nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒02‒02
forty-one papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. The Nature of Civil Conflict By Cemal Eren Arbatli; Quamrul Ashraf; Oded Galor
  2. The Economic and Demographic Transition, Mortality, and Comparative Development By Sunde, Uwe; Cervellati, Matteo
  3. American Colonial Incomes, 1650-1774 By Peter H. Lindert; Jeffrey G. Williamson
  4. The Trans-Atlantic Slave Trade and Local Political Fragmentation in Africa By Nonso Obikili
  5. Inequality and biological welfare during the mining boom: Rio Tinto, 1836-1935 By Jose Miguel Martínez-Carrión; Miguel Á. Pérez de Perceval Verde; Ángel Pascual Martínez Soto
  6. Structural change and the Kaldor facts in a growth model with relative price effects and non-Gorman preferences By Boppart, Timo
  7. Savings and economic growth: A historical analysis of the relationship between savings and economic growth in the Cape Colony economy, 1850 - 1909 By Grietjie Verhoef, Lorraine Greyling and John Mwamba
  8. 150 Years of Italian CO2 Emissions and Economic Growth By Barbara Annicchiarico; Anna Rita Bennato; Emilio Zanetti Chini
  9. Income Inequality, Competitiveness of Political Systems and the Distance to the Efficient Frontier of Economic Growth By Hakobyan, Lilit
  10. The Future of U.S. Economic Growth By John G. Fernald; Charles I. Jones
  11. Contraception and the Fertility Transition By Bhattacharya, Joydeep; Chakraborty, Shankha
  12. Education and Fertility: Panel Time-Series Evidence from Southern Africa By Manoel Bittencourt
  13. Growing at Your Neighbor’s Expense? A Spatial examination of growth in the Americas By Brian Piper
  14. Growth and Welfare Effects of Health Care in Knowledge Based Economies By Kuhn, Michael; Prettner, Klaus
  15. An empirical assessment of Fairtrade: A perspective for low- and middle-income countries? By Elisabeth Nindl
  16. Is technical progress sectorally concentrated? An empirical analysis for Western European countries By Schiersch, Alexander; Gornig, Martin; Belitz, Heike
  17. Birthplace diversity of the workforce and productivity spill-overs in firms By Mayr, Karin; Böheim, Rene; Horvath, Thomas
  18. Endogenous Growth, Green Innovation and GDP Deceleration in a World with Polluting Production Inputs By Burghaus, Kerstin; Funk, Peter
  19. Growth and Welfare under Endogenous Lifetime By Schneider, Maik; Winkler, Ralph
  20. Inflation and Economic Growth in the SADC: Some Panel Time-Series Evidence By Manoel Bittencourt, Renee van Eyden and Monaheng Seleteng
  21. Economic Stagnation and Stable Growth: The Persistence and Survival of Growth Regimes under Political Transitions By Hakobyan, Lilit
  22. Institutions, ratings and economic growth: in search of reliable indicators By Rinat Menyashev; Timur Natkhov; Konstantin Yanovskiy
  23. Political Transition, Economic Growth and Reoccurring Crisis in Countries with and without Experience of Military Dictatorship By Hakobyan, Lilit
  24. On the estimation of the volatility-growth link By Wälde, Klaus; Launov, Andrey; Posch, Olaf
  25. Complementarity in Models of Public Finance and Endogenous Growth By Misch, Florian; Gemmell, Norman; Kneller, Richard
  26. Dynamic analysis of reductions in public debt in an endogenous growth model with public capital By Noritaka Maebayashi; Takeo Hori; Koichi Futagami
  27. FDI and International Income Divergence By Schwab, Jakob
  28. The Impact of Growing Public Debt on Economic Growth in the European Union By Mencinger, Jernej; Aristovnik, Aleksander; Verbic, Miroslav
