nep-gro New Economics Papers
on Economic Growth
Issue of 2014‒09‒05
twenty-two papers chosen by
Marc Patrick Brag Klemp
Brown University

  1. Historical Missionary Activity, Schooling, and the Reversal of Fortunes: Evidence from Nigeria By Okoye, Dozie; Pongou, Roland
  2. No reversal of fortune in the long run: geography and spatial persistence of prosperity in Colombia, 1500-2005 By Adolfo Meisel
  3. Economic Reforms and Growth in Developing Countries By Tolga Aksoy
  4. Grease or sand the wheel? The effects of individual bribe payments on aggregate productivity growth By Julien Hanoteau; Virginie Vial
  5. Macroeconomic Performance, Individual Characteristics and Preference for Democracy By Maryia Akulava
  6. Carbon Dioxide Emissions, economic growth and energy mix: empirical evidence from 93 countries By Elena Stolyarova
  7. Immigration and Economic Growth By Robert E. Wright; Katerina Lisenkova; Marcel Merette
  8. Population Ageing and Technological Change By Robert E. Wright; Jouko Kinnunen; Katerina Lisenkova; Marcel Merette
  9. Coal Mining, Economic Development, and the Natural Resource Curse By Betz, Mike; Farren, Michael; Lobao, Linda; Partridge, Mark D.
  10. Human capital investment and population growth: An overlapping generations analysis for Malawi By Kristinn Hermannsson; Patrizio Lecca
  11. Migration, Diasporas and Culture: an Empirical Investigation By Paul Collier; Anke Hoeffler
  12. Estimating Dynamic Equilibrium Level of Economic Growth By Lal Almas; Nazim U. Hajiyev
  13. Growth and Inequality in Indonesia: Does Kuznets Curve Hold? By G.A. Diah Utari
  14. Stock Market and Economic Growth in China By Baotai Wang; D. Ajit
  15. The Contribution of Saving and Loan onn Economic Growth, The Case of Indonesia By Muhammad Fadli Hanafi; Berly Martawardaya; Andi M. Alfian Parewangi
  16. Growth analysis in developing countries: empirical issues and a small dynamic model By Mercado, P. Ruben; Cicowiez, Martin
  17. Export-led growth in Europe: Where and what to export? By Ana Paula Ribeiro; Paula Gracinda Teixeira Santos; Vitor Carvalho
  18. Economic growth and Income distribution: The case of Korean R&D Investment By Sungmoon Jung; Yeo Yeongjun; Jeong-Dong Lee
  19. The relationship between trade openness and economic growth: Some new insights on the openness measurement issue By Marilyne HUCHET-BOURDON; Chantal Le Mouël; Mariana Vijil
  20. Going beyond tradition:Growth and Mitigation Policies with Uncertain Climate Damage By Lucas Bretschger; Alexandra Vinogradova
  21. Research of Impact of Natural Resources Wealth on Economic Development and Human Capital Using Marx’s Production Scheme By Yadulla Hasanli
  22. The Biocultural Origins of Human Capital Formation By Marc Klemp; Oded Galor

  1. By: Okoye, Dozie; Pongou, Roland
    Abstract: This paper shows that historical missionary activity has had a persistent effect on schooling outcomes, and contributed to a reversal of fortunes wherein historically richer ethnic groups are poorer today. Combining contemporary individual-level data with a newly constructed dataset on mission stations in Nigeria, we find that individuals whose ancestors were exposed to greater missionary activity have higher levels of schooling. This effect is robust to omitted heterogeneity, ethnicity fixed effects, and reverse causation. We find inter-generational factors and the persistence of early advantages in educational infrastructure to be key channels through which the effect has persisted. Consistent with theory, the effect of missions on current schooling is larger for population subgroups that have historically suffered disadvantages in access to education.
    Keywords: Missions, Africa, Education, Reversal of Fortunes, Nigeria
    JEL: I20 N30 N37 N47 O15 Z12
    Date: 2014–08–20
  2. By: Adolfo Meisel
    Abstract: This paper examines the non-reversal of fortune thesis proposed by Acemoglu, Johnson, and Robinson (2002) in the light of the Colombian experience over the last 500 years. Using a total of 14 national population censuses and the record of tributary Indians in 1559, it is found that the population density of Colombian regions presented a high degree of persistence through time. Thus, the evidence indicates that those places that were prosperous circa 1500 remain so today, and viceversa. These results indicate that the long run influences of geography on regional economic disparities within a country are not negligible.
