nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2015‒01‒14
four papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. FDI and Economic Growth: The Role of Natural Resources By Arshad Hayat
  2. Public spending and growth: the role of government accountability By Atsuyoshi Morozumi; Francisco José Veiga
  3. Do remittances not promote growth? : a bias-adjusted three-step mixture-of-regressions By Konte M.
  4. A Note on Reconciling Gross Output TFP Growth with Value Added TFP Growth By Diewert, W. Erwin

  1. By: Arshad Hayat (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nábreží 6, 111 01 Prague 1, Czech Republic)
    Abstract: In the paper, I explored links between inflow of FDI, natural resource abundance and economic growth. The paper is an attempt to analyze a lager sample of 106 countries and investigate the impact of FDI inflow on the economic growth of the host country. Further, natural resource abundance is considered to slow down the economic growth. The paper explores if the natural resource abundance affect the FDI-growth relationship. Using panel data for a sample the period 1993-2012, the paper uses fixed effects model and conclude that FDI inflow accelerates economic growth of the host country. However, the presence of natural resources slows down the FDI induced growth. The same results hold after controlling for endogeneity.
    Keywords: Foreign Direct Investment, Economic Growth, Natural Resources, Resource Curse, Hausman Test
    JEL: F23 F43 O4 Q0
    Date: 2014–12
  2. By: Atsuyoshi Morozumi; Francisco José Veiga
    Abstract: This paper examines the role of institutions in the nexus between public spending and economic growth. Using a newly assembled dataset of 80 countries over the 1970-2010 period, we show that only when institutions prompt governments to be accountable to the general citizen does the capital component of public spending significantly promote growth. The critical role of accountability remains regardless of the financing sources of capital spending, including a reallocation from current spending, an increase in revenue, and a rise in the budget deficit. Meanwhile, current spending does not show a robust growth-fostering effect, for any level of government accountability. We highlight that it is the type of institutions affecting the state-citizen relations that plays a key role in the capital spending-growth nexus, not the country's income level or the type of institutions affecting citizen-citizen relations. Our interpretation of the distinct role of government accountability in this nexus is that ineficiencies induced by unaccountable oficials' rent-seeking behavior in public investment mitigate otherwise growth-fostering effects of capital spending.
    Keywords: Economic growth, Public spending, Public investment efficiency, Institutions, Accountability
  3. By: Konte M. (UNU-MERIT)
    Abstract: This paper re-examines the impact of remittance inflows on growth using data for developing countries over the period 1970-2010. The paper seeks to understand why it has been so difficult to find a positive impact of remittances on growth despite the growing amount of remittances in many developing countries and the different studies that have emphasized the positive effect of remittances on poverty and inequality. We relax the hypothesis that all countries follow the same unique growth regime and test whether the impact of remittances on growth depends on the growth regime to which a country belongs. We apply the newly bias-adjusted three-step finite mixture approach, which incorporates corrections into the different steps of the estimation. We find that our data are best described by an econometric model with two different growth regimes one in which remittances have a positive and significant impact on growth and another in which the effect of remittances is insignificant. The analysis of the determinants of the probability of being in the remittances growth-enhancing regime shows that an increase in the level of financial development decreases the probability of a country being in this growth regime, while being a Sub-Saharan African country increases this probability.
    Keywords: Remittances; Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence;
    JEL: F24 O47
    Date: 2014
  4. By: Diewert, W. Erwin
    Abstract: The paper obtains relatively simple exact expressions that relate value added Total Factor Productivity growth (TFP growth or Multifactor Productivity Growth) in a value added framework to the corresponding measures of TFP growth in a gross output framework when Laspeyres or Paasche indexes are used to aggregate outputs and inputs. Basically, as the input base becomes smaller, the corresponding estimates of TFP growth become larger. A fairly simple approximate relationship between Fisher indexes of gross output TFP growth and the corresponding Fisher index of value added TFP growth is also derived. The methodology developed in this note can be applied in other situations.
    Keywords: Total Factor Productivity growth, TFP growth, Multifactor Productivity growth, MFP growth, Laspeyres, Paasche and Fisher index number formulae, magnif
    JEL: C43 D24
    Date: 2014–12–17

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