nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2013‒11‒02
twelve papers chosen by
Iulia Igescu
Global Insight, GmbH

  1. Optimal growth under a climate constraint By Amigues, Jean-Pierre; Moreaux, Michel
  2. Public Research Spending in an Endogenous Growth Model By Kunihiko Konishi
  3. Public debt in an OLG model with imperfect competition: long-run effects of austerity programs and changes in the growth rate By Peter Skott; Soon Ryoo
  4. Processes of firm growth and diversification: theory and evidence By Alex Coad; Christina Guenther
  5. The Skill Content of Offshoring and Growth By Andreas Hoefele
  6. Multivariate–Based Granger Causality between Financial Deepening and Poverty: The Case of Pakistan By Shahbaz, Muhammad; Ur Rehman, Ijaz
  7. Characterizing economic growth paths based on new structural change tests By Nuno Sobreira; Luís Catela Nunes; Paulo M.M. Rodrigues
  8. Sleeping Gazelles: High profits but no growth By Anders Bornhäll; Sven-Olov Daunfeldt; Niklas Rudholm
  9. Saving Rate, Total Factor Productivity and Growth Process for Developing Countries By Cuong Le Van; Tu Anh Nguyen; Tran Dinh Tuan
  10. Can the Mauritian Miracle continue? - The role of financial and ICT services as prospective growth drivers By Arielle Joseph; Bernhard Troester
  11. On Learning and Growth By Leonard J. Mirman; Kevin Reffett; Marc Santugini
  12. Market-Oriented Structural Reforms and Human Development: Evidence from Transition Economies By Antonio Carvalho; Matthew Cable; Rabindra Nepal; Tooraj Jamasb

