nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2012‒01‒18
fourteen papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Immigration, unemployment and GDP in the host country: Bootstrap panel Granger causality analysis on OECD countries By Ekrame Boubtane; Dramane Coulibaly; Christophe Rault
  2. The relationship between budgetary expenditure and economic growth in Poland By Gurgul, Henryk; Lach, Lukasz; Mestel, Roland
  3. Optimal government size and economic growth in France (1871-2008) : An explanation by the State and market failures By François Facchini; Mickaël Melki
  4. Growth under strain in the European Union: A long run perspective By Francesco Farina
  5. Growth and Election Outcomes in a Developing Country. By Gupta, Poonam; Panagariya, Arvind
  6. Preoccupation with Protecting Manufacturing? Preoccupation with Protecting Manufacturing? By Edward Tower; Alecia Waite
  7. Minimum Wage Legislation and Economic Growth: Channels and Effects By Mo, Pak Hung
  8. Productivity shocks and aggregate fluctuations in an estimated endogenous growth model with human capital By Jim Malley; Ulrich Woitek
  9. Productivity growth and volatility: How important are wage and price rigidities? By Annicchiarico Barbara; Pelloni Alessandra
  10. The Impact of the Global Crisis on South-Eastern Europe By Francesco Spadafora; Emidio Cocozza; Andrea Colabella
  11. Italy after the crisis: a case of recoveryless credit growth By Forte, Antonio
  12. Bootstrapping as a Resource Dependence Management Strategy and its Association with Startup Growth By T. VANACKER; S. MANIGART; M. MEULEMAN; L. SELS
  13. The Determinants of Economic Growth in the Philippines: A New Look By Willa Boots J. Tolo
  14. The electricity consumption versus economic growth of the Polish economy By Gurgul, Henryk; Lach, Lukasz

  1. By: Ekrame Boubtane; Dramane Coulibaly; Christophe Rault
    Keywords: Immigration, GROWTH, unemployment, Granger causality
    JEL: E20 F22 J61
    Date: 2011–12
  2. By: Gurgul, Henryk; Lach, Lukasz; Mestel, Roland
    Abstract: Abstract This paper investigates the association between different kinds of budgetary expenditure and economic growth of Poland. The empirical analysis makes use of linear and nonlinear Granger causality tests to evaluate the applicability of Wagner’s Law and that of the contrasting Keynesian theory.We employ aggregate and disaggregate data with the sub-categories of most important budgetary expenditure, including health care and social security, education and science, national defence and public security expenditure and government administration expenditure for the period Q1 2000 to Q3 2008. This causality analysis indicates that total relation between budgetary expenditure and economic growth is consistent with Keynesian theory. The results of our computations have important policy implications. In case of Poland the health care expenditure was found to be as important for economic growth as expenditures on education and science. Furthermore, in order to stimulate economic growth, Polish government should consider reallocating some of national defence, public security and government administration expenditure to health care, social security, education and science expenditure.
    Keywords: Government expenditure · Linear and nonlinear causality · Bootstrap techniques
    JEL: E21 C01
    Date: 2011–12–01
  3. By: François Facchini (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne); Mickaël Melki (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne)
    Abstract: This paper analyses the effect of public expenditure on economic growth from both a theoretical and an empirical point of view. Given that the economic literature supplies numerous and conflicting views on the topic, the article offers a framework combining both theories of market failures and State failures to account for an inverted U-shapped relation between government size and GDP growth. The empirical contribution is to provide evidence through a long time-series analysis of the existence of such a relation on the period 1871-2008 for France, which offers one of the longest stable democratic periods to analyse.
    Keywords: Public spending, public expenditure, government size, BARS curve, Armey curve, economic growth, market failure, State failure, France.
    Date: 2011–12
  4. By: Francesco Farina
    Abstract: This paper interprets the GDP growth experienced by the economies of the European Union in the perspective of the growth and the agglomeration models. The objective consists in understanding to what extent the growth and convergence paths followed by Europe during the last decades of economic integration process have been affected by the evolution of the exchange rate regime and by increasingly constraining monetary and fiscal policies.