  29. Economic growth in Ghana : determinants and prospect By Raggl, Anna K.
  30. Equilibrium Health Spending and Population Aging in a Model of Endogenous Growth - Will the GDP Share of Health Spending Keep Rising? By Isaac Ehrlich; Yong Yin
  31. Growth, Structural Transformation, and Volatility By Loris Rubini
  32. The Role of Allocative Efficiency in A Decade of Recovery By Kaiji Chen
  33. Green Growth and Sustainability: Analysing Trade-offs in Climate Change Policy Options. By Alessandro Palma
  34. The Changing Roles of Education and Ability in Wage Determination By Gonzalo Castex; Evgenia Dechter
  35. A dynamical countries-interaction model based on technology for the study of European growth and stability By Bernardo Maggi; Daniel Muro
  36. The Dynamics of Exports, Financial Development and Economic Growth in Pakistan: New Extensions from Cointegration and Causality Analysis By Shahbaz, Muhammad; Mohammad, Mafizur Rahman
  37. Use renewables to be cleaner: Meta-analysis of the renewable energy consumption-economic growth nexus By Sebri, Maamar
  38. The Role of Information Communication Technology and Economic Growth in Recent Electricity Demand: Fresh Evidence from Combine Cointegration Approach in UAE By Shahbaz, Muhammad; Sbia, Rashid; HAMDI, Helmi; Ur Rehman, Ijaz
  39. Inflation and Economic Growth: Evidence from the Southern African Development Countries By Manoel Bittencourt, Renee van Eyden and Monaheng Seleteng
  40. The Natural Resource Curse Revisited: Is There a Financial Channel? By Hattendorff, Christian
  41. Oil Shocks and Economic Growth in OPEC countries By Zied Ftiti; Khaled Guesmi; Frédéric Teulon

  1. By: Cemal Eren Arbatli; Quamrul Ashraf; Oded Galor
    Abstract: This research empirically establishes that the emergence, prevalence, and recurrence of civil conflict in the modern era reflect the long shadow of prehistory. Exploiting variations across contemporary national populations, it demonstrates that genetic diversity, as determined pre- dominantly tens of thousands of years ago, has contributed significantly to the frequency, incidence, and onset of both overall and ethnic civil conflicts over the last half century, accounting for a large set of geographical and institutional correlates of civil conflict, as well as measures of economic development. These findings arguably reflect the adverse effect of genetic diversity on interpersonal trust and cooperation, the potential impact of genetic diversity on income inequality, the potential association between genetic diversity and divergence in preferences for public goods and redistributive policies, and the contribution of genetic diversity to the degree of fractionalization and polarization across ethnic and linguistic groups in the population
    Keywords: #
    Date: 2013
  2. By: Sunde, Uwe; Cervellati, Matteo
    Abstract: We propose a unified growth theory to investigate the mechanics generating the economic and demographic transition, and the role of mortality differences for comparative development. The framework can replicate the quantitative patterns in historical time series data and in contemporaneous cross-country panel data, including the bi-modal distribution of the endogenous variables across countries. The results suggest that differences in extrinsic mortality might explain a substantial part of the observed differences in the timing of the take-off across countries and the worldwide distribution of the main variables of interest. --
    JEL: O11 J10 O40
    Date: 2013
  3. By: Peter H. Lindert; Jeffrey G. Williamson
    Abstract: New data now allow conjectures on the levels of real and nominal incomes in the thirteen American colonies. New England was the poorest region, and the South was the richest. Colonial per capita incomes rose only very slowly, and slowly for five reasons: productivity growth was slow; population in the low-income (but subsistence-plus) frontier grew much faster than that in the high-income coastal settlements; child dependency rates were high and probably even rising; the terms of trade was extremely volatile, presumably suppressing investment in export sectors; and the terms of trade rose very slowly, if at all, in the North, although faster in the South. All of this checked the growth of colony-wide per capita income after a 17th century boom. The American colonies led Great Britain in purchasing power per capita from 1700, and possibly from 1650, until 1774, even counting slaves in the population. That is, average purchasing power in America led Britain early, when Americans were British. The common view that American per capita income did not overtake that of Britain until the start of the 20th century appears to be off the mark by two centuries or longer.
    JEL: N11 N31 O47 O51
    Date: 2014–01
  4. By: Nonso Obikili
    Abstract: I examine the possibility that the trans-Atlantic slave trades influenced the political institutions of villages and towns in precolonial Africa. Using anthropological data, I show that villages and towns of ethnic groups with higher slave exports were more politically fragmented during the precolonial era. I use instrumental variables to show that the relationship is at least partly causal. I argue this fragmentation is important for relative economic development because it still influences political institutions today. I support this argument by using more contemporary data to show that areas with higher precolonial political fragmentation have a higher incidence of bribery.
    Keywords: Trans-Atlantic, Slave trade, Poltical
    Date: 2014
  5. By: Jose Miguel Martínez-Carrión (Universidad de Murcia, Murcia, Spain); Miguel Á. Pérez de Perceval Verde (Universidad de Murcia, Murcia, Spain); Ángel Pascual Martínez Soto (Universidad de Murcia, Murcia, Spain)
    Abstract: This paper explores the impact of the mining boom in the biological standard of living and inequality in Rio Tinto, the main copper basin of Spain and one of the largest in the world. We use data height of military recruits in two municipalities: Zalamea Real and Nerva between 1856 and 1935 (1836-1914 cohorts). The results show that the height deteriorated in the 1850-1870 cohorts and increased inequality, seeing themselves affected adolescents from 1870 to 1890, when the British firm took its biggest push. During the mining fever and heavy immigration, the cohorts of the late nineteenth century increased the height, but the gap between natives and immigrants and among illiterate and literate also widened. The height of the cohorts of the early twentieth century stagnated due to the business downturn following the increase of competitiveness.
