nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2016‒06‒14
three papers chosen by
Iulia Igescu
Ministry of Presidential Affairs

  1. Stationary Growth and the Impossibility of Capital Efficiency Gains By Li, Defu; Bental, Benjamin; Huang, Jiuli
  2. What type of finance matters for growth? Bayesian model averaging evidence By Hasan, Iftekhar; Horvath, Roman; Mares, Jan
  3. Human Capital, Inequality and Growth By Torben M Andersen, Department of Economics and Business Economics Aarhus University, CEPR, CESifo and IZA

  1. By: Li, Defu; Bental, Benjamin; Huang, Jiuli
    Abstract: Improving the efficiency either in the process of factor accumulation or in the process of production of final output is often considered as a main driving force for the sustainable growth of modern economies. However, this article proves that for the most important input, physical capital, total efficiency, i.e. the total efficiency gained in the process of accumulation and in the production process, must be zero along a stationary growth path.
    Keywords: Neoclassical Growth Model; Uzawa’s Theorem; Improving Efficiency; Technical Change; Stationary Growth Path
    JEL: E13 O30 O41
    Date: 2016–05–21
  2. By: Hasan, Iftekhar; Horvath, Roman; Mares, Jan
    Abstract: We examine the effect of finance on long-term economic growth using Bayesian model averaging to address model uncertainty in cross-country growth regressions. The literature largely focuses on financial indicators that assess the financial depth of banks and stock markets. We examine these indicators jointly with newly developed indicators that assess the stability and efficiency of financial markets. Once we subject the finance-growth regressions to model uncertainty, our results suggest that commonly used indicators of financial development are not robustly related to long-term growth. However, the findings from our global sample indicate that one newly developed indicator – the efficiency of financial intermediaries – is robustly related to long-term growth.
    Keywords: finance, growth, Bayesian model averaging
    JEL: C11 G10 O40
    Date: 2015–08–20
  3. By: Torben M Andersen, Department of Economics and Business Economics Aarhus University, CEPR, CESifo and IZA
    Abstract: Income inequality is increasing in most countries at the same time as traditional redistribution policies are under pressure, not least due to strained public finances. What are the underlying causes, and what is the scope to turn the trend? This is discussed from the perspective of the link between inequality and growth running via education and human capital formation. It is argued that imperfections arising from both capital market imperfections and social barriers imply that inequality may be a barrier to education, which in turn makes inequality persistent and reduces growth. In discussing redistribution it is thus important to distinguish between the traditional passive means of redistribution via taxes and transfers to repair on the distribution of market incomes, and active means which affect the distribution of market incomes. The latter may both lead to more income equality and efficiency improvements reflected in higher incomes or income growth. Policy options to improve educational outcomes and their distribution are discussed.
    JEL: I24 E02
    Date: 2015–09

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