nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2015‒12‒20
three papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Capital Misallocation during the Great Recession By Di Nola, Alessandro
  2. 'Threshold Effects of Human Capital: Schooling and Economic Growth' By Humna Ahsana; M. Emranul Haque
  3. Unified Growth Theory Contradicted by the Economic Growth in Africa By Ron W Nielsen

  1. By: Di Nola, Alessandro
    Abstract: In this paper I evaluate the contribution of financial frictions in explaining the drop in aggregate TFP through misallocation during the Great Recession. I build a quantitative model with heterogeneous establishments; with the help of the model I compute the counterfactual drop in misallocation: by how much would aggregate TFP have decreased if the credit crunch had been absent. I find that a "real recession" would have caused a drop of only 0.16 percent, as opposed to 1.04 percent found in the data; therefore financial frictions account for a significant part of the drop in aggregate TFP. The key mechanism is the following: the increase in the cost of external finance affects negatively the reallocation of productive inputs from low to high productivity firms, by dampening the growth of small-highly productive firms.
    Keywords: Financing constraints, misallocation, heterogeneous firms, incomplete markets, idiosyncratic shocks.
    JEL: E2 E22 E25
    Date: 2015–09–01
  2. By: Humna Ahsana; M. Emranul Haque
    Abstract: Many recent studies have found average years of schooling to be unrelated with economic growth. In this note, we show that the significant positive effect of schooling can only be realised after an economy crosses a threshold level of development.
    Date: 2015
  3. By: Ron W Nielsen
    Abstract: One of the fundamental postulates of the Unified Growth Theory is the claimed existence of three distinctly different regimes of economic growth governed by three distinctly different mechanisms of growth. However, Galor also proposed that the timing of these regimes is different for developed countries and for less-developed countries. Africa is the perfect example of economic growth in less-developed countries. The data used by Galor, but never properly investigated, are now analysed. They turn out to be in dramatic contradiction of this theory.
    Date: 2015–12

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