    Keywords: Biological welfare, mining, Río Tinto, inequality
    JEL: I12 J24 N13 D63
    Date: 2014–01
  6. By: Boppart, Timo
    Abstract: Growth is associated with (i) shifts in the sectoral structure of the economy, (ii) changes in relative prices and (iii) the Kaldor facts. Moreover, (iv) cross-sectional data shows systematic differences in the expenditure structure across income groups. This paper presents a growth model which is consistent with (i)-(iv) at the same time, a result the existing literature has not been able to generate. The theory is simple and parsimonious and contains an analytical solution. The model s functional form and cross-sectional data are exploited to estimate the relative importance of price and income effects as determinants of the structural change. --
    JEL: O14 O41 D90
    Date: 2013
  7. By: Grietjie Verhoef, Lorraine Greyling and John Mwamba
    Abstract: The sub-optimal savings propensity in South Africa the past three decades causes concern for the ability of the country to support its economic development. An historical analysis of the development of the savings’ trends in South Africa may assist in understanding the historical roots of the phenomenon. Apart from general descriptions of the nature of economic activity in the Cape Colony very little is known about the role financial sector development and savings played in the growing colonial economy. This paper explores the performance of the economy of the Cape Colony between 1850 and 1909, through the business cycles, financial sector stability, the nature and extent of economic activity and seeks to explain the relationship between savings and economic growth. The question is whether the general view that ‘financial development is robustly growth promoting’ can be substantiated in the last half of the nineteenth century Cape Colony? It contributes to the economic history literature on the colonial past of South Africa by using newly compiled data on the GDP of the Cape Colony during the last half of the nineteenth century. The paper finds that despite the expectations in the literature that financial deepening contributes to economic growth; the Cape Colony did not display such causal relationship between savings and economic growth in the period under review. The paper shows the different forms of savings in the colony and the trend of savings behavior in the period amidst the development of a relatively robust financial sector.
    Keywords: Cape Colony, economic growth, financial deepening, gross domestic product, savings
    JEL: N27
    Date: 2014
  8. By: Barbara Annicchiarico (Department of Economics, University of Rome "Tor Vergata"); Anna Rita Bennato (ESRC Centre for Competition Policy, University of East Anglia, UK); Emilio Zanetti Chini (Department in Economics and Institutions, University of Rome "Tor Vergata" and CREATES)
    Abstract: This paper examines the relationship between economic growth and carbon dioxide emissions in Italy considering the developments in a 150-year time span. Using several statistical techniques, we find that GDP growth and carbon dioxide emissions are strongly interrelated, with a dramatic change of the elasticity of pollutant emissions with respect to output. Our findings highlight lack of structural change in the reduction of the carbon dioxide, suggesting the difficulties for Italy to meet the emissions targets within the Europe 2020 strategy.
    Keywords: Carbon Dioxide Emissions, Time Series Analysis, Italian Economy, Environmental Kuznets Curve
    JEL: Q50 C22
    Date: 2014–01–27
  9. By: Hakobyan, Lilit (Department of Economics, Umeå School of Business and Economics)
    Abstract: This paper investigates whether and under which conditions democracy renders economic performance more efficient. Efficiency, measured by the ratio of (mean)/ (standard deviation) of output growth, becomes an important indicator of the relative goodness of economic performance when countries face a trade-off between development scenarios with high-mean and low-volatility of output growth. This seems to be a case when economies approach the efficient frontier. However, when countries are far away from the frontier economic efficiency may be improved by simultaneously increasing the mean and decreasing the volatility of growth. This study differs from others on the topic in three basic ways: (i) asymmetric (G)ARCH models are employed to simultaneously estimate the mean and volatility of output growth conditional on the factors of interest; (ii) variations in within-country effects of democratisation on the mean, variance and efficiency of economic growth conditional on cross-country variations of income inequality are analysed; (iii) the asymmetry of deviations from the mean is investigated. The results suggest (do not suggest) that in countries with no (with) military dictatorship history democratisation moves economies towards the efficient frontier. The positive effect of democratisation on the efficiency of economic performance seems to be systematically stronger in countries with lower (higher) income inequality in the countries with (without) consolidated civil governments.
    Keywords: Mean and volatility of output growth; efficient frontier; political system competitiveness; income inequality; weak institutions; asymmetric GARCH model
    JEL: E02 E32 O43 P16
    Date: 2014–01–23
  10. By: John G. Fernald; Charles I. Jones
    Abstract: Modern growth theory suggests that more than 3/4 of growth since 1950 reflects rising educational attainment and research intensity. As these transition dynamics fade, U.S. economic growth is likely to slow at some point. However, the rise of China, India, and other emerging economies may allow another few decades of rapid growth in world researchers. Finally, and more speculatively, the shape of the idea production function introduces a fundamental uncertainty into the future of growth. For example, the possibility that artificial intelligence will allow machines to replace workers to some extent could lead to higher growth in the future.
    JEL: O4
    Date: 2014–01
  11. By: Bhattacharya, Joydeep; Chakraborty, Shankha
    Abstract: Three profound changes - the mortality, fertility and contraception transitions - characterized the Victorian era in England. Economists, following Becker (1960), focus on the first two and underplay the third by assuming couples can achieve their fertility target at no cost. The historical experience from Victorian England is at odds with this view of costless fertility regulation. We incorporate costly fertility limitation into the Becker paradigm: in our story, the mortality transition spurs on a contraception revolution which, in turn, makes it possible for the fertility transition to arrive. In the model, generationally-linked households with heterogeneous income choose between two contraception strategies, one ``traditional'', the other ``modern''. The modern comes with a higher fixed cost (reflecting social opposition and informational barriers characteristic of the times), but has a lower variable cost when it comes to averting childbirths. While the initial adopters of the modern technology are the rich -- those unfazed by the higher fixed cost -- eventually everyone switches so as to economize on the variable cost. What hastens the switch is the decline in child mortality. Increased adoption of modern contraception unleashes a social diffusion process causing more people to switch, lowering fertility further and across all socioeconomic groups. The model is consistent with broad time-series and cross-sectional patterns of the English fertility transition.
