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on Financial Development and Growth |
| By: | Zang, Xiaowei |
| Abstract: | Rapid economic development in China in the post-1978 era has been considered ‘intriguing’ and ‘puzzling’ since it occurred under the dominance of the Chinese Communist Party – the fusion of politics and economics is supposed to be a powerful impediment to market growth. Scholars have proposed different accounts to explain this paradox, with particular emphasis on the role of the political elite in economic progress. This paper contributes to this literature by studying why the political elite are motivated to promote economic development in China. It argues that like politicians in other types of political regimes, autocratic leaders are interested in high growth rates. It also studies the historical development of China’s developmental elites to understand their motivations for economic growth in the reform era. To better understand whether or not elites in developing countries promote economic growth, scholars should focus on factors such as historical experience, political stability, leadership turnover, or elite perceptions about the impact of growth on their hold on power rather than the differences between autocracy and democracy. |
| Keywords: | China, democracy, autocracy, development, growth, elites |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2010-84&r=fdg |
| By: | Halkos, George |
| Abstract: | In this study we try to detect the relationship between financial and real sector employing in the estimation procedure the recent time-series techniques of co-integration, vector error-correction modelling and Granger multivariate causality. We contribute to the existing literature by using for the first time a number of financial and economic variables for the case of Greece for the time period 1960-2005. Our empirical results reveal that the linkage between financial and real development is relatively weak in Greece and real sector plays the major role in the evolution of the financial system. The latter seems to promote growth only by increasing its competitiveness. |
| Keywords: | Financial sector; real sector; Greek banks |
| JEL: | E50 G0 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24391&r=fdg |
| By: | Jakob B. Madsen; James B. Ang; Rajabrata Banerjee |
| Abstract: | Using long historical data for Britain over the period 1620-2006, this paper seeks to explain the importance of innovative activity, population growth and other factors in inducing the transition from the Malthusian trap to the post-Malthusian growth regime. Furthermore, the paper tests the ability of two competing second-generation endogenous growth models to account for the British growth experience. The results suggest that innovative activity was an important force in shaping the Industrial Revolution and that the British growth experience is consistent with Schumpeterian growth theory. |
| JEL: | O30 O40 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2010-18&r=fdg |
| By: | Christian M. Dahl (University of Southern Denmark, CEBR and CREATES); Hans Christian Kongsted (University of Copenhagen, CAM and CEBR); Anders Sørensen (Copenhagen Business School and CEBR) |
| Abstract: | What has been the quantitative effect on productivity growth of information and communication technology (ICT) in Europe after 1995? Based on a multi-country sectoral panel data set, we provide econometric evidence of positive and signi?cant productivity effects of ICT in Europe, mainly due to advances in total factor productivity. The impact of ICT in Europe has happened against a negative macro economic shock not related to ICT. This is in contrast to the established evidence for the US. Our main results challenge the consensus in the growth-accounting literature that there has been no acceleration of productivity growth in Europe, mainly due to a dismal performance of ICT-using sectors. |
| Keywords: | Labor productivity, total factor productivity, information and communications technology, panel data methods. |
| JEL: | E32 C23 O47 |
| Date: | 2010–08–25 |
| URL: | http://d.repec.org/n?u=RePEc:aah:create:2010-47&r=fdg |
| By: | António Afonso; Hans Peter Grüner; Christina Kolerus |
| Abstract: | In this paper we assess to what extent in the existence of a financial crisis, government spending can contribute to mitigate economic downturns in the short run and whether such impact differs in crisis and non crisis times. We use panel analysis for a set of OECD and non-OECD countries for the period 1981-2007. The fiscal multiplier for the full sample for instrumented regular and crisis spending is about 0.6-0.8 considering the sample average government spending share of GDP of about one third. Altogether, we cannot reject the hypothesis that crisis spending and regular spending have the same impact using a variation of controls, sub-samples and specifications. |
| Keywords: | fiscal policy, financial crisis, growth, OECD, EU, panel analysis. |
| JEL: | C23 E62 E44 F43 H50 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp102010&r=fdg |
| By: | Mauricio Armellini; Parantap Basu |
| Abstract: | An optimal education subsidy formula is derived using an overlapping generations model with parental altruism. The model predicts that public education subsidy is greater in economies with lesser parental altruism because a benevolent government has to compensate for the shortfall in private education spending of less altruistic parents with a finite life. On the other hand, growth is higher in economies with greater parental altruism. Cross-country regressions using the World Values Survey for altruism lend support to our model predictions. The model provides insights about the reasons for higher education subsidy in richer countries. |
