nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2010‒12‒11
ten papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Population Aging and Economic Growth in China By Judith Banister; David E. Bloom; Larry Rosenberg
  2. A Contribution to the Empirics of Welfare Growth By Konstantinos Vrachimis; Marios Zachariadis
  3. Is History a Blessing or a Curse? International Borrowing without Commitment, Leapfrogging and Growth Reversals By Raouf BOUCEKKINE; Patrick A. PINTUS
  4. Total Public Debt and Growth in Developing Countries By Andrea F. Presbitero
  5. Whither Corruption? A Quantitative Survey of the Literature on Corruption and Growth By Campos, Nauro F.; Dimova, Ralitza; Saleh, Ahmad
  6. The Role of Energy in Economic Growth By David I. Stern
  7. Financial Crises, Credit Booms, and External Imbalances: 140 Years of Lessons By Òscar Jordà; Moritz Schularick; Alan M. Taylor
  8. Agent-based dynamics in disaggregated growth models By Antoine Mandel; Carlo Jaeger; Steffen Fürst; Wiebke Lass; Daniel Lincke; Frank Meissner; Federico Pablo-Marti; Sarah Wolf
  9. Productivity growth in the Old and New Europe: the role of agglomeration externalities By Emanuela Marrocu; Raffaele Paci; Stefano Usai
  10. Financial Sector Taxation By European Commission

  1. By: Judith Banister (Harvard School of Public Health); David E. Bloom (Harvard School of Public Health); Larry Rosenberg (Harvard School of Public Health)
    Keywords: Population aging, economic growth, China
    Date: 2010–03
  2. By: Konstantinos Vrachimis; Marios Zachariadis
    Abstract: This paper compares the determinants of economic growth and welfare growth. Our main result is that determinants may differ or have different impact on welfare outcomes as compared to economic outcomes. Human capital plays a bigger role in determining the former, so that policies targeting human capital can have a greater effect on the welfare of societies than one would think by looking at their impact on economic growth alone. Institutions also have a greater effect on welfare growth compared to their impact on economic growth, consistent with the importance of government stability for the uninterrupted provision of health-related inputs and information. Finally, initial income has a greater impact on welfare growth than on real income per capita growth, implying even faster convergence than in Becker, Philipson, and Soares (2005) after adding a number of economic, health-related, institutions-related, and geographic variables. We conclude that there exist systematic differences for the impact of a number of factors on economic relative to welfare outcomes.
    Keywords: Economic growth, Welfare, Full income
    Date: 2010–01
  3. By: Raouf BOUCEKKINE (Universite Catholique de Louvain and IRES-CORE, Universite de la Mediterranee and GREQAM); Patrick A. PINTUS (Universite de la Mediterranee and GREQAM-IDEP, Institut Universitaire de France)
    Abstract: We develop a simple open-economy AK model with collateral constraints that accounts for growth-reversal episodes, during which countries face abrupt changes in their growth rate that lead to either growth miracles or growth disasters. Absent commitment to investment by the borrowing country, imperfect contract enforcement leads to an informational lag such that the debt contracted upon today depends upon the past stock of capital. The no-commitment delay originates a history effect by which the richer a country has been in the past, the more it can borrow today. For (arbitrarily) small deviations from perfect contract enforcement, the history effect offsets the growth benefits from international borrowing and dampens growth, and it leads to leapfrogging in long-run levels. When large enough, the history effect originates growth reversals and we connect the latter to leapfrogging. Finally, we argue that the model accords with the reported evidence on growth disasters and growth accelerations. We also provide examples showing that leapfrogging and growth reversals may coexist, so that currently poor but fastgrowing countries experiencing sharp growth reversals may end up, in the long-run, significantly richer than currently rich but declining countries.
    Keywords: Growth Reversals, Leapfrogging, International Borrowing, Open Economies
    JEL: F34 F43 O40
    Date: 2010–11–02
  4. By: Andrea F. Presbitero (Università Politecnica delle Marche)
    Abstract: The global crisis and the expansionary government reaction in many countries has revamped the at-tention of policy makers and academics on the growth effects of large public debts. Recent empiri-cal studies investigate the impact of public debt on growth in advanced and emerging countries. This paper aims at complementing the existing evidence focusing on developing countries, where the increase in domestic borrowing, already started before the crisis, requires a more comprehensive analysis, based not only on external debt, but on total public debt. Results on a panel of low- and middle-income countries over the period 1990-2007 show that public debt has a negative impact on output growth up to a threshold of 90 percent of GDP, beyond which its effect becomes irrelevant. This non-linear effect can be explained by country-specific factors since debt overhang is a growth constraint only in countries with sound macroeconomic policies and stable institutions.
    Keywords: Domestic debt, Public debt, growth
    JEL: F33 F34 F35 O11
    Date: 2010–11–30
  5. By: Campos, Nauro F. (Brunel University); Dimova, Ralitza (University of Manchester); Saleh, Ahmad (Brunel University)
    Abstract: Does corruption grease or sand the wheels of economic growth? This paper uses meta-analysis techniques to systematically evaluate the evidence addressing this question. It uses a data set comprising 460 estimates of the effect of corruption on growth from 41 empirical studies. The main factors explaining the variation in these estimates are whether the model accounts for institutions and trade openness (both are found to deflate the negative effect of corruption), authors' affiliation (academics systematically report less negative impacts), and use of fixed-effects. We also find that publication bias, albeit somewhat acute, does not eliminate the genuine negative effect of corruption on economic growth.