    Keywords: child mortality, fertility, demographic transition, contraception
    JEL: I12 J11 O40
    Date: 2014–01–22
  12. By: Manoel Bittencourt (Department of Economics, University of Pretoria)
    Abstract: In this paper we investigate whether secondary school enrolment has played any role on total fertility rates in all fifteen members of the Southern African Development Community (SADC) between 1980 and 2009. The evidence, based on panel time-series analysis (we make use of the Pooled OLS, Fixed Effects and Fixed Effects with Instrumental Variables estimators), robustly suggest that education has indeed reduced fertility rates in the region, or that the community is already trading-off quantity for quality of children. The results are important not only because lower fertility, caused by education, implies more capital per worker, higher productivity and therefore higher growth rates, but also because in accordance to the unified growth theory they suggest that southern Africa is experiencing its own transition from the Malthusian epoch into a sustained (modern) growth regime.
    Keywords: Education, fertility, Africa
    JEL: I20 J13 O55
    Date: 2014–01
  13. By: Brian Piper (Department of Economics and International Business, Sam Houston State University)
    Date: 2014–01
  14. By: Kuhn, Michael; Prettner, Klaus
    Abstract: We study the effects of a labor-intensive health care sector within an R&D-driven growth model with overlapping generations. Health care increases longevity and labor participation/productivity. We examine under which conditions expanding health care enhances growth and welfare. Even if the provision of health care diverts labor from productive activities, it may still fuel R&D and economic growth if the additional wealth that comes with expanding longevity translates into a more capital/machine-intensive final goods production and, thereby, raises the return to developing new machines. We establish mild conditions under which an expansion of health care beyond the growth-maximizing level is Pareto-improving. --
    JEL: I11 O41 O11
    Date: 2013
  15. By: Elisabeth Nindl (Department of Economics, Vienna University of Economics and Business)
    Abstract: This paper presents the first cross-country empirical evidence on the determinants of participation in Fairtrade and the impact of the export of Fairtrade certified products on agricultural growth in low and middle income countries. Using the number of certified producer organizations per country in 2006-2010 as a proxy for Fairtrade exports, estimation results indicate a small but significantly positive effect on the growth rate of per capita value added in agriculture that is largest in upper middle income countries. Given the particularly poverty-reducing effect of agricultural growth, we find empirical evidence that Fairtrade certification is indeed able to deliver its core values, but misses to target the very poor.
    Keywords: Fairtrade, agriculture, growth, poverty
    JEL: D3 O1
    Date: 2014–01
  16. By: Schiersch, Alexander; Gornig, Martin; Belitz, Heike
    Abstract: Previous research shows that technical progress at the industry level, measured by sectoral TFP growth, is more localized in continental European countries than in Anglo-Saxon coun-tries. We use EU KLEMS data sets to decompose sectoral TFP for nine European countries by means of a Malmquist approach, in order to separate technical change. Applying Harberger diagrams, we describe the sectoral patterns of technical progress. The analysis reveals that in most European countries technological progress is much more evenly distributed across sectors than TFP. --
    JEL: O14 O47 E23
    Date: 2013
  17. By: Mayr, Karin; Böheim, Rene; Horvath, Thomas
    Abstract: We analyze the e ffect of workforce composition by birthplace on workers' wages. In our model, each worker's productivity may depend on whether co-workers are of the same or of a di fferent birthplace. Wages depend both on the relative size of workers' groups as well as on the production structure of fi rms. We derive empirically testable hypotheses about the eff ect of co-worker birthplace on wages using a stylized model of intra-fi rm spill-overs across worker groups. We fi nd evidence for complementarities between workers of di fferent birthplace in line with our model. --
    JEL: D21 F22 J31
    Date: 2013
  18. By: Burghaus, Kerstin; Funk, Peter
    Abstract: We study economic growth and pollution control in a model with endogenous rate and direction of technical change. Economic growth (growth of real GDP) results from growth in the quantity and productivity of polluting intermediates. Pollution can be controlled by reducing the pollution intensity of a given quantity through costly research (green innovation) and by reducing the share of polluting intermediate quantity in GDP. Without clean substitutes, saving on polluting inputs implies that the rate of GDP growth remains below productivity growth (deceleration). While neither green innovation nor deceleration is chosen under laissez-faire, both contribute to long-run optimal pollution control for reasonable parameter values. In our baseline-model, there are no exhaustible resources. In an extension, we analyze the e ects of resource-scarcity on the environment, long-run growth and the direction of technical change. --
    JEL: O31 O33 Q55
    Date: 2013
  19. By: Schneider, Maik; Winkler, Ralph
    Abstract: Welfare aspects of longevity increases are often discussed neglecting the complex relationship between longevity and economic growth, which is the focal point of another literature. Combining both perspectives, we develop an endogenous growth OLG-framework to investigate how longevity affects economic growth and welfare. In our model, life expectancy is determined endogenously by individuals' investments in healthcare. In our benchmark specification growth effects are small, but direct welfare gains from longer lifetimes can be substantial. In the generalized model specification the growth effect dominates and may even lead to overall welfare losses from longevity increases. We interpret our results with respect to real world data and discuss the importance of assumptions about the engine of growth as well as the externalities associated with healthcare investments. --
    JEL: O10 I10 J10
    Date: 2013
  20. By: Manoel Bittencourt, Renee van Eyden and Monaheng Seleteng
    Abstract: In this paper we investigate the role of inflation rates in determining economic growth in fifteen sub-Saharan African countries, which are all members of the Southern African Development Community (SADC), between 1980 and 2009. The results, based on panel time-series data and analysis, suggest that in‡ation has had a detrimental effect to growth in the region. All in all, we highlight not only the fact that inflation has o¤set the prospective Mundell-Tobin effect and consequently reduced, the much needed, economic activity in the region, but also the importance of an institutional framework conducive to a stable macroeconomic environment as a precondition for development and prosperity in the community.
