg |
| By: | Daniel Berkowitz; David DeJong |
| Abstract: | In the early stages of post-Soviet Russia’s economic transition, small-scale entrepreneurial activity appeared to be a strong engine of growth. Moreover, striking regional variations in initial conditions and adopted policy reforms appeared useful in accounting statistically for observed regional variations in entrepreneurial activity. Here, we investigate whether these relationships have persisted as Russia’s transition has continued to evolve, and find that they have not. We then document that the emergence of bank-issued credit, virtually non-existent outside of Moscow prior to 2000, has been an important engine of growth since 2000. Thus to date, Russia’s post-Soviet development appears as a tale of two distinct transition paths. |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:385&r=fdg |
| By: | Jacques Kibambe (Department of Economics, University of Pretoria); Renee van Eyden (Department of Economics, University of Pretoria); charlotte du Toit (Department of Economics, University of Pretoria) |
| Abstract: | In this research article, we investigate the improved modelling ability and the outstanding policy advocacy of infusing health and education in sectoral growth equations of the South African economy. Our findings not only include improved and dependable modelling results but also provide distinct estimates of the returns on investment in health and education per sector using Iterative Seemingly Unrelated Regressions techniques. Additionally, this paper provides a theoretical description of the productivity effects of HIV/AIDS using sectoral equations. Also, this research investigates the diffusion process in the technological progress at the South African sectoral level and its impact on the study of social ingredients. Using a fixed effects model, some features of the diffusion process are explained. |
| Keywords: | Coefficient of effectiveness, Diffusion process, Fixed effects model, Seemingly Unrelated Regressions |
| JEL: | E23 I39 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:200931&r=fdg |
| By: | KONNO Tomohiko |
| Abstract: | Most growth theories have focused on R&D activities. Although R&D significantly influences economic growth, the spillover effect also has a considerable influence. In this paper, we study knowledge spillover among agents by representing it as network structures. The objective of this study is to construct a framework to treat knowledge spillover as a network. We introduce a knowledge spillover equation, solve it analytically to find a workable solution. It has mainly three properties: (1) the growth rate is common for all the agents only if they are linked to the entire network regardless of degrees, (2) the TFP level is proportional to degree, and (3) the growth rate is determined by the underlying network structure. We compare growth rate among representative networks: regular, random, and scale-free networks, and find the growth rate is the greatest in scale-free network. We apply this framework, i.e., knowledge spill over equation, to the problem of firms forming a network endogenously and show how distance and region size affect the economic growth. We also apply the framework to network formation mechanism. The aim of our paper is not just showing results, but in constructing a framework to study spillover by network. |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:10002&r=fdg |
| By: | Che, Natasha Xingyuan |
| Abstract: | The sectoral composition of US economy has shifted dramatically in the recent decades. At the same time, knowledge and information capital has become increasingly important in modern production process. This paper argues that a ready explanation for the recent sectoral structural change lies in the difference of intangible capital accumulation across sectors. In the two-sector model of the paper, as the importance of intangible capital increases, labor is shifted from direct goods production to creating sector-specific intangible capital. In the process, the real output and employment shares of the high-intangible sector increase. The model generates sectoral composition change and labor productivity trend that reasonably match the data. It also shows that conventional labor productivity calculation understates the "true" productivity in sectoral goods production. The underestimation is greater for the growing sector. The empirical regressions of the paper indicate a positive and significant association between intangible capital investment intensity and firms' future output and employment growth. The correlation is higher for firms in the growing sector. At the industry level, controlling for industry human capital intensity, physical capital intensity and IT investment level, intangible capital intensity is positively correlated with future industry real output and employment share growth. These findings are consistent with the implications of the model. The paper also presents evidence suggesting that most growing service industries are intangible capital intensive. Thus the theory developed here can also help to reconcile the expansion of the service sector and the seemingly low productivity of the sector. |
| Keywords: | Intangible Capital; Structural Change; Knowledge Economy; Firm Investment; |
| JEL: | E22 E17 E23 |
| Date: | 2009–12–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19653&r=fdg |
