nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2016‒04‒16
four papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Burying the Bumblebee Once and for All: By Bergh, Andreas; Bjørnskov, Christian
  2. Dynastic Altruism, Population Growth, and Economic Prosperity By Bharat Diwakar; Gilad Sorek
  3. Public spending, monetary policy and growth: Evidence from EU countries By Papaioannou, Sotiris
  4. Veiled Repression: Mainstream Economics, Capital Theory,and the Distributions of Income and Wealth By Lance Taylor

  1. By: Bergh, Andreas (Research Institute of Industrial Economics (IFN)); Bjørnskov, Christian (Aarhus University)
    Abstract: High levels of social trust has been linked to both public sector size and long term economic growth, thereby helping to explain how some countries are able to combine high taxes and relatively high levels of economic growth. This paper examines if social trust as a background factor also insulates countries against negative effects of public sector size on growth, as government size and growth are found to be negatively associated in several recent studies. We note that the effect is theoretically ambiguous. In panel data from 66 countries across 40 years, we find little robust evidence of insulating effects. Instead we find robust evidence that high trust aggravates the crowding out effects of public sector size on private investments.
    Keywords: Tust; Economic growth; Government consumption
    JEL: H10 O11 P16 Z10
    Date: 2016–03–21
  2. By: Bharat Diwakar; Gilad Sorek
    Abstract: We show that non-linear dynastic altruism toward future generations yields non-monotonic relation between population growth and economic prosperity, which is polynomial in general. The exact shape of this non-monotonic relation depends on the concavity of parental altruistic utility. Hence, this work contributes to the recent line of modified R&D-based growth models, aimed to align theory with empirical evidence on non-linear relation between population growth and economic prosperity.
    Keywords: Dynastic Altruism; Population Growth; Technological Progress
    JEL: O31 O40
    Date: 2016–03
  3. By: Papaioannou, Sotiris
    Abstract: This study examines whether differences in monetary policy are associated with diverging effects of public spending on growth. At first stage, we estimate public spending multipliers for each country of the European Union (EU). Their size varies considerably across countries. Then we incorporate in the analysis the role of monetary policy and examine whether real interest rates affect the relationship between public spending and growth. The main result of the econometric analysis is that government spending can affect growth positively only when real interest rates become negative. This result remains robust to several changes in the econometric specification and measures of interest rate.
    Keywords: Public spending, Fiscal multipliers, Monetary policy, Economic growth.
    JEL: E43 E62 O40
    Date: 2016–03–15
  4. By: Lance Taylor (New School for Social Research)
    Abstract: The Cambridge UK vs USA capital theory debates of the 1960s showed that the workhorse mainstream growth model relies on unsustainable assumptions. Its standard interpretation is not consistent with the last four decades of data. Part of an estimated increase in the ratio of personal wealth to income in recent years is due to higher asset prices. The other side of the accounts reveals that financialization and growing business debt partially offset the greater net worth of households. Attempts to interpret growth in wealth principally as a consequence of capitalization of rents are misleading. An alternative growth model based on Cambridge ideas can help correct these misinterpretations.
    Keywords: Income distribution, wealth distribution, Cambridge controversies
    JEL: D3 E1
    Date: 2015–12

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