    Keywords: Inflation, Growth, SADC
    JEL: E31 O11 O42 O55
    Date: 2014
  21. By: Hakobyan, Lilit (Department of Economics, Umeå School of Business and Economics)
    Abstract: This paper analyses the survival of four different growth regimes conditional on political regime transitions that occurred during the first or prior year of the economic regime. The results suggest that in countries with no history of military dictatorship (MD), the episodes of fast-growing regimes initiated by political democratisation have an approximately 40% lower hazard of termination than the miracle growth episodes that were not started by political transitions. This finding does not hold in countries in which the consolidation of democracy is complicated by the historical role played by the army in the governing process. Additional analyses are carried out for the effect of political transitions on the duration of ongoing economic regimes. The data does not support the argument that “order” and the “rule of law” promote economic growth under more authoritarian regimes, which commonly feature authoritarian leaders during times of economic crisis. Political transitions of both directions under an economic crisis render the ongoing economic regime more durable. In contrast political transitions (of both directions) seem to be economically more efficient under the regime of stagnation.
    Keywords: Heckman correction for selection bias; economic growth regimes; survival analyses; political transition
    JEL: C21 O43 O57 P16
    Date: 2014–01–23
  22. By: Rinat Menyashev (National Research University Higher School of Economics); Timur Natkhov (National Research University Higher School of Economics); Konstantin Yanovskiy (Gaidar Institute for Economic Policy, Head of Department of Institutional Development)
    Abstract: The ratings of political institutions are well-known and widely used in academic literature. These ratings are mostly based on expert evaluations. However, such evaluations can be subjective and occasionally driven by ideological considerations. In this paper we propose two new indicators of institutional quality for 154 countries. These indicators are constructed in a way that minimizes the subjectivity of the evaluations. Only the presence or absence of a particular institutional phenomenon is identified. This puts much less weight on possible bias and makes easy to verify. We show that these indices predict economic growth better than those commonly used, primarily because they include information about institutions that has been accumulated over a period of approximately two centuries
    Keywords: Rule of Law, Democracy, Limited Government, Institutions, Indicators, Economic growth
    JEL: P50 N40 O43
    Date: 2013
  23. By: Hakobyan, Lilit (Department of Economics, Umeå School of Business and Economics)
    Abstract: This paper analyses the experience of 83 countries from the period of 1950-2004 and addresses the following question: when do democratic transitions produce (good) bad economic outcomes. Following the theoretical papers of Acemoglu et al. (2004, 2008(a)), an attempt is made to control for both de jure and de facto sides of political power. In addition, the countries with and without the experience of Military Dictatorship (MD) are analysed separately. The results imply that concentration of economic power per se produces bad economic outcomes. Besides, the data seem to contain an indication that democratisation induces additional socially wasteful investments into de facto political power. In addition, the analyses suggest that, when the army assumes political leadership, countries with low concentration of economic power demonstrate better economic performance. In terms of Acemoglu et al. (2007), this may support the idea that the institutional environment switches from a “weak” to a “strong” one. Finally, the potential trade-off between democratisation and political stability seems to be mainly relevant to the degree of severity of reoccurring economic crises in countries with MD experience.
    Keywords: de facto and de jure political power; economic growth; structural breaks; Markov-switching chain; military dictatorship; political transition
    JEL: D72 O43 O57 P26
    Date: 2014–01–23
  24. By: Wälde, Klaus; Launov, Andrey; Posch, Olaf
    Abstract: It is common practice to estimate the volatility-growth link by specifying a standard growth equation such that the variance of the error term appears as an explanatory variable in this growth equation. The variance in turn is modelled by a second equation. Hardly any of existing applications of this framework includes exogenous controls in this second variance equation. Our theoretical ndings suggest that the absence of relevant explanatory variables in the variance equation leads to a biased and inconsistent estimate of the volatility-growth link. Our simulations show that this effect is large. Once the appropriate controls are included in the variance equation consistency is re- stored. In short, we suggest that the variance equation must include relevant control variables to estimate the volatility-growth link. --
    JEL: E32 O47 O41
    Date: 2013
  25. By: Misch, Florian; Gemmell, Norman; Kneller, Richard
    Abstract: This paper considers the effects of complementarity in private production between private and public inputs on optimal fiscal policy under the objective of growth maximization. Using an endogenous growth model with public finance and CES technology, it derives two central results. First, it shows that with complementarity, growth-maximizing fiscal policy is also affected by preference parameters, the degree of complementarity and the stock-flow properties of public inputs to private production. Second, it shows that optimal public spending composition and taxation are interrelated and also depend on the efficiency of public spending under growth maximization. Both results contrast with standard findings in the literature that are typically based on the assumption of Cobb-Douglas technology, and have important lessons for policy settings.