| By: | Bigsten, Arne (Department of Economics, School of Business, Economics and Law, Göteborg University); Tengstam, Sven (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | The Zambian economy has grown relatively fast over the last decade up to the current global financial crisis. This paper discusses the challenge of using these growing resources effectively to improve the welfare of the population and to reduce poverty. The poverty head count index is found to have declined from 1998 to 2004 by about 5.4 percentage points. This change can be decomposed into a 6.6 percentage point reduction due to growth and a 1.2 percentage point increase due to inequality change. Since poverty is most severe in the rural areas it is important to make agriculture more efficient by improving roads and electricity, extension services and education. Our discussion further highlights the need to improve tax revenue collection and efficiency in realising budget expenditure plans. An important reform to undertake would be to change the budget cycle. The private sector development strategy should make the country a more attractive destination for private investors by creating a better business environment and infrastructure. The country also needs a new trading arrangement with the EU. Poverty relevant social services such as health and education remain vital. The health sector needs to be strengthened both because it has an immediate effect on welfare and because it helps build and protect human capital that is essential for long-term growth. Also social protection might have a role to play. It might be possible to use schools for channelling resources to the poor. Finally, improved governance helps all other measures to become more efficient.<p> |
| Keywords: | Zambia; poverty estimates; economic policy; budget; private sector; social services |
| JEL: | O10 |
| Date: | 2009–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0424&r=fdg |
| By: | Michael D. Bordo; David Hargreaves; Mizuho Kida (Reserve Bank of New Zealand) |
| Abstract: | We identify the timing of currency, banking crises and sudden stops in New Zealand from 1880 to 2008 using methodologies from the international literature and consider the extent to which the empirical models in that literature can explain New Zealand’s crisis history. We find that the cross country evidence on the determinants of crises fits New Zealand experience reasonably well. A number of the risk factors that correlate with crises internationally – such as domestic imbalances, external debt, and currency mismatches – were elevated for New Zealand when the country had more frequent crises and have improved in the recent more stable) period. However, a time-series analysis of New Zealand growth over 120 years shows that global factors – such as the US growth rate and terms of trade – explain New Zealand growth fairly well, and that crisis dummy variables do not have significant additional explanatory power. This suggests that having sound institutions and policies may help avoid severe domestic crises, but will not be sufficient to avoid the domestic economic impact of the global business cycle. |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:nzb:nzbdps:2009/17&r=fdg |
| By: | Alcalá, Francisco |
| Abstract: | Consumption requires time (consumption and time are complements). Also, higher-quality goods provide more utility per unit of time allocated to consumption, though at a higher monetary cost. Since time is limited, higher income is decreasingly spent augmenting the number of units of goods being consumed and increasingly spent upgrading their quality. After analyzing the basic microeconomics of consumer quantity/quality choices, the paper investigates its implications on growth. As a country develops, raising the quality of output becomes increasingly important as a component of GDP growth relative to quantity growth. Furthermore, technological progress is increasingly quality-biased. Lower income inequality raises the scale of output while reducing average quality. This is positive for technical progress and growth at early stages of development but may be negative at later stages. These results are broadly consistent with the existing empirical evidence on the composition of GDP growth, international trade patterns of vertical specialization across countries, and the non-linearity of the impact of inequality on growth. The paper also explores the potential role of progressive consumption taxes as a growth policy. |
| Keywords: | Allocation of Time; Product Quality; Inequality; Growth; Distortionary Consumption Taxes |
| JEL: | O11 O15 O33 |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19402&r=fdg |
| By: | Jens Høj |
| Abstract: | Individual elements in Belgian tax system affect the growth process through different channels and to a varying degree. Consumption taxes are among the least distortive for growth, and there is considerable scope to increase the reliance on this tax source in Belgium. The Belgian differential taxation of saving vehicles distorts investment decisions, hampering the reallocation of capital towards its most productive use. However, the most distortive Belgian taxes are on labour through their effects on workers’ labour market decisions. Recognising the latter, the authorities have aimed at reducing taxation on labour. However, its level remains internationally high, reflecting numerous exemptions, which reduce tax bases and thus require higher tax rates than otherwise. To promote labour market prospects for individual groups on the labour market, wage subsidies and social security contribution reductions have been used extensively, leading to a complex system, often poorly targeted and at times subject to conflicting objectives. The end result is that the interaction between the personal income tax, the social security contributions, and the generous benefit systems has created a multitude of labour market traps which hold back employment. New tax reforms are constrained by the large and growing fiscal sustainability problem, implying that, unless substantial expenditure cuts are implemented, new tax reforms must be self-financed. This can be achieved by shifting the reliance of the tax system towards the least distortive sources and by broadening tax bases to allow lower tax rates. This Working Paper relates to the 2009 OECD Economic Survey of Belgium (www.oecd.org/eco/surveys/belgium).