  1. By: Amigues, Jean-Pierre; Moreaux, Michel
    Abstract: Inside a standard growth model with exhaustible resources, we study the optimal growth policy of an economy submitted to a climate constraint, taking the form of a ceiling over admissible atmospheric carbon concentrations. The optimal scenario is a three phases path: a rise of carbon concentrations until the carbon cap is attained followed by a time phase constrained by the ceiling on possible emissions and a last unconstrained phase of resource depletion. Depending upon the primitives of the model we show that the optimal path may be of two main kinds: paths characterized by a positive growth of the economy and paths corresponding to a complex structural adjustment process involving negative growth during some time interval.
    Keywords: Carbon pollution; economic growth; exhaustible resources
    JEL: Q00 Q32 Q43 Q54
    Date: 2013–01
  2. By: Kunihiko Konishi (Graduate School of Economics, Osaka University)
    Abstract: This study constructs a variety expansion growth model with public research spending, in which public researchers raise the productivity of private R&D. We show that the rela- tionship between public research spending and the growth rate follows an inverted U-shape. This is because public research spending increases private R&D productivity, but crowds out labor input to private R&D. It is also shown that the welfare-maximizing level of pub- lic research spending is below the growth-maximizing level. With regards to tax policy, a zero-proffit tax maximizes both growth and welfare. Finally, the study analyzes the stability of the steady state, showing that the equilibrium is indeterminate when the governmentfs revenue source depends on asset income tax.
    Keywords: Public expenditure, Endogenous growth, Innovation, Indeterminacy
    JEL: E62 O41
    Date: 2013–10
  3. By: Peter Skott (University of Massachusetts Amherst); Soon Ryoo (Adelphi University)
    Abstract: We show that (i) dynamic inefficiency may be empirically relevant in a modified Diamond model with imperfect competition, (ii) if fiscal policy is used to avoid inefficiency and maintain an optimal capital intensity, the required debt ratio will be inversely related to the growth rate, and (iii) austerity policies reductions in government consumption and entitlement programs for the old generation raise the required debt ratio.
    Keywords: Public debt, dynamic efficiency, growth effects, austerity
    JEL: E62 E22
    Date: 2013
  4. By: Alex Coad (SPRU, University of Sussex, UK); Christina Guenther (WHU - Otto Beisheim school of Management, Germany)
    Keywords: Diversification, firm growth, Penrose, Machine tools, Growth process
    JEL: L6 L11 L20 L25
  5. By: Andreas Hoefele (School of Business and Economics, Loughborough University, UK)
    Abstract: This paper analyses the effect of offshoring on the growth rate and welfare of a small open economy, taking into account the skill content of offshoring. The model exposes two opposing effects that increasing the extent of offshoring has on the growth rate. First, offshoring has a negative effect on the growth rate by increasing the relative wage of skilled labour and thus the costs of (skill intensive) research. Second, offshoring has a positive effect on the growth rate as it increases the effective labour endowments, which increases the size of the market and thus leads to more entry into research. Thus the overall effect of offshoring on the growth rate is ambiguous. The effect on welfare in the short run is positive, whereas the long-run welfare is ambiguous.
    Keywords: Offshoring, Trade in Tasks, Growth, Skill Differences
    JEL: F1 F4 O4
    Date: 2013–10
  6. By: Shahbaz, Muhammad; Ur Rehman, Ijaz
    Abstract: This paper deals with the empirical investigation of causal relationship between financial deepening, economic growth and poverty reduction using quarter frequency data in case of Pakistan over the period of 1972-2011. We applied the ARDL bounds testing approach by incorporating structural breaks stemming in the series. The order of integration of the variables is examined by applying structural break unit root test. Our empirical exercise indicated that long run relationship between financial deepening, economic growth and poverty reduction exists in case of Pakistan. The causality analysis implied that causality results are sensitive with the use of proxy for poverty reduction as well as methodology to be applied.
    Keywords: Financial deepening, economic growth, poverty
    JEL: E0 E00
    Date: 2013–10–14
  7. By: Nuno Sobreira; Luís Catela Nunes; Paulo M.M. Rodrigues
    Abstract: One of the prevalent topics in the economic growth literature is the debate between neoclassical, semi-endogenous, and endogenous growth theories regarding the model that best describes the data. An important part of this discussion can be summarized in three mutually exclusive hypotheses: the \constant trend", the \level shift", and the \slope shift" hypotheses. In this paper we propose the characterization of a country's economic growth path according to these break hypotheses. We address the problem in two steps. First, the number and timing of trend breaks is determined using new structural change tests that are robust to the presence, or not, of unit roots, surpassing technical and methodological concerns of previous empirical studies. Second, conditional on the estimated number of breaks, break dates, and coefficients, a statistical framework is introduced to test for general linear restrictions on the coefficients of the suggested linear disjoint broken trend model. We further show how the aforementioned hypotheses, regarding the economic growth path, can be analysed by a test of linear restrictions on the parameters of the breaking trend model. We apply the methodology to historical per capita GDP for an extensive list of countries. The results support the three alternative hypotheses for different sets of countries.
    JEL: C22 F43 O40
    Date: 2013
  8. By: Anders Bornhäll (Research, HUI, Sweden); Sven-Olov Daunfeldt (Research, HUI, Sweden); Niklas Rudholm (Research, HUI, Sweden)
  9. By: Cuong Le Van (CNRS, CES, Hanoi WRU, VCREME); Tu Anh Nguyen (Central Institute for Economic Management, CIEM, Vietnam); Tran Dinh Tuan
    Date: 2013
  10. By: Arielle Joseph; Bernhard Troester
    Abstract: This paper presents the prospective sectors for further economic growth in Mauritius. We approach this by firstly tracing the historical development of Mauritius and providing explanations for the growth experienced. This is used as the basis for the analysis of the country’s current economic situation from which we infer that future growth may not be as promising as the historical growth path, thereby, implying that there may be a real threat of the ‘middle income trap’. However, through the analysis of the current situation two potential strategic growth sectors are identified: financial intermediation and information and communications technology. These two sectors are presented with their main components and their present and prospective contribution to economic growth in Mauritius is explored. Our conclusion from the discussion presented is that, although, the growth prospects are clear for the two identified sectors, their impact might be limited and the hindrance to further economic growth may extend beyond these two strategic sectors. Ultimately, it is the continued current account deficit and key structural problems which can severely impact the sustainable growth of the island state.
    Keywords: working paper, daadpartnership, finance-and-trade
    Date: 2013–04
  11. By: Leonard J. Mirman; Kevin Reffett; Marc Santugini
    Abstract: We study the effect of learning on optimal growth. We first derive the Euler equation in a general learning environment without experimentation. We then consider the case of iso-elastic utility and linear production, for general distributions of the random shocks and beliefs (i.e., no conjugate priors) and for any horizon. We characterize the unique optimal policy function for this learning model. We show how learning alters the maximization problem of the social planner. We also compare the learning model with the deterministic and stochastic models. This work builds on the work on learning and growth in a Brock-Mirman environment initiated by Koulovatianos, Mirman, and Santugini (2009) (KMS) for the Mirman-Zilcha model (with log utility and Cobb-Douglas production). While the Mirman-Zilcha model provides some insights about the effect of learning on growth, it also hides many important features of learning that the model in this paper takes account of. In other words, compared to the Mirman-Zilcha model, we show that the case of iso-elastic utility and linear production yields a more profound effect of learning on dynamic programming and thus optimal behavior.
    Keywords: Brock-Mirman environment, Dynamic programming, Learning, Optimal growth
    JEL: D8 D9 E2
    Date: 2013
  12. By: Antonio Carvalho; Matthew Cable; Rabindra Nepal (School of Economics, The University of Queensland); Tooraj Jamasb
    Abstract: Market based reforms are expected to result in both higher economic growth and development. This paper studies the impact of reform of economic institutions and infrastructure sectors on the economic, educational and health dimension of human well- being among 25 transition economies. We use a panel data for the 1992-2007 periods and the LSDVC technique to analyse the effects of market-driven reforms on the Human Development Index (HDI) and reform packages using EBRD transition indicators. The results show that institutional economic reforms led to positive economic effect and significant impacts on other dimensions of human development. On the other hand, we find limited positive impact from infrastructure sectors reforms. However, not every aspect of reforms appear to generate positive impacts as the transition process is rather complex. For example, large scale privatizations seem to have had negative effects in health and economic outcomes. The results point towards the importance of the interaction among and the combined effect of different reform measures.
    Date: 2013–10–23

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