    Keywords: Complementarity, Economic growth, Productive public spending, Optimal fiscal policy,
    Date: 2014
  26. By: Noritaka Maebayashi (Graduate School of Economics, Osaka University); Takeo Hori (College of Economics, Aoyama Gakuin University); Koichi Futagami (Graduate School of Economics, Osaka University)
    Abstract: We construct an endogenous growth model with productive public capital and government debt, in which government debt is gradually adjusted to the target level. We examine how the governmentfs debt reductions affect the transitional dynamics and welfare of the economy. We show that fiscal consolidation has contractionary ef- fects on the economy in the short run, but has positive long-run effects on the growth of key macroeconomic variables. Fiscal consolidation based only on expenditure cuts improves social welfare and attains larger welfare gains than consolidation that com- bines a tax increase with expenditure cuts. Importantly, under fiscal consolidation based only on expenditure cuts, as the size and speed of the debt reduction increase, welfare improves even further.
    Keywords: Fiscal consolidation; Debt policy rule; Public capital; Welfare; Endogenous growth
    JEL: E62 H54 H63
    Date: 2012–04
  27. By: Schwab, Jakob
    Abstract: I incorporate imperfect capital markets in a standard neoclassical model of economic growth to analyze the long run effect of capital market globalization for develping countries. In autarky, domestic savings are invested and Solow-type growth emerges. In contrast, when a country that lags behind in the growth process opens up to international capital markets, FDI flows in. This lowers returns to investment and thus the possibility of domestic agents to build up capital. Although short term benefits in terms of increased wage rates occur, the wedge between the returns to investment and savings that is constantly reaped by foreign investors is foregone for domestic agents in the long run and - compared to the autarky case - national income is lower. --
    JEL: F21 F43 O16
    Date: 2013
  28. By: Mencinger, Jernej; Aristovnik, Aleksander; Verbic, Miroslav
    Abstract: The paper attempts to empirically explore the transmission mechanism regarding the short-term impact of public debt and growth. We examine and evaluate the direct effect of higher indebtedness on economic growth for countries in the EU which are in the epicentre of the current sovereign debt crisis. In comparison to similar empirical studies, our research will add to the existing literature by extending the sample of countries and providing the latest empirical evidence for a non-linear and concave (i.e. inverted U-shape) relationship. The empirical analysis primarily includes a panel dataset of 25 sovereign member states of the EU. Our sample of EU countries is divided into subgroups distinguishing between so-called ‘old’ member states, covering the period 1980–2010, and ‘new’ member states, covering the period 1995–2010. In order to account for the impact of the level of the debt-to-GDP ratio on the real growth rate of GDP, we employ a panel estimation on a generalized economic growth model augmented with a debt variable, while also considering some methodological issues like the problems of heterogeneity and endogeneity. The results across all models indicate a statistically significant non-linear impact of public debt ratios on annual GDP per capita growth rates. Further, the calculated debt-to-GDP turning point, where the positive effect of accumulated public debt inverts into a negative effect, is roughly between 80% and 94% for the ‘old’ member states. Yet for the ‘new’ member states the debt-to-GDP turning point is lower, namely between 53% and 54%. Therefore, we may conclude that the threshold value for the ‘new’ member states is lower than for the ‘old’ member states. In general, the research may contribute to a better understanding of the problem of high public debt and its effect on economic activity in the EU.
    Keywords: fiscal policy, public debt, economic growth, panel analysis, turning points, EU
    JEL: C33 E62 H63 O40
    Date: 2014–01
  29. By: Raggl, Anna K.
    Abstract: This paper employs a simple cross-country panel framework to assess the determinants of growth in Ghana's gross domestic product over the past four decades. A set of standard covariates is used to explain growth rates. Natural resource variables are included because the effects of natural resource rents in gross domestic products are of particular interest for Ghana. Using the preferred specification, Ghana's growth potential is predicted for the upcoming decades under different scenarios. The results indicate that under the most pessimistic scenario of no improvements in the determinants of growth compared with the period 2005-09, Ghana's gross domestic product per capita growth rates will stagnate at approximately 4.5 percent during the next decade and decrease thereafter. If the policy measures and country characteristics improve in the way they did in the past three decades, average per capita growth rates of roughly 5.5 percent could be reached during 2015-34. Taking into account the expected oil production until 2034 adds 0.6 percentage points to projected gross domestic product growth rates on average.