    Keywords: Comparative Economic History, Demographic Economics, Latin America.
    JEL: N16 J10 N36
    Date: 2014–08–21
  3. By: Tolga Aksoy
    Abstract: The last quarter of twentieth century has witnessed a dramatic decrease of restrictions in a number of areas such as international trade, capital account, and domestic financial sector in developing countries. Growth impacts of these liberalizations at large on the economy have long been investigated. Since the research to date focuses on the long-run impacts of reforms, much less is known about their short-run effects. Yet, this issue is important since possible short-run losses due to the adjustment costs may trigger dispute about the implementation of reforms. The aim of this paper is to answer the following questions: Is there any difference between short-run and long-run effects of reforms? Are reforms harmful in the short-run? What are the policy implications to alleviate the short-run costs of the reforms? In order to the aforementioned questions, this paper employs Pooled Mean Group (PMG) estimator developed by Pesaran et al. (1999). PMG estimator takes into consideration the cross-country heterogeneity and allows obtaining both the short-run and the long-run parameters of the model within the same estimation framework. Despite the short-run coefficients differ across groups, PMG estimator constrains the long-run coefficients to be homogenous over cross countries. This feature of the estimator is crucial for the research question of the paper since short-run adjustment to the reforms might depend on country-specific characteristics such as policy regimes and market imperfections. On the other hand, I expect that the long-run relationship between economic reforms and growth is homogeneous across countries. The main findings can be summarized as follows. In the long-run, international trade, capital account, and domestic financial reforms are positively associated with real per capita GDP. Moreover the positive long-run relationship between reforms and growth is robust to inclusion of de facto measures of reforms and quality of democracy variable. Having identified the long-run relationship, I take the short-run coefficients of the reforms for each country and analyze their determinants. Results indicate that, stimulating institutions preceding reforms is a prerequisite in order to mitigate the adverse short-run impacts. It is also worth noting that, countries gain from international trade reform already in the short-run provided that they are financially more closed.
    Keywords: Developing Countries (33 countries over the period 1973-2006), Growth, Developing countries
    Date: 2013–06–21
  4. By: Julien Hanoteau; Virginie Vial
    Abstract: While the Asian Paradox literature evidences a grease-the-wheel effect of corruption on individual firm productivity growth, the results call into question the aggregate effect of individual bribery. A large literature analyzes the drivers of productivity growth at the firm and sector levels, and suggests that corruption may affect these drivers through the resulting less favorable conditions for investment and technological progress, as well as distortions and misallocation in output and inputs markets. We are not aware of any literature that investigate the effects of micro-level corruption on aggregate productivity growth (APG) and its different components (intra-plant productivity growth; market shares reallocation between incumbents; and the effect of firm entry and exit in the industry). Filling this gap is important for understanding the dynamics by which corruption damages countries’ economic performance (Dal Bo and Rossi 2007) as measured by its main driver: productivity growth (Barro and Sala-i-Martin 2003). Using a unique panel dataset covering the population of Indonesian manufacturing establishments over the long period 1975-1995, we assess the cumulated effect of micro-bribe payments to aggregate productivity growth. Following Foster et al. (2001) methodology so as to model and decompose Aggregate Labour Productivity Growth (ALPG), and using establishment-level measures of productivity and bribe payments, we assess the contribution of three different corruption-classes of plants: plants paying zero, low, or high bribes. As a robustness check, and to account for the overestimation of the net entry effect, we use the Melitz and Polanec (2012) modeling approach that is a dynamic version of Olley and Pakes (1996).We demonstrate that the aggregate class of high-corruption plants contributes negatively to aggregate labour productivity growth, while the aggregate class of plants paying zero or low bribes contributes positively. Our results are robust to the use of two different measures of corruption. Thus, this paper shows that the two diverging effects of corruption, that is the grease- and the sand-the-wheel effects, coexist at different aggregation levels and for different classes of plants. While corruption has beneficial effects if kept low, the cost of high corruption in terms of aggregate productivity growth becomes evident.