| Keywords: | Altrusim, Education Subsidy, Human Capital, Growth. |
| JEL: | D9 |
| Date: | 2010–08–21 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2010_21&r=fdg |
| By: | Baafi Antwi, Joseph; Oppong Kwakye, Francis |
| Abstract: | Globalization is described as a process by which regional economics, societies and cultures have become integrated through a global network of communication, transportation and trade. Different researchers have argued both in favour of and against globalization. Bhagwati claims that globalization has created a direct link to economic fortunes for the poor rural folks in developing countries who are often farmers. He argues that increase in information and information technology has loosened the control of exploitative middlemen whose activities reduce the returns rural farmer receive for their produce. Prystay (2005) provided evidence to this argument. Another argument comes from factor endowment. Argument against globalization is the fact that it has produced unprecedentedly high levels of inequality or hardships to the poor. Evidence from both China and India have reviled that globalization has propelled both countries economically; increase in economic growth from 6.15 to 9.37 percent in the case of China and information technology in the case of India, but the issue of inequality is still important and need to be addressed by individual government. |
| Keywords: | Globalization; Inequality; Growth |
| JEL: | F01 |
| Date: | 2010–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24608&r=fdg |
| By: | Saten Kumar; Gail Pacheco |
| Abstract: | Lifting the long run growth rate is, arguably, the pursuit of every economy. What should Kenya do to enhance its long run growth rate? This paper attempts to answer this question by examining the determinants of total factor productivity (TFP) in Kenya. We utilized the theoretical insights from the Solow (1956) growth model and its extension by Mankiw, Romer and Weil (1992) and followed Senhadji’s (2000) growth accounting procedure. We find that growth in Kenya, until the 1990s was mainly due to factor accumulation. Since then, TFP has made a small contribution to growth. Our findings imply that while variables like overseas development aid, foreign direct investment and progress of financial sector improves TFP, trade openness is the key determinant. Consequently, policy makers should focus on policies that improve trade openness if long run growth rate is to be raised. |
| Keywords: | Solow model, growth accounting, total factor productivity. |
| JEL: | O10 O15 |
| Date: | 2010–08–16 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2010_16&r=fdg |
| By: | Marek Jarociński (European Central Bank, DG-Research, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | The number of variables related to long-run economic growth is large compared with the number of countries. Bayesian model averaging is often used to impose parsimony in the cross-country growth regression. The underlying prior is that many of the considered variables need to be excluded from the model. This paper, instead, advocates priors that impose parsimony without excluding variables. The resulting models fit the data better and are more robust to revisions of income data. The positive relationship between measures of trade openness and growth is much stronger than found in the literature. JEL Classification: C20, C52, O40, O47. |
| Keywords: | Economic Growth, Bayesian Model Averaging, Adaptive Ridge Regression, Measurement Error. |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101234&r=fdg |
| By: | Cristina Checherita (European Central Bank, Fiscal Policies Division, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Philipp Rother (European Central Bank, Fiscal Policies Division, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper investigates the average impact of government debt on per-capita GDP growth in twelve euro area countries over a period of about 40 years starting in 1970. It finds a non-linear impact of debt on growth with a turning point—beyond which the government debt-to-GDP ratio has a deleterious impact on long-term growth—at about 90-100% of GDP. Confidence intervals for the debt turning point suggest that the negative growth effect of high debt may start already from levels of around 70-80% of GDP, which calls for even more prudent indebtedness policies. At the same time, there is evidence that the annual change of the public debt ratio and the budget deficit-to-GDP ratio are negatively and linearly associated with per-capita GDP growth. The channels through which government debt (level or change) is found to have an impact on the economic growth rate are: (i) private saving; (ii) public investment; (iii) total factor productivity (TFP) and (iv) sovereign long-term nominal and real interest rates. From a policy perspective, the results provide additional arguments for debt reduction to support longer-term economic growth prospects. JEL Classification: H63, O40, E62, E43. |
| Keywords: | Public debt, economic growth, fiscal policy, sovereign long-term interest rates. |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20101237&r=fdg |