nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2014‒12‒08
seven papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Shift in tax burden and its impact on economic growth in the European Union By Szarowska, Irena
  2. Does Public Education Expansion Lead to Trickle-Down Growth? By Böhm, Sebastian; Grossmann, Volker; Steger, Thomas M.
  3. Financial Development and Economic Growth in a Natural Resource Based Economy: Evidence from Angola By Yuri Quixina; Álvaro Almeida
  4. Public Preferences for Government Spending Priorities: Survey Evidence from Germany By Bernd Hayo; Florian Neumeier
  5. Education and growth with learning by doing By Marconi G.; Grip A. de
  6. Current Accounts in the Eurozone Countries: The Role of Euro, Fiscal Policies and Financial Developments By Jaromír Baxa; Tomáš Olešòaník
  7. OPEC and non-OPEC oil production and the global economy By Ronald A. Ratti; Joaquin L. Vespignani

  1. By: Szarowska, Irena
    Abstract: This article deals with a tax burden in the European Union in as financial and economic crisis has impacted also on tax systems in the European Union. Governments´ tax measure aims to consolidate public finance and promote an economic growth. The article provides empirical evidence on a shift in a tax burden and its structure and analyzes the effects of shift in tax burden on economic growth in the EU. It is used the Eurostat definition to categorize tax burden by economic functions and implicit rates of consumption, labour and capital are investigated. The analysis is based on annual data of the EU member states in a period 1995-2010. Pairwise Granger Causality Test was used for examining relations between economic growth and tax burden by economic functions in short-term. Results confirm that there is two-way causality between change of implicit tax rate of consumption and GDP growth; and also GDP growth Granger-cause change of implicit tax rate of capital and implicit tax rate of labour through one-way causality. On average, labour taxes have decreased by 1.9 p.p., capital taxes have also decreased – by 2.1 p.p., but consumption taxes have mildly increased by 0.4 p.p. in the European Union in a period 1995-2010.
    Keywords: tax burden, tax shift, implicit tax rates, growth conductive system, economic functions, economic growth
    JEL: E62 H2 O11
    Date: 2013
  2. By: Böhm, Sebastian (University of Leipzig); Grossmann, Volker (University of Fribourg); Steger, Thomas M. (University of Leipzig)
    Abstract: The paper revisits the debate on trickle-down growth in view of the widely discussed evolution of the earnings and income distribution that followed a massive expansion of higher education. We propose a dynamic general equilibrium model to dynamically evaluate whether economic growth triggered by an increase in public education expenditure on behalf of those with high learning ability eventually trickles down to low-ability workers and serves them better than redistributive transfers. Our results suggest that, in the shorter run, low-skilled workers lose. They are better off from promoting equally sized redistributive transfers. In the longer run, however, low-skilled workers eventually benefit more from the education policy. Interestingly, although the expansion of education leads to sustained increases in the skill premium, income inequality follows an inverted U-shaped evolution.
    Keywords: directed technological change, publicly financed education, redistributive transfers, transitional dynamics, trickle-down growth
    JEL: H20 J31 O30
    Date: 2014–10
  3. By: Yuri Quixina (Faculdade de Economia, Universidade do Porto); Álvaro Almeida (CEF.UP and Faculdade de Economia, Universidade do Porto)
    Abstract: This paper analyzes the relationship between financial development and economic growth in Angola, an economy heavily dependent on natural resources. We extend existing literature by treating separately the oil and non-oil sectors of the economy. We test for Granger causality between three variables – oil revenues, non-oil GDP and financial development – for the Angolan economy for the period 1995-2012. The results show that the oil sector has been the great engine of Angolan economic growth, since we identified Granger causality from oil revenues to the other two variables, but none of these variables Granger causes oil revenues. On the other hand, financial development does not seem to have a significant role in economic growth in Angola: it does not Granger-cause either oil revenues or non-oil GDP, even though it is Granger-caused by both variables.