    Keywords: growth, beta and sigma convergence, human capital, European Union.
    JEL: J24 O47 O52
    Date: 2011–05
  5. By: Gupta, Poonam (National Institute of Public Finance and Policy); Panagariya, Arvind (Columbia University)
    Abstract: With the exception Brander and Drazen (2008), who use a comprehensive cross-country database consisting of both developed and developing countries, the hypothesis that rapid growth helps incumbents win elections has been tested exclusively for the developed countries (e.g., Ray Fair 1978). But since sustained rapid growth offers the prospect of pulling vast numbers of the voters out of poverty within a generation, such an effect is far more likely to be present in the developing rather than developed countries. In this paper, we offer the first test of the hypothesis on a large developing and poor country, India, which has seen its economy grow 8 to 9 percent recently. We first generalize the Fair model to allow for multiple candidates instead for just two and then test it using crossstate data. We find quantitatively large and statistically robust effect of growth on the prospects of the candidates of the state incumbent parties to win elections. Specifically, we use the data on 422 candidates in the 2009 parliamentary elections and show that the candidates of incumbent parties in high-growth states have much better prospects of victory than those in low-growth states.
    Date: 2011–10
  6. By: Edward Tower; Alecia Waite (Duke University)
    Abstract: This paper explores the relationship between manufacturing and growth rate in recent years. Authors undertake a simple cross-country analysis using UN data. When controlling for variables relevant to growth, find no significant relationship between the two variables.
    Keywords: manufacturing and growth rate, cross-country analysis, manufacturing protetionism
    JEL: F1
    Date: 2011–10
  7. By: Mo, Pak Hung
    Abstract: Despite decades of experience and research, the effects of minimum wage legislation (MWL) on long-run economic performance have rarely been studied since Stigler’s (1946) classic exposition about the shortcomings of MWL. In this study, we use a novel method to estimate the magnitude and transmission channels by which MWL affect productivity and GDP growth. Our results suggest that countries with MWL have a growth rate of about 20 to 30 percent lower than the sample mean. Although the initial impacts are small, in the ‘steady state’ where the marginal effect of the legislation years equals zero, a country will have a growth rate of about 30 to 38 percent lower than the average.
    Keywords: minimum wage; GDP growth; private investment; government size; government investment; population growth
    JEL: E02 O38 O43 C52 O15 I38 J58 D78 O12
    Date: 2011–12
  8. By: Jim Malley; Ulrich Woitek
    Abstract: Employing an endogenous growth model with human capital, this paper explores how productivity shocks in the goods and human capital producing sectors contribute to explaining aggregate fluctuations in output, consumption, investment and hours. Given the importance of accounting for both the dynamics and the trends in the data not captured by the theoretical growth model, we introduce a vector error correction model (VECM) of the measurement errors and estimate the model’s posterior density function using Bayesian methods. To contextualize our findings with those in the literature, we also assess whether the endogenous growth model or the standard real business cycle model better explains the observed variation in these aggregates. In addressing these issues we contribute to both the methods of analysis and the ongoing debate regarding the effects of innovations to productivity on macroeconomic activity.
    Keywords: Endogenous growth, human capital, real business cycles, VEC Mmeasurement errors, Bayesian estimation
    JEL: C11 C52 E32
    Date: 2011–08
  9. By: Annicchiarico Barbara; Pelloni Alessandra
    Abstract: We study the implications of having different sources of nominal rigidities on the relationship between productivity growth and shocks volatility in a model with procyclical R&D and imperfect competition in goods and labour markets. We show that the effects of uncertainty on long-term growth not only depends on the source of fluctuations, as recent literature shows, but also, and crucially, on whether prices and/or wages are rigid.
