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on Financial Development and Growth |
| By: | Raza, Syed Ali; Sabir, Muhammad Sarwar; Mehboob, Farhan |
| Abstract: | This study intends to investigate the impact of foreign capital inflow on economic growth of Pakistan during the period of 1985-2010. The empirical analysis is based on multiple regression technique. Results show that foreign direct investment (FDI), foreign portfolio investment (FPI) and remittances are positive and significant relationship with economic growth. While foreign aid shown significant but negative relationship with economic growth. Finding further suggests that foreign direct investment, foreign portfolio investment and remittances enhance the economic growth. And it is recommended that country like Pakistan should enhance the domestic resources to break the vicious circle of foreign aid. |
| Keywords: | Foreign direct investment; foreign portfolio investment; remittances; foreign aid; economic growth; capital inflow |
| JEL: | F35 A11 |
| Date: | 2011–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36790&r=fdg |
| By: | Elias Dinopoulos (University of Florida, Department of Economics, Gainesville, USA); Wolf-Heimo Grieben (Department of Economics, University of Konstanz, Germany); Fuat Sener (Department of Economics, Union College, Schenectady, New York, USA) |
| Abstract: | This paper adopts a Neo-Schumpeterian approach to macroeconomics, by proposing a model which includes fully-endogenous growth, involuntary search-based unemployment, and financial frictions. The model analyzes the effects of several recovery policies used by governments to fight unemployment or/and enhance growth. Employment protection legislation reduces growth and unemployment. Policies that reduce the cost of job vacancies decrease unemployment and raise growth. Industrial policies in the form of production subsidies to young small firms, production taxes to adult large firms, and R&D subsidies increase growth and unemployment. Policies that reduce financial frictions accelerate growth but exert an ambiguous effect on unemployment. |
| Keywords: | fully- endogenous growth, Schumpeterian unemployment, financial frictions, recovery policies, vacancy creation |
| JEL: | J63 O31 |
| Date: | 2012–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:1203&r=fdg |
| By: | Gaetano Lisi; Maurizio Pugno |
| Abstract: | A matching model will explain both unemployment and economic growth by considering the underground sector and human capital. Three problems can thus be simultaneously accounted for: (i) the persistence of the underground sector, (ii) the ambiguous relationships between underground employment and unemployment, and (iii) between growth and unemployment. Key assumptions are that entrepreneurial ability is heterogeneous, skill accumulation determines productivity growth, job-seekers choose whether to invest in education. The conclusions are that the least able entrepreneurs, whose number is endogenous, set up underground firms, employ unskilled labour, and do not contribute to growth. If the monitoring rate is sufficiently low, underground employment alleviates unemployment, but the economy grows at lower rates. |
| Keywords: | Matching models, endogenous growth, underground economy, entrepreneurship, unemployment. |
| JEL: | E26 J6 J24 L26 |
| Date: | 2012–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2012_03&r=fdg |
| By: | Diego d'Andria (LUISS Guido Carli University, Rome); Giuseppe Mastromatteo (Università Cattolica del Sacro Cuore, Milan) |
| Abstract: | A growing body of literature tests the effects of different tax structures on long-run economic growth. We argue that these tests do not properly account for endogeneity between supposedly independent variables. We run several cross-country ordinary least squares tests with special attention to human capital, and show how education choice behaviors are affected by different tax mixes. The results obtained by microeconomic theory are validated, and they imply that accumulation rates of human capital cannot be deemed independent from savings taxation. Our results also show that more progressive labor taxation does not appear to be correlated with lower investments in education, contrary to what one would expect from microeconomic theory. We discuss possible implications, and suggest that a likely explanation lies in the outcome of redistribution policies reducing credit constraints of poorer households, thus allowing them easier access to education and, consequently, higher aggregate human capital accumulation. |
| Keywords: | tax mix, human capital, growth, cross-country |
| JEL: | H21 E24 O4 C23 |
| Date: | 2012–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:217&r=fdg |
| By: | Ljungvall, Christer (Copenhagen Business School); Gustavsson Tingvall, Patrik (The Ratio Institute) |
| Abstract: | We examine whether China has benefited more than other countries from financial sector development by performing a meta-analysis of the relevant literature covering a large number of countries at different stages of development. Although the results for China are inconclusive, they indicate the absence of a direct link between financial development and economic growth. |
| Keywords: | meta-analysis; financial sector development; economic growth; China |
| JEL: | F43 G20 O11 O53 |
| Date: | 2012–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0185&r=fdg |
