nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2011‒01‒23
ten papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Cross-Country Growth Empirics and Model Uncertainty: An Overview By Bulent Ulasan
  2. Endogenous growth in a model with heterogeneous agents and voting on public goods By Kirill Borissov; Alexander Surkov
  3. Augmented Neoclassical Growth Model: A Replication over the 1960-2000 Period By Bulent Ulasan
  4. On the Simultaneity Problem in the Aid and Growth Debate By Markus Brückner
  5. The Long-Run Effects of Mortality Decline in Developing Countries By Lehmijoki, Ulla; Palokangas, Tapio K.
  6. Economic Growth and the Rise of Political Extremism By Markus Brückner; Hans Peter Grüner
  7. The relationship between bankruptcy risk and growth for non-listed firms By Kjell Bjørn Nordal; Randi Næs
  8. Can the economic impact of political decentralisation be measured? By Roberto Ezcurra; Andrés Rodríguez-Pose
  9. Common and private property to exhaustible resources: theoretical implications for economic growth By Kirill Borissov; Alexander Surkov
  10. Public Debt Dynamics and Debt Feedback By Reda, Cherif; Fuad, Hasanov

  1. By: Bulent Ulasan
    Date: 2011
  2. By: Kirill Borissov; Alexander Surkov
    Abstract: We consider a Barro-type endogenous growth model in which the government's purchases of goods and services enter into the production function. The provision of government services is financed by flat-rate (linear) income or lump-sum taxes. It is assumed that individuals differing in their discount factors vote on the tax rates. We propose a concept of voting equilibrium leading to some versions of the median voter theorem for steady-state equilibria, fully characterize steady-state equilibria and show that if the median voter discount factor is sufficiently low, the long-run rate of growth in the case of flat-rate income taxation is higher than that in the case of lump-sum taxation.
    Keywords: economic growth, taxation, voting
    JEL: O40 D91 H21 H24 H31 P16
    Date: 2010–08–04
  3. By: Bulent Ulasan
    Date: 2011
  4. By: Markus Brückner (School of Economics, University of Adelaide)
    Abstract: This paper shows that foreign aid has a signicant positive average effect on real per capita GPD growth if, and only if, the quantitatively large negative reverse causal effect of per capita GDP growth on foreign aid is adjusted for in the growth regression. Instrumental variables estimates yield that a 1 percentage point increase in GDP per capita growth decreased foreign aid by over 4 percent. Adjusting for this quantitatively large, negative reverse causal eect of economic growth on foreign aid yields that a 1 percent increase in foreign aid increased real per capita GDP growth by around 0.1 percentage points.
    Keywords: aid allocation, aid effectiveness, economic growth, simultaneity
    JEL: O1 O2 O4
    Date: 2011–01
  5. By: Lehmijoki, Ulla (University of Helsinki); Palokangas, Tapio K. (University of Helsinki)
    Abstract: Since World War II, mortality has declined in the developing world. This paper examines the effects of this mortality decline on demographic and economic growth by a family-optimization model, in which fertility is endogenous and wealth yields utility through its status. The decline in mortality stimulates investment and generates an income stream which promotes population growth, but the desire of status hampers fertility and prevents capital-diluting demographic expansion. If status-seeking is strong, then the decline of mortality decreases population growth below its original level.
    Keywords: mortality, population growth, economic growth
    JEL: O41 J13 J10 O10
    Date: 2011–01
  6. By: Markus Brückner (School of Economics, University of Adelaide); Hans Peter Grüner (University of Mannheim and CEPR)
    Abstract: In many western democracies, political parties with extreme platforms challenge more moderate incumbents. This paper analyses the impact of economic growth on the support for extreme political platforms. We provide a theoretical argument in favor of growth effects (as opposed to level effects) on the support for extreme political parties and we empirically investigate the relationship between growth and extremist votes. Lower growth rates benet right-wing and nationalist parties, but do not have a robust positive eect on the support for communist parties. Our estimates indicate that extreme political platforms are unlikely to gain majorities in OECD countries, unless there is an extreme drop in the GDP per capita growth rate.
    Keywords: political regimes, political extremism, economic growth
    JEL: O40 O52 P16
    Date: 2011–01
  7. By: Kjell Bjørn Nordal (Norges Bank (Central Bank of Norway)); Randi Næs (Norwegian Ministry of Trade and Industr)
    Abstract: We investigate the relationship between bankruptcy risk and expected future sales growth for Norwegian non-listed firms for the period 1988-2007. We find that firms with high bankruptcy risk also have high expected future growth. Financial ratios characterizing firms with high bankruptcy risk also characterize firms with high future expected growth. Small firms, firms with low levels of equity and retained earnings, firms with low profitability and low levels of sales per unit of capital, have all higher expected future growth rates than other firms. These findings suggest a tradeoff between the upside potential of high growth and the downside risk of bankruptcy.
    Keywords: Non-listed firms, growth, bankruptcy risk
    JEL: G10 G30 G33
    Date: 2010–12
  8. By: Roberto Ezcurra (Universidad Pública de Navarra); Andrés Rodríguez-Pose (IMDEA Social Sciences Institute)
    Abstract: This paper examines whether, given the increasing salience of subnational governments, political decentralisation has an impact on overall economic performance. It uses panel data analyses in order to determine the association between a number of the different indices of political decentralisation developed over the last decade and a half with two basic measures of economic performance: changes in aggregate GDP per head and the evolution of within country territorial inequalities. The results highlight that, in the case of economic growth, the perception we may have of how political decentralisation affects economic performance is highly contingent on the index we use, with results ranging from a mildly positive to a neutral influence of political decentralisation on economic growth. For regional inequalities, political decentralisation seems to lead to a rise in disparities, regardless of how political decentralisation is measured.
    Keywords: political decentralisation; economic growth; regional disparities; regions; Europe
    JEL: H70 R11 R59
    Date: 2011–01–05
  9. By: Kirill Borissov; Alexander Surkov
    Abstract: We develop two models of economic growth with exhaustible natural resources and consumers heterogeneous in time preferences. The first model assumes private ownership of natural resources. In the second model, natural resources are commonly owned and the resource extraction rate is chosen by voting. We show that if discount factors are given exogenously, the long-run rate of growth under private property is higher than or equal to that under common property. If the discount factors are formed endogenously, under some circumstances common property can result in a higher rate of growth than private property.
    Keywords: economic growth, taxation, voting
    JEL: Q32 E13 D91 O40
    Date: 2010–08–18
  10. By: Reda, Cherif; Fuad, Hasanov
    Abstract: We study the dynamics of U.S. public debt in a parsimonious VAR. We find that including debt feedback ensures the stationarity of debt while standard VARs excluding debt may imply an explosive debt path. We also find that the response of debt to inflation or interest shocks is not robust and depends on the policy regime. The recent past suggests that a positive shock to inflation increases debt while the same to interest rate decreases it. Positive shocks to growth and primary surplus unambiguously reduce debt.
    Keywords: debt; fiscal policy; growth; VAR; generalized impulse responses
    JEL: E62 C32 H60
    Date: 2010–12

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