    Keywords: Achieving Shared Growth,Economic Theory&Research,Labor Policies,Environmental Economics&Policies,Inequality
    Date: 2014–01–01
  30. By: Isaac Ehrlich; Yong Yin
    Abstract: The apparently unrelenting growth in the GDP-share of health spending (SHS) has been a perennial issue of policy concern. Does an equilibrium limit exist? The issue has been left open in recent dynamic models which take income growth and population aging as given. We view these variables as endogenously determined within an overlapping-generations, human-capital-based endogenous-growth model, where a representative parent makes all life-cycle consumption and investment decisions, and life and health protection are subject to diminishing returns. Our prototype model, allowing for both quantity and quality of life as desired goods, yields equilibrium upper bounds for SHS. Our calibrated simulations also account for observed trends in reproductive choices, population aging, life expectancy, and economic growth. The analysis offers new insights about factors that drive long-term trends in aging and health spending and establishes a direct relation between health investments at young age and the equilibrium, steady-state rate of economic growth.
    JEL: I1 I15 J11 J17 J24 O4
    Date: 2014–01
  31. By: Loris Rubini
    Abstract: I study how growth, via structural transformation, affects volatility. Growth in the United States has led to a shift in resources from agriculture and manufacturing to services. Since the service sector is the least volatile, this shift can potentially reduce aggregate volatility. Existing studies have explored this idea by aggregating sectoral volatilities to the economy-wide volatility when the sector shares are independent of sectoral shocks. But theories of structural transformation highlight the strong links between these: sectoral shocks are the source of changes in sectoral shares. I incorporate this relationship by developing a fully specified dynamic model of structural transformation with real business cycles, and use it to derive the equilibrium relationship between sectoral and aggregate volatilities. I then feed into my model the measured sectoral volatilities and growth trends. I find that growth, via structural transformation, can account for one third of the reduction in the volatility of US GDP in 1984-2007 compared to 1947-1983. This contrasts existing work that suggests that aggregate volatility is largely influenced by sectoral composition.
    Date: 2013
  32. By: Kaiji Chen (Emory University)
    Abstract: The Chilean economy experienced a decade of sustained growth in aggregate output and productivity after the 1982 financial crisis. This paper analyzes the role of resource allocative efficiency on total factor productivity (TFP) of the manufacturing sector by applying the methodology of Hsieh and Klenow (2009) to the establishment data from the Chilean manufacturing census. We find that a reduction in resource misallocation accounts for about 46 percent of the growth in manufacturing TFP between 1983 and 1996. The improvement in allocative efficiency, moreover, is essentially driven by a reduction in the cross-sectional dispersion of output distortion. In particular, a reduction in the least productive plants' output subsidies is the most important reason for the reduction in resource misallocation during this period.
    Date: 2013
  33. By: Alessandro Palma (Department of Economics, Roma Tre University)
    Abstract: In this paper we investigate the trade-offs between growth and low carbon targets for both developing and developed countries for the period to 2035. The issues examined include two policy options for being on track to meet the 450 ppm target: (a) national/regional targets without international trade in carbon permits and (b) a global market in permits. Policy options are evaluated with an original dynamic CGE model which relies on the static GTAP-E structure. The model focuses on bilateral trade flows and links between economies and sectors that capture the realistic economy-wide nature of a globalized world. The results show higher costs of meeting the target than the average of previous models, although there are some previous studies that have costs in the same range. We then go on to investigate options for reducing these costs that are broadly consistent with a green growth strategy of supporting low carbon development. A green carbon fund financed through a levy on carbon taxation can benefit all parties. Potential larger benefits are associated with the investment of the green fund to foster energy efficiency.
    Keywords: Dynamic CGE Model, Climate Change Policies, Green Carbon Fund, Energy Efficiency
    JEL: C68 H23 O44 Q54
    Date: 2013–12
  34. By: Gonzalo Castex; Evgenia Dechter
    Abstract: This study examines changes in returns to formal education and cognitive skills over the last 20 years using the 1979 and 1997 waves of the National Longitudinal Survey of Youth. We show that cognitive skills had a 30%-60% larger effect on wages in the 1980s than in the 2000s. Returns to education were higher in the 2000s. These developments are not explained by changing distributions of workers’ observable characteristics or by changing labor market structure. We show that the decline in returns to ability can be attributed to differences in the growth rate of technology between the 1980s and 2000s.
    Date: 2013–08
  35. By: Bernardo Maggi (Sapienza Universita' di Roma); Daniel Muro (Universita' di Roma III)
    Abstract: With this study we intend to define a methodology capable to deal with the task of evaluating and planning the interdependent dynamics of growth for some European countries together with their foreign partners. To that aim we employ a nonlinear differential equations system representing a disequilibrium model based on a Schumpeterian evolutionary context with endogenous technology. We use such a model in order to disentangle the interrelationships occurring among countries for the critical variables considered. That is, we succeed in evaluating the contribution to growth of a country with respect to another one in terms of the variables involved. We address and corroborate the validity of our conjectures on the importance of the business services in the innovation and production processes by presenting also a minimal model. Further, we provide an evaluation of the convolution integral of our differential system to determine the necessary initial conditions of the critical variables for policy purposes. We then perform a sensitivity analysis to assess per each country the effectiveness of some possible efforts in order to gain stability.
    Keywords: Continuous Time Panel Econometrics, Distance, Programming, Growth, Stability, Sensitivity, Technology, Business Services.