| By: | Chu, Angus C.; Lai, Ching-Chong; Liao, Chih-Hsing |
| Abstract: | In this note, we develop a search-based monetary growth model to analyze the growth and welfare effects of inflation. We introduce endogenous growth via capital externality into a two-sector search model and compare the effects of inflation to those from a standard cash-in-advance (CIA) growth model. We find two important differences between the two approaches. First, while the growth effect of inflation operates solely through endogenous labor supply in the CIA model, the growth effect of inflation operates through an additional consumption effect in the decentralized market in the search model. Second, we quantitatively evaluate the welfare cost of inflation and fi nd that the search model exhibits a larger (smaller) welfare gain than the CIA model when we decrease the growth rate of money supply to achieve the Friedman rule (zero inflation). These contrasting results are due to a non-linearity in welfare as a function of inflation in the search model. |
| Keywords: | economic growth; inflation; monetary policy |
| JEL: | O42 O41 E41 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36691&r=fdg |
| By: | Augustin Kwasi Fosu; Yoseph Yilma Getachew; Thomas Ziesemer |
| Abstract: | How much does public capital matter for economic growth? How large should it be? This paper attempts to answer these questions, taking the case of SSA countries. It develops and estimates a model that posits a nonlinear relationship between public investment and growth, to determine the growth-maximizing public investment GDP share. It empirically also accounts for the crowding-in and crowding-out effects between public and private investment, with equations estimated separately and simultaneously, using System GMM. The paper further runs simulation and examines the public investment GDP share that maximizes consumption. This is estimated to be between 8.4 percent and 11.0 percent. The results from estimating the growth model are in the middle of this range, which is larger than the observed value of 7.2 percent at the end of the sample period. These outcomes suggest that, on average, there has been public under-investment in Africa, contrary to previous findings. |
| Keywords: | Public investment; Economic Growth; Nonlinearity |
| JEL: | O4 H4 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2011-22&r=fdg |
| By: | Augustin Kwasi Fosu (UNU-WIDER); Yoseph Yilma Getachew (Durham Business School); Thomas Ziesemer (Maastricht University) |
| Abstract: | How much does public capital matter for economic growth? How large should it be? This paper attempts to answer these questions, taking the case of SSA countries. It develops and estimates a model that posits a nonlinear relationship between public investment and growth, to determine the growth-maximizing public investment GDP share. It empirically also accounts for the crowding-in and crowding-out effects between public and private investment, with equations estimated separately and simultaneously, using System GMM. The paper further runs simulation and examines the public investment GDP share that maximizes consumption. This is estimated to be between 8.4 percent and 11.0 percent. The results from estimating the growth model are in the middle of this range, which is larger than the observed value of 7.2 percent at the end of the sample period. These outcomes suggest that, on average, there has been public under-investment in Africa, contrary to previous findings |
| Keywords: | Public investment; Economic Growth; Nonlinearity |
| JEL: | H4 |
| Date: | 2012–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:dur:durham:2012_03&r=fdg |
| By: | Xin Long (Faculty of Economics, University of Rome "Tor Vergata"); Alessandra Pelloni (Faculty of Economics, University of Rome "Tor Vergata") |
| Abstract: | We consider the optimal factor income taxation in a standard R&D model with technical change represented by an increase in the variety of intermediate goods. Redistributing the tax burden from labor to capital will increase the employment rate in equilibrium. This has opposite e¤ects on two distortions in the model, one due to monopoly power, the second to the incomplete appropriability of the benefits of inventions. Their relative momentum determines the sign of the welfare effect. We show that, for parameter values consistent with available estimates, the optimal tax rate on capital will be sizable. |
| Keywords: | Capital Income Taxes, R&D, Growth Effect, Welfare Effect |
| JEL: | E62 H21 O41 |
| Date: | 2012–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:218&r=fdg |
| By: | Nicolas-Guillaume Martineau (Universite de Sherbrooke); Gregor W. Smith (Queen's University) |
| Abstract: | Differences across countries or decades in the countercyclical stance of fiscal policy can help identify whether the growth in government spending affects output growth and so speeds recovery from a recession. We use the heterogeneity in the government-spending reaction functions across twenty countries in the interwar period to identify this effect. The main finding is that the growth of government spending did not have a significant effect on output growth, so that there is little evidence that this central aspect of fiscal policy played a stabilizing role from 1920 to 1939. |
| Keywords: | fiscal policy, business-cycle history, Great Depression, interwar economy |
| JEL: | E32 E65 N10 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1290&r=fdg |