    Keywords: Indonesia, Growth, Developing countries
    Date: 2014–07–03
  5. By: Maryia Akulava
    Abstract: What affects individual preference for different types of political regime? This paper investigates the determinants of individual preferences for democratic values and looks at differences in impact of influencing factors in transition and non-transition countries. It combines both individual and country level characteristics in order to see whether they impact personÕs attitude. I found that preferences for democracy are formed by impact of both individual and country-level factors. However, the direction of impact depends on the type of political regime and stage of economic development in the country. First, GDP per capita, growth of inequality and inflation are positively affecting personal preferences for democratic values in the democratic countries and negatively in the countries with autocratic regime. In turn, growth of unemployment in democratic countries decreases individual support of democracy and has a positive impact on support in the countries with autocratic regime. That agrees with the literature that beliefs and attitude towards political systems depend on countryÕs past experience. Age has different effect in transition and non-transition economies proving that being raised in different environments matters in terms of formation of political preferences.
    Keywords: Democracy, macroeconomic factors, individual characteristics, transition countries
    JEL: D7 J2 O1 P1 P2
    Date: 2014–08
  6. By: Elena Stolyarova
    Abstract: This paper provides an empirical analysis of CO2 emissions and economic growth, based on a panel dataset covering 93 countries over the period 1960-2008, and examines the challenge of country selection for homogeneous and appropriates groups. We have proposed a no parametric hierarchic clustering approach, based on 17 categorical variables, used the Multiple Correspondence Analysis (MCA) and the Hierarchical Clustering on Principal Components (HCPC). We have began ecnometric modeling by some model specification tests: parameters’ homogeneity, the unit root (IPS procedure) and Pedroni's cointegration tests. Finally Dynamic Panel Data and WITHIN models were estimated to explain the growth rate of per capita CO2 emissions. The results of the clustering indicate the optimal partition of 93 countries into 7 groups, each with its own characteristics. The unit root and cointegration tests show that the long-run relationship does not exist for any clusters and the nature of stationary is different between and into the groups. It’s found that the growth rate of per capita CO2 emissions depends positively on the growth rate of per capita GDP (short-run elasticity is between 0.3 and 0.79) and negatively on the growth rate of energy mix (between -0.025 and -0.13).
    Keywords: 93 countries (largest CO2 emitters), Energy and environmental policy, Macroeconometric modeling
    Date: 2013–06–21
  7. By: Robert E. Wright; Katerina Lisenkova; Marcel Merette
    Abstract: This paper provides empirical estimates of the impact of immigration on economic growth. A dynamic overlapping generations computable general equilibrium (OLG-CGE) model is used for this purpose. The basic structure of the model follows in the Auerbach and Kotlikoff tradition. However, the model takes into consideration directly age-specific mortality. This is analogous to “building in” a cohort-component population projection structure to the model, which allows more complex and more realistic demographic scenarios to be considered. The model is calibrated for Scotland. Scotland is an interesting case study since it is likely that both the population and the labour force will decrease in size considerably in the future. In addition, the population is expected to age rapidly over the coming decades. The analysis suggests that modest levels of net-migration, driven by higher levels of immigration, are associated with considerably higher levels of economic growth. See above See above
    Keywords: NA, General equilibrium modeling, Growth
    Date: 2013–06–21
  8. By: Robert E. Wright; Jouko Kinnunen; Katerina Lisenkova; Marcel Merette
    Abstract: To model the economics impacts of population ageing in high-income countrie by estimating the scale of required technological change. Presentation of a over-lapping generations computable general equilibrium model. Population ageing is associated with low growth and large welfare losses. The scale of technological change needed to compensate for this is very large in historical terms.
    Keywords: Calibration is for Scotland. , General equilibrium modeling, Macroeconometric modeling
    Date: 2014–07–03
  9. By: Betz, Mike; Farren, Michael; Lobao, Linda; Partridge, Mark D.
    Abstract: Coal mining has a long legacy of providing needed jobs in isolated communities but it is also associated with places that suffer from high poverty and weaker long-term economic growth. Yet, the industry has greatly changed in recent decades. Regulations, first on air, have altered the geography of coal mining, pushing it west from Appalachia. Likewise, technological change has reduced labor demand and has led to relatively new mining practices such as invasive mountain-top approaches. Thus, the economic footprint of coal mining has greatly changed in an era when the industry appears to be on the decline. This study investigates whether these changes along with coal’s “boom/bust” cycles have affected economic prosperity in coal country. We separately examine the Appalachian region from the rest of the U.S. due to Appalachia’s unique history and different mining practices. Our study takes a new look at the industry by assessing the winners and losers of coal development around a range of economic indicators and addressing whether the natural resources curse applies to contemporary American coal communities today. The results suggest that modern coal mining has rather nuanced effects that differ between Appalachia and the rest of the U.S. We do not find strong evidence of a resources curse, except that coal mining has a consistent inverse association with measures linked to population growth and entrepreneurship, and thereby future economic growth.
