nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2010‒08‒14
six papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Endogenous Growth and Parental Funding of Education in an OLG Model with a Fixed Factor By Lionel Artige
  2. Taxation in the Two-Sector Neoclassical Growth Model with Sector-Specific Externalities and Endogenous Labor Supply By Amano, Daisuke; Itaya, Jun-ichi
  3. Federal Legislative Activism in Australia: A New Approach to Testing Wagner's Law By Stephen Kirchner
  4. Endogenous Growth in an OLG Model with a Fixed Factor By Lionel Artige
  5. An Examination of the Relationship between Health and Economic Growth By Garima Malik
  6. The role of macroeconomic policies in the global crisis By Pietro Catte; Pietro Cova; Patrizio Pagano; Ignazio Visco

  1. By: Lionel Artige
    Abstract: This paper examines the stationary state income level and income growth in an overlapping generations (OLG) model in which production uses three inputs: physical capital, human capital and land. The accumulation of human capital relies on parental funding of education and the past aggregate human capital stock. Four cases exhibiting various possible specifications of returns to scale in output and human capital technologies are studied and compared.
    Date: 2010
  2. By: Amano, Daisuke; Itaya, Jun-ichi
    Abstract: This paper examines the long-run impacts of selective (sector-specific) commodity, payroll and profit taxes in a two-sector endogenous growth model with sector-specific production externalities, in which one sector produces consumption goods and the other produces investment goods. The novelty of the model is that it allows not only for endogenous labor supply (which may lead to indeterminacy) but also for the intersectional allocation of labor. We analytically show that the long-run effects of these selective taxes are closely related to the possible emergence of the indeterminacy of equilibria, which may reverse the standard results of the growth effects of distortionary taxes.
    Keywords: Selective tax, Two-sector model, Endogenous growth, Production externalities, Indeterminacy, Endogenous labor supply,
    JEL: H22 J22 O41
    Date: 2010–06
  3. By: Stephen Kirchner (School of Finance and Economics, University of Technology, Sydney)
    Abstract: Legislation is an important output of the political process. Growth in legislation can serve as a proxy for growth in the size and role of government, side-stepping some of the endogeneity problems encountered in estimating relationships between government spending and revenue and national income. This paper considers the relationship between government growth and real GDP per capita by developing three models of federal legislative output in Australia since the country's founding in 1901. The models explain growth in (1) the number of acts of parliament; (2) the total number of pages of legislation enacted; and (3) a measure of legislative complexity based on the annual average number of pages per act. The growth in the number of acts is found to be negatively related to growth in real national income per capita in the short-run, implying that legislative output responds to temporary economic shocks, but without a robust long-run relationship with the level of income. The growth in the number of pages of legislation enacted and legislative complexity also show a negative short-run relationship with growth in real national income per capita, but a positive long-run relationship with the level of income that is consistent with Wagner's (1890) law of increasing state activity. However, both the short and long-run relationships are statistically significant only for the post-World War II period, raising questions about the general applicability of Wagner's law.
    Keywords: Wagner's law; Australia; legislation; economic growth
    JEL: D72 D78
    Date: 2010–07–01
  4. By: Lionel Artige
    Abstract: This paper examines the conditions for endogenous growth in an overlapping generations (OLG) model with two sectors of production when the returns to scale may be non constant and provides the technological conditions for the highest in- come growth rate.
    Date: 2010
  5. By: Garima Malik
    Abstract: This paper attempts to examine the relationship between health and economic growth. The rate of growth is measured using gross national income (GNI) and health status is measured using infant mortality rate and life expectancy rate. A theoretical framework has been developed to model this linkage between health and growth and this is further tested using a regression model which tests the causality between these variables of interest. We have also assumed in this analysis that these variables are affected by state-specific unobservable fixed effects, since there are other cultural, political and social factors at work here. [Working Paper No. 185]
    Keywords: Health, Economic Growth, Gross National Income (GNI), theoretical framework, cultural, political, social factors
    Date: 2010
  6. By: Pietro Catte (Banca d'Italia); Pietro Cova (Banca d'Italia); Patrizio Pagano (Banca d'Italia); Ignazio Visco (Banca d'Italia)
    Abstract: This paper argues that the lack of timely and decisive policy action to correct domestic and external imbalances contributed crucially to the build-up of financial excesses that led to the financial crisis and the Great Recession. We focus on 2002-07 and perform a number of counterfactual simulations to investigate two central elements of the story, namely: (a) an over-expansionary US monetary policy and the absence of effective macro-prudential supervision, which permitted a prolonged expansion of debt-financed consumer spending; (b) the decision of China and other emerging countries to pursue an export-led growth strategy supported by pegging their currencies to the US dollar, resulting in a huge build-up of their official reserves, in conjunction with sluggish domestic demand in surplus advanced economies characterized by low potential output growth. The results of the simulations lend support to the view that if substantial, globally coordinated demand rebalancing had been undertaken in a timely manner, the macroeconomic and financial imbalances would not have accumulated to the extent that they did and the financial turmoil might have had less drastic global consequences.
    Keywords: global imbalances, financial crisis, monetary policy, macroprudential regulation, structural reforms.
    JEL: E52 F42 F43 F47 G15
    Date: 2010–07

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