<P>Comment réformer le système fiscal belge afin de renforcer l’expansion économique<BR>Les éléments constitutifs des systèmes fiscaux influent sur le processus de croissance par des canaux différents et à des degrés divers. Les impôts sur la consommation sont parmi ceux qui faussent le moins la croissance et il est tout à fait possible, en Belgique, d’exploiter davantage cette source de recettes fiscales. La taxation différenciée des instruments l’épargne fausse les décisions d’investissement, entravant le redéploiement des capitaux vers leur emploi le plus productif. Cependant, les impôts qui occasionnent le plus de distorsions sont ceux qui frappent le revenu du travail, en raison de leur impact sur les décisions des travailleurs en matière d'emploi. Conscientes de cela, les autorités belges ont cherché à alléger la fiscalité du travail. Cette dernière demeure cependant lourde en comparaison des autres pays, en raison de nombreuses exonérations, qui réduisent les bases d’imposition et nécessitent donc, pour compenser, des taux d’impôt plus élevés. Afin d’améliorer les perspectives des différents groupes sur le marché du travail, on a recouru largement à des subventions salariales et des réductions de cotisations de sécurité sociale, créant ainsi un système complexe, souvent mal ciblé et visant parfois des objectifs contradictoires. En fin de compte, l’interaction entre l’impôt sur le revenu des personnes physiques, les cotisations de sécurité sociale et le généreux système de prestations a créé une multitude de pièges du marché du travail qui brident l’emploi. Les nouvelles réformes fiscales sont limitées par les problèmes importants et grandissants de viabilité des finances publiques, ce qui signifie que, à moins de procéder à de fortes compressions de dépenses, ces réformes devront s’autofinancer. Pour ce faire, il faut déplacer la charge fiscale vers les sources qui créent le moins de distorsions et élargir les bases d’imposition afin de pouvoir appliquer des taux plus bas. Ce document de travail se rapporte à l’Étude économique de l’OCDE de la Belgique, 2009 (www.oecd.org/eco/etudes/belgique). |
| Keywords: | Belgium, consumption tax, contribution, fiscal sustainability, labour market decisions, social security, tax and growth, tax bases, tax rates, taxation of savings vehicles |
| JEL: | H20 H23 H24 H25 O16 |
| Date: | 2009–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:741-en&r=fdg |
| By: | Leo Krippner; Leif Anders Thorsrud (Reserve Bank of New Zealand) |
| Abstract: | We forecast economic growth in New Zealand using yield curve data within simple statistical models; i.e. typical OLS relationships that have been well-established for other countries, and related VAR specifcations. We find that the yield curve data has significant forecasting power in absolute terms and performs well relative to various benchmarks. Specifications including measures of the yield curve slope produce the best forecasts overall. Our results also highlight the benefits of fully exploiting the timeliness of yield curve information (i.e it is always available and up to date). |
| JEL: | E43 E44 E47 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:nzb:nzbdps:2009/18&r=fdg |
| By: | Schlenkhoff, Georg |
| Abstract: | The recent recession has brought a sharp decrease in income, output, and world trade, as well as an increase in unemployment in developed and underdeveloped countries. Experts such as Paul Krugman, Christina Romer, or Barry Eichengreen, compare the current situation with the Great Depression of the 1930s. However, the current debate is whether that comparison is even applicable. Since policy makers have to understand the roots and the dimension of the crisis in order to seize the fiscal stimulus package, adjust the level of taxes, and change regulation of the financial sector, the debate is of course a reasonable one to have. The Great Depression is the archetype of a recession, so it provides policy makers with valuable insights into right and wrong reaction methods. However, if policy makers orientate at the Great Depression, they have to make sure that the roots of the crisis are similar. So this paper addresses the question: Is the current financial crisis similar to the Great Depression? For that purpose I will systematically compare the Great Recession with the Great Depression. First, by examining the theories that commonly explain the Great Depression. Subsequently I will apply these theories to the Great Recession and discuss if they are applicable. I will argue that some theories are still applicable. For example, which flaws in the monetary system contributed to the Great Recession as well as to the Great Depression? However, the economic environment has changed and applying the same policy reactions today as in the Great Depression will be a policy error. Finally I will briefly present policy recommendations that are based on the findings. |
| Keywords: | Great Depression; Great Recession; Crisis; Bretton Woods II; Fiscal Policy; Monetary Policy; Shocks |
| JEL: | B10 B0 A23 A1 B22 A2 A10 B15 A11 B25 B12 E5 B13 E4 E3 |
| Date: | 2009–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:19781&r=fdg |