    Keywords: Coal, Economic Development, Regional Labor Markets
    JEL: O10 O13 R23
    Date: 2014–08–09
  10. By: Kristinn Hermannsson; Patrizio Lecca
    Abstract: Recent work on human capital accumulation has tended to abstract from population change. This is a reasonable simplification when analysing economies with relatively static populations, such as high income countries. However, many low income countries are undergoing rapid population change, which significantly influences the impact of human capital policies. This is acerbated as the rate of expansions of education systems is limited due to funding constraints and ability to train skilled teaching staff. To analyse this issue we construct an overlapping generations (OLG) numerical simulation model to simulate the simultaneous impact of human capital accumulation and population change. We calibrate this for Malawi, a small sub-Saharan country, which has made significant progress in expanding its education system, but is also projected to experience rapid population growth. Furthermore, there is evidence to suggest that demographics are not invariant of education policies. We explore how expansion of education (in particular secondary education of women) could influence population growth and how this modifies the impact of human capital policies. In aggregate we expect expanding education to have a positive economic impact. However, ex ante it is more difficult to predict impact of population growth due to influence of fixed factors such as land. On a per capita basis we expect education to have a positive impact, but population growth to dilute the per capita human capital accumulation. We are interested in exploring where the pivotal point lies w.r.t. to the growth of GDP per capita how this compares to current projections for population and education growth in Malawi.
    Keywords: Malawi, General equilibrium modeling, Developing countries
    Date: 2014–07–03
  11. By: Paul Collier; Anke Hoeffler
    Abstract: Using global data we examine the dynamics of migration from developing to developed countries. Origin and destination countries are characterized by substantial differences in incomes, political rights and cultures. Incentives as well as costs shape the decision to migrate. One powerful dynamic effect is that diasporas increase migration, mainly because they lower the cost of migration. Diasporas assist the next wave of migrants by overcoming the high cost of the emigration, in particular when the origin country is far away and poor. The interaction between the diaspora and cultural distance is also significant. Diasporas in culturally distant countries appear to be particularly useful in overcoming the cost of migration. Culturally distant diasporas are less likely to assimilate and maintain closer links with their country of origin, while diasporas from culturally similar countries are more likely to assimilate and thus be less useful to potential new migrants.
    Keywords: Migration, development, culture
    JEL: O15 Z1
    Date: 2014
  12. By: Lal Almas; Nazim U. Hajiyev
    Abstract: The economic condition in each country can be determined based on two ratios. One of them is inflation and the other is economic growth. The inflation level is an indicator of economic stability in the country; however, sustainable development is an indicator of economic development and the welfare of the country. Due to the fact that economic development is a vast phenomenon, it consolidates social, ecological, ethical and other factors. The main point here is provision of a fecund environment for sustainable economic development. We would like to note that economic growth cannot provide an adequate approximation of the long-term development; therefore, the provision of the dynamic equilibrium level of economic growth is essential. The research covers a time span of 1996 through 2010 and has the following goals: • Evaluation of the country’s economy and the determination of its dynamic equilibrium level of economic growth using Keynesian Domar model; • Determination of changes in the basic economic determinants by the conduction of Domar table; • Effect of application of obtained results in measurements dedicated to the support of economic growth. The models of economic growth reflect the real economic processes using some simplifications, but holding the main concepts. These models analyze the different points of the economic development and make possible the identification of certain consistencies and rules. We would like to note that the differentiating features of the economic growth models are their ability to grow only in account of capital and labor forces. We know that the economic development is possible under various circumstances such as quality and quantity of economic resources and their changes, economic technologies, technical progress and etc. However, it is not possible without an initial investment. For this reason, the Keynesian model is considered to be the most basic model of economic growth. Thus the main point in this model is determination of factors enabling the dynamic equilibrium growth model. During the modeling of the economic process the simplification and identification of initial inputs is also important. The Domar model is considered a simple Keynesian model and reflects this in the following way [3, 180], [2, 519-520], [4, 250]: (1) here, - the speed of the economic growth t period; - the capital efficiency