    JEL: C33 C62 C61 O11 O33 O34
    Date: 2014–01
  36. By: Shahbaz, Muhammad; Mohammad, Mafizur Rahman
    Abstract: This paper explores the relationship between exports, financial development and economic growth in case of Pakistan. In doing so, the autoregressive distributed lag (ARDL) bounds testing approach to cointegration and error correction model are applied to test the long run and short run relationships, respectively. The direction of causality between the variables is investigated by the vector error correction model (VECM) Granger causality test and robustness of causality analysis is tested by applying innovative accounting approach (IAA). The analysis confirms cointegration for the long run relation between exports, economic growth and financial development in case of Pakistan. The results indicate that economic growth and financial development spur exports growth in Pakistan. The causality analysis reveals feedback hypothesis that exists between financial development and economic growth, financial development and exports, and, exports and economic growth. This study provides new insights for policy makers to sustain exports growth by stimulating economic growth and developing financial sector in Pakistan.
    Keywords: Exports, Financial Development, Economic Growth, Cointegration
    JEL: F14
    Date: 2014–01–15
  37. By: Sebri, Maamar
    Abstract: The renewable energy consumption-economic growth nexus is a growing area of research over the last few years, emanating to mixed results. The aim of the current study is to quantitatively synthesise the empirical literature on the subject using the meta-analysis approach. In particular, a meta-multinomial regression is employed to investigate the sources of variation in the direction of causality between renewable energy consumption and economic growth. This causal relationship takes the form of four hypotheses, namely the conservation, growth, neutrality and feedback hypotheses. To the best of author’s knowledge, this study constitutes the first meta-analysis undertaken on the renewable energy consumption-economic growth nexus. The empirical results reveal that the variation in the supported hypotheses is due to a number of characteristics including model specification, data characteristics, estimation techniques (cointegration methods and causality tests), and development level of the country on which a study was conducted.
    Keywords: Causality; economic growth; meta-analysis; multinomial logit model; renewable energy consumption.
    JEL: Q2 Q26 Q3 Q4
    Date: 2014–01–27
  38. By: Shahbaz, Muhammad; Sbia, Rashid; HAMDI, Helmi; Ur Rehman, Ijaz
    Abstract: This paper investigates relationship between information communication technology (ICT), economic growth and electricity consumption using data of UAE over the period of 1975-2011.We have tested the unit properties of variables and the Bayer and Hanck combined cointegration approach for long run relationship. The innovative accounting approach is applied to test the robustness of the VECM Granger causality findings. Our empirical results confirm the existence of cointegration between the series. We find that ICT adds in electricity demand but electricity prices lower it. Income growth increases electricity consumption. The non-linear relationship between ICT and electricity consumption is an Inverted U-shaped. The causality results reveal that ICT and electricity prices Granger cause electricity demand. The feedback effect exists between economic growth and electricity consumption
    Keywords: ICT, Growth, Electricity, UAE
    JEL: O3
    Date: 2014–01–16
  39. By: Manoel Bittencourt, Renee van Eyden and Monaheng Seleteng
    Abstract: In this paper we investigate the role of inflation rates in determining economic growth in fifteen sub-Saharan African countries, which are all members of the Southern African Development Community (SADC), between 1980 and 2009. The results, based on panel time-series data and analysis, suggest that in‡ation has had a detrimental effect to growth in the region. All in all, we highlight not only the fact that inflation has offset the prospective Mundell-Tobin effect and consequently reduced, the much needed, economic activity in the region, but also the importance of an institutional framework conducive to a stable macroeconomic environment as a precondition for development and prosperity in the community.
    Keywords: Inflation, Growth, SADC
    JEL: E31 O11 O42 O55
    Date: 2014
  40. By: Hattendorff, Christian
    Abstract: The paper contributes to the ongoing debate on the natural resource curse, which refers to a negative link between natural resource abundance and economic growth. It shows empirically that resource-rich countries appear to have a less developed financial system and investigates a potential mechanism by applying insights from the finance and trade literature. It tests whether the resource sectors' lower demand of short-term external credit negatively affects financial development of a resource-based economy. This is done with cross-sectional and panel analysis, using an instrument for credit demand based on exogenous geographic determinants. The results, however, suggest that export concentration rather than firms' credit demand drives the detrimental effect of resources on finance. --
    JEL: F10 G20 O13
    Date: 2013
  41. By: Zied Ftiti; Khaled Guesmi; Frédéric Teulon
    Abstract: This paper assesses the impact of oil prices on economic growth of the four major OPEC countries (United Arab Emirates, Kuwait, Saudi Arabia and Venezuela) over the period spanning from 03/09/2000 to 03/12/2010. We aim at complementing the results from existing analyses (mainly focused on oil-importing countries) by using the evolutionary co-spectral analysis as defined by Priestley and Tong (1973). We find that co-movements between oil and economic growth have different patterns depending of the studied horizons. This interdependence is a mediumlived phenomenon, revealed on a three years and one quarter horizon, being weak in the short-run (ten months). We show that oil price shocks in periods of world turmoil or during fluctuations of the global business cycle (downturn or growth, as for instance the 2008 financial crisis) have a significant impact on the relationship between oil and economic growth in oil-exporting countries.
    Keywords: oil prices shocks, stock markets, evolutionary co-spectral analysis, OPEC
    JEL: C14 C22 G12 G15 Q43
    Date: 2014–01–06

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