nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2013‒05‒19
five papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Energy Prices and Economic Growth: Theory and Evidence in the Long Run By Ýstemi Berk; Ý. Hakan Yetkiner
  2. Export-Led Growth in Cambodia: An Empirical Study By Tuck Cheong Tang; Chea Ravin
  3. Social Organizations, Violence & Modern Growth By Greif, Avner; Iyigun, Murat
  4. Tax evasion,tax corruption and stochastic growth By Fred Celimene; Gilles Dufrenot; Gisele Mophou; Gaston N'Guerekata
  5. From Tradition to Modernity: Economic Growth in a Small World By Ines Lindner; Holger Strulik

  1. By: Ýstemi Berk (Cologne Graduate School (CGS), Institute of Energy Economics (EWI), University of Cologne); Ý. Hakan Yetkiner (Department of Economics, Izmir University of Economics)
    Abstract: In this paper, we attempt to derive and test the role of energy prices on economic growth. We first developed a two-sector endogenous growth model, based on Rebelo (1991). We modified the model such that consumption goods sector uses energy as an input along with capital. The model allows us to show that the growth rate of energy price has a negative effect on the growth rates of energy use and real GDP, consistent with the finding of van Zon and Yetkiner (2003), who studied a similar model by placing energy as an input in the intermediate goods sector. Following this, derived theoretical relationships between energy prices and economic growth and energy consumption were tested empirically using error-correction based panel cointegration tests and panel Autoregressive Distributed Lag (ARDL) approach. We applied this methodology on annual data of composite energy prices, GDP per capita and energy consumption per capita for fifteen countries for the period between 1978 and 2011. We found significant cointegration between energy prices and real GDP per capita as well as between energy prices and energy consumption per capita. Moreover, long-run elasticity estimates reveal a negative and significant impact of composite energy prices on both GDP per capita and energy consumption per capita.
    Keywords: Two-sector model, energy price, endogenous growth, panel cointegration, panel ARDL
    JEL: O4 Q3 C3
    Date: 2013–04
  2. By: Tuck Cheong Tang; Chea Ravin
    Abstract: The study examines the export-led growth (ELG) hypothesis for Cambodia. The sample covers annual observations between 1972 and 2008. The Granger's non-causality tests support ELG as well as the growth-led exports. Also, there is causality from imports growth to exports growth. The study also presents the results of impulse response functions and variance decomposition. Some policy implications are viewed in the study.
    Keywords: Cambodia; Exports; Imports; Growth
    JEL: E2 F4
    Date: 2013–05
  3. By: Greif, Avner (Stanford University); Iyigun, Murat (University of Colorado, Boulder)
    Abstract: Although social institutions permeate the world in which we live, they are all but absent from our analyses of economic growth and development. This paper argues the need to mitigate this omission by demonstrating the importance of social institutions for growth and development.
    Keywords: economic development, institutions
    JEL: O10 N10 N13
    Date: 2013–04
  4. By: Fred Celimene (CEREGMIA, Université des Antilles et de la Guyane); Gilles Dufrenot (Aix-Marseille Université); Gisele Mophou (CEREGMIA, Université des Antilles et de la Guyane); Gaston N'Guerekata (Morgan State University, Baltimore, MD, USA)
    Abstract: This paper presents a continuous time stochastic growth model to study the effects of tax evasion and tax corruption on the level and volatility of private investment and public spending. Our results suggest that there do exist several regimes of mean growth and growth volatility, depending upon the consumer's degree of risk aversion, the tax income yield, the risk-adjusted return of the agent's portfolio, the productivity of public spending. We find that public spending is described asymptotically by an incomplete upper Gamma distribution, while private capital is described by a power law distribution. Depending upon the values of the parameters of these distributions, growth can be characterized by extreme values (high volatility) when the return to taxation lies under a certain threshold and/or when the risk-adjusted return of investing the proceeds of illegal activities evolves above a given threshold. We provide an empirical illustration of the model.
    Date: 2013–02
  5. By: Ines Lindner (VU University Amsterdam); Holger Strulik (University of Goettingen)
    Abstract: This paper introduces the Small World model (Watts and Strogatz, Nature, 1998) into the theory of economic growth and investigates how increasing economic integration affects firm size and efficiency, norm enforcement, and aggregate economic performance. When economic integration is low and local connectivity is high, informal norms control entrepreneurial behavior and more integration mainly improves search for efficient investment opportunities. At a higher level of economic integration neighborhood enforcement deteriorates and formal institutions are needed to keep entrepreneurs in check. A gradual take-off to perpetual growth is explained by a feedback effect from investment to the formation of long-distance links and the diffusion of knowledge. If formal institutions are weak, however, the economy does not take off but stagnates at an intermediate income level. Structurally, the equilibrium of stagnation differs from balanced growth by the presence of relatively many small firms of low productivity.
    Keywords: modernization, economic integration, firm size, norms, networks, knowledge spillovers, growth
    JEL: O10 O40 L10 L14 Z13
    Date: 2012–04–10

This nep-fdg issue is ©2013 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.