    Keywords: productivity, growth, volatility
    JEL: E32 E52 O42
    Date: 2011–12
  10. By: Francesco Spadafora; Emidio Cocozza; Andrea Colabella
    Abstract: This paper analyzes the impact of the global crisis on six South-Eastern European countries. The main objective is to compare macro-financial conditions and policies in the run-up to the crisis as well as to compare the policy responses to it, so as to highlight, inter alia, possible country-specific constraints. While sharing a common pre-crisis pattern of strong capital inflows and robust growth, a key difference in the conduct of macroeconomicpolicies is that some countries adopted expansionary (and procyclical) fiscal policies. These moves exacerbated external vulnerabilities and compromised the ability to discretionarily use the fiscal instrument in acountercyclical fashion.
    Keywords: Banks , Capital flows , Credit expansion , Credit risk , Current account deficits , Eastern Europe , Economic growth , External debt , Financial crisis , Financial sector , Fiscal consolidation , Fiscal policy , Global Financial Crisis 2008-2009 , Monetary policy ,
    Date: 2011–12–20
  11. By: Forte, Antonio
    Abstract: In this study I compare the credit condition with the economic growth in Italy from January 2007 onward. Starting from the literature on the creditless recovery, I highlight the specific features of the Italian situation in which, notwithstanding the prolonged and deep economic crisis, the credit has persistently continued to grow. A comparison with the German case confirms the peculiar characteristics of the Italian condition. An econometric study supports this idea and, in order to depict this Italian economic situation, I propose a new expression: the recoveryless credit growth.
    Keywords: Italy; credit; recovery
    JEL: E32 E50
    Date: 2012–01
    Abstract: This paper studies the association between bootstrapping and startup growth. Bootstrapping reduces a startup’s dependence on financial investors, but may create new dependencies. Drawing upon resource dependence theory, we hypothesize that when bootstrapping does not create new strong dependencies it will benefit startup growth, especially when dependence from financial investors is high. However, when bootstrapping creates new strong dependencies it will constrain growth, especially when dependence from financial investors is low. We use a longitudinal database of 205 Belgian startups comprising data from both questionnaires and yearly financial accounts. Findings broadly confirm our hypotheses. Theoretical and managerial implications are discussed.
    Date: 2011–09
  13. By: Willa Boots J. Tolo
    Abstract: This paper uses a panel of 23 emerging markets for the period 1965–2008 to study the determinants of per capita GDP growth in the Philippines. The Philippines is an outlier in terms of agricultural exports, investment, research and development, population growth, and political uncertainty. Panel regressions reveal that these factors, along with the deficit, inflation, trade openness, the current account balance and the frequency of crisis episodes are siginificant determinants of growth. A growth index confirms that these determinants also capture the absolute and relative performance of each country over time and suggests that the Philippines has lacked a sustained period of relatively strong economic reforms.
    Keywords: Agricultural sector , Current account balances , Economic growth , Emerging markets , Fiscal policy ,
    Date: 2011–12–06
  14. By: Gurgul, Henryk; Lach, Lukasz
    Abstract: The aim of this contribution is an investigation of causal interdependences between electricity consumption and GDP in Poland. Our research was conducted for total electricity consumption as well as for the industrial consumption of electricity. In order to reflect the causality between GDP and electricity consumption properly we performed our investigations in a threedimensional framework with employment chosen as an additional variable. We used reliable quarterly data from the period Q1 2000 - Q4 2009. In order to check the stability of the causalities the investigations were performed on two samples: a full sample and a pre-crisis (i.e. Q1 2000 - Q3 2008) subsample. We applied both traditional methods as well as some recently developed econometric tools. We found feedback between total electricity consumption and GDP as well as between total electricity consumption and employment. We also found unidirectional causality running from industrial electricity consumption to employment and no direct causal links between industrial electricity consumption and GDP. In addition, all these findings were, in general, not seriously affected by the financial and economic crisis of 2008. A significant exception is the causal effect of industrial electricity consumption on employment, which was more pronounced after the crisis of 2008.
    Keywords: electricity consumption; causality
    JEL: E21
    Date: 2011–12–01

This nep-fdg issue is ©2012 by Iulia Igescu. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.