    Keywords: Financial Development, Economic Growth, Natural Resources, Angola
    JEL: E44 O16 O43 Q32
    Date: 2014–09
  4. By: Bernd Hayo (University of Marburg); Florian Neumeier (University of Marburg)
    Abstract: Employing data from a representative survey conducted in Germany, this paper examines public preferences for the size and composition of government expenditure. We focus on public attitudes toward taxes, public debt incurrence, and public spending in six different policy areas. Our findings suggest, first, that the current scope of government is supported by a majority of the German population. Second, we find that individual preferences for the composition of government spending differ along various dimensions. Specifically, personal economic well-being, economic literacy, confidence in politicians, political ideology, and time preference are significantly related to individual attitudes toward public spending, taxes, and debt. The magnitude of the effects is particularly large for time preference, economic knowledge, and party preference. Third, public preferences for public spending priorities are only marginally affected when considering a public budget constraint.
    Keywords: Public spending, public preferences, public debt, taxes, survey, Germany.
    JEL: E62 H11 H50 H63
    Date: 2014
  5. By: Marconi G.; Grip A. de (ROA)
    Abstract: In this paper, we develop a general equilibrium overlapping generations model which is based on the view that education makes workers more productive by increasing their ability to learn from work experience, rather than providing skills that directly increase productivity. This assumption is discussed and compared with the dominant Mincerian view on the education-productivity relationship. One important implication of the model is that the enrolment rate to education has a negative effect on the GDP in the medium term and a positive effect in the long term. This could be an explanation for the weak empirical relationship between education and economic growth that has been found in the empirical macroeconomic literature. Conversely, for a given enrolment rate, the quality of education, as measured by workers ability to learn, has a positive effect on the GDP both in the medium and in the long term.
    Keywords: Human Capital; Skills; Occupational Choice; Labor Productivity; Macroeconomic Analyses of Economic Development; One, Two, and Multisector Growth Models;
    JEL: J24 O11 O41
    Date: 2014
  6. By: Jaromír Baxa (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic. Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic, Pod Vodárenskou veží 4, 182 08 Prague 8, Czech Republic); Tomáš Olešòaník (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic)
    Abstract: Should we blame the euro for widening of current account deficits in the EMU? In this paper, we employ time-specific fixed effect estimator to study determinants of the current account deficits of the EU countries before and after adoption of the euro. Our aim is to assess to what extent the increased current account deficits could be attributed to the single currency and to the role of other variables, especially fiscal policy and developments of financial sector. We show that euro had negative effect on current account balances of southern countries. Moreover, we provide evidence that the role of fiscal policy in current account dynamics changed with euro adoption and twin deficits emerged in many countries. Finally, we document significant role of growing credits to private sector for built-up of persistent current account deficits, hence the negative effects of excessive lending on external balance should be addressed by the regulators and policy makers in the future.
    Keywords: current account, euro, fiscal balance, financial system
    JEL: E42 E62 F14
    Date: 2014–09
  7. By: Ronald A. Ratti; Joaquin L. Vespignani
    Abstract: Hamilton identifies 1973 to 1996 as “the age of OPEC” and 1997 to the present as “a new industrial age.” During 1974-1996 growth in non-OPEC oil production Granger causes growth in OPEC oil production. OPEC oil production decreases significantly with positive shocks to non-OPEC oil production in the earlier period, but does not do so in the “new industrial age”. In the “new industrial age” OPEC oil production rises significantly with an increase in oil prices, unlike during “the age of OPEC” period. OPEC oil production responds significantly to positive innovations in global GDP throughout. Over 1997:Q1-2012:Q4 the negative effect on real oil price of positive shocks to non-OPEC oil production is larger in absolute value than that of positive shocks to OPEC oil production. The cumulative effects of structural shocks to non-OPEC oil production and to real oil price on OPEC oil production are large. The cumulative effects of structural shocks to OPEC production and real oil price on non-OPEC production are small. Results are robust to changes in model specification. An econometric technique to predict growth in OPEC oil production provides support for the results from the SVAR analysis. Results are consistent with important changes in the global oil market.
    Keywords: OPEC production, non-OPEC, oil Price, global oil market
    JEL: E31 E32 Q43
    Date: 2014–11

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