    Keywords: corruption, economic growth, meta-regression analysis
    JEL: O1
    Date: 2010–11
  6. By: David I. Stern (Arndt-Corden Department of Economics, Crawford School of Economics and Government, The Australian National University)
    Abstract: Physics shows that energy is necessary for economic production and, therefore, economic growth but the mainstream theory of economic growth, except for specialized resource economics models, pays no attention to the role of energy. This paper reviews the relevant biophysical theory and mainstream, resource economics, and ecological economics models of growth. A possible synthesis of energy-based and mainstream models is presented. This model shows that when energy is scarce it imposes a strong constraint on the growth of the economy but when energy is abundant its effect on economic growth is much reduced. This explains the industrial revolution as a releasing of the constraints on economic growth due to the development of methods of using coal and the discovery of new fossil fuel resources. Time series analysis shows that energy and GDP cointegrate and energy use Granger causes GDP when capital and other production inputs are included in the vector autoregression model. There are, however, various mechanisms that can weaken the links between energy and growth. The empirical literature finds that energy used per unit of economic output has declined in developed and some developing countries, due to both technological change and to a shift from poorer quality fuels such as coal to the use of higher quality fuels, and especially electricity. Substitution of other inputs for energy and sectoral shifts in economic activity play smaller roles.
    Keywords: Energy, Economic Growth, Survey
    JEL: N70 O40 Q43
    Date: 2010–10
  7. By: Òscar Jordà; Moritz Schularick; Alan M. Taylor
    Abstract: Do external imbalances increase the risk of financial crises? In this paper, we study the experience of 14 developed countries over 140 years (1870-2008). We exploit our long-run dataset in a number of different ways. First, we apply new statistical tools to describe the temporal and spatial patterns of crises and identify five episodes of global financial instability in the past 140 years. Second, we study the macroeconomic dynamics before crises and show that credit growth tends to be elevated and natural interest rates depressed in the run-up to global financial crises. Third, we show that recessions associated with crises lead to deeper recessions and stronger turnarounds in imbalances than during normal recessions. Finally, we ask if external imbalances help predict financial crises. Our overall result is that credit growth emerges as the single best predictor of financial instability, but the correlation between lending booms and current account imbalances has grown much tighter in recent decades.
    JEL: C14 C52 E51 F32 F42 N10 N20
    Date: 2010–12
  8. By: Antoine Mandel (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Carlo Jaeger (Potsdam Institute for Climate Impact Research - Telegrafenberg A51); Steffen Fürst (Potsdam Institute for Climate Impact Research - Telegrafenberg A51); Wiebke Lass (Potsdam Institute for Climate Impact Research - Telegrafenberg A51); Daniel Lincke (Potsdam Institute for Climate Impact Research - Telegrafenberg A51); Frank Meissner (Potsdam Institute for Climate Impact Research - Telegrafenberg A51); Federico Pablo-Marti (Universidad de Alcalá - Pza. San Diego, s/n); Sarah Wolf (Potsdam Institute for Climate Impact Research - Telegrafenberg A51)
    Abstract: This paper presents an agent-based model of disaggregated economic systems with endogenous growth features named Lagon GeneriC. This model is thought to represent a proof of concept that dynamically complete and highly disaggregated agent-based models allow to model economies as complex dynamical systems. It is used here for "theory generation", investigating the extension to a framework with capital accumulation of Gintis results on the dynamics of general equilibrium.
    Keywords: Agent-based models, economic growth.
    Date: 2010–10
  9. By: Emanuela Marrocu; Raffaele Paci; Stefano Usai
    Abstract: The recent history of the European Union is characterized by a dual picture showing the Old and the New countries in sharp contrast with respect to several economic dimensions. In particular, regions and industries in Eastern countries have shown an excellent performance whilst Western countries have kept moving on a rather slow track. Our aim is to assess the intertwined performance of regions and industries in New and Old economies within Europe by investigating the dynamics of total factor productivity over the period 1996-2007 and the role played by local externalities in the agglomeration process of economic activities. Among the determinants of local industry growth we analyse the agglomeration externalities and, in particular, we focus on the different impact of the specialisation and diversity externalities. Moreover, we analyse the potential influence of regional intangible assets such as human and technological capital while controlling for other territorial features which may affect the efficiency of the local industry. The empirical analysis makes use of spatial econometric techniques to take into account the possibility of cross-border externalities.
    Keywords: Agglomeration externalities; Local industry growth; Total Factor Productivity; Spatial models; European regional cohesion
    JEL: C31 O47 R31
    Date: 2010
  10. By: European Commission
    Abstract: The European Commission services published a staff working document assessing the Financial Transactions Tax (FTT) and the Financial Activities Tax (FAT).
    Keywords: European Union; taxation; financial transaction tax; financial activities tax; financial institutions
    JEL: G20 H21 H22 H23 H25 H27
    Date: 2010–11

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