limit; and - saving norm. As we can see the capital efficiency limit and saving norm are the basic variables of the model and can be estimated using the following quotations: (2) (3) Where - output growth in t period, - investment in the capital in t period, - savings in t period, - output level in t period, and σ - constants. It is obvious that all models are estimated under conditions of predefined limitations. This is due to the fact that a model cannot account for all conditions and terms of actual economic process, which can bring about additional complexity and inconsistencies. From this point of view, the Domar model consists of the following initial conditions [1, 231], [2, 519], [4, 249-250]: 1. The model is based only on the products/goods market; 2. The technology of the production is reflected by the Leontyev function, i.e. the limit of capital efficiency is constant; 3. The labor market is in a saturation condition and there is no lack of labor force; 4. The excessive supply on labor market supports the stable prices; 5. The growth in investments reflects the growth in total supply and total demand, i.e. both total demand and total supply increase only due to increase in investments; 6. There is no amortization of capital; and 7. Correlation between capital (K) and quantity of goods (Y) is (K/Y) reflecting the saving norm Due to the initial terms of the model ( ) is constant. The major conclusions drawn from the model are that limits of product output, investments and capital growth are equal to each other [2, 520], [4, 250]. In other words, (4) During the composition of this model for the Azerbaijani economy we considered the specifics of economic growth and the oil factor of the economy. Considering that the oil and natural gas resources are scarce and limited and the national economy cannot fully rely on it (Holland syndrome), necessary measurement and changes in the national economic policy should be taken. A number of policy measures were implemented in this direction such as establishment of oil fund, saving of oil revenue in foreign banks and etc. However, in order to continue the obtained economic growth, we need to establish and realize the complexity of the necessary measurements. The major role in the establishment of sustainable economic development in Azerbaijan is the identification of the dynamic equilibrium levels of economic growth and the qualitative and quantitative evaluation of actual deviations from this level. It will play a crucial role in the formation of the national economic policy. In order to evaluate the Domar model we should determine its basic inputs – saving norm and the efficiency limit of the capital. Therefore the econometric evaluation of equation (2) was as following: Table 1. the results of econometric evaluation of saving norm Variable ratio Standard deviation t-statistics Probability R_GDP 0.627099 0.0416 15.06642 0.000 C -561.353 300.9516 -1.86526 0.095 Determination ratio 0.94583 Average of the variable 4346.899 Clarified Determination ratio 0.94166 Standard deviation of variable 3197.992 Standard deviation of regression 772.393 Akayk information factor 16.260 Sum of squares of deviations 775568 Schwartz factor 16.355 Log relevance to reality -119.95 F-statistics 226.100 Statistics of Durbin-Watson 1.22534 Probability (F-statistics) 0.00003 Source: the valuation was made by author It can be seen from the results that the model is significant from an economic point of view. According to the determination ratio, 95% of increase in real savings during 1997-2000 can be explained by the increase in real GDP during this period. At the same time, the high level of t-statistics (15.066) shows that the GDP taken as an explanatory variable has a really large impact on other variables within the model. The model supports the stability test and coefficient test at the required level and provides the basis for the economic conclusions. According to the results of the model increase in GDP by one million Azeri Manat (AZN) brings about an increase in savings by 0.62 million AZN. In other words, if our country’s population spends one AZN, it reflects as 38 kopeks of consumption and 62 kopeks for saving. From the population’s point of view this result seems unrealistic. In reality, an increase in income brings about an increase in consumption. It is explained by the fact that the consumption demands of the population are not met yet. However, considering that the inputs of the model contained information not only about population, but also about the government, companies and other organization, we believe that the obtained results can be considered as reliable. Thus the governmental bodies and companies direct their revenues to savings rather than consumption, which forms the savings base of our country. Now let us identify the limit of capital efficiency. For this purpose we observed the relation between the growth of real GDP and capital investments using the econometric evaluation tools: Table 5. The results of evaluation of limit of capital efficiency Variable ratio Standard deviation t-statistics Probability R_CI 0.153436 0.024873 6.168736 0.0000 Determination ratio 0.377072 Average of variable 978.5786 Clarified Determination ratio 0. 377072 Standard deviation of variable 844.4061 Standard deviation of regression 666.4543 Akayk information factor 15.91057 Sum of squares of deviations 5774098. Schwartz factor 15.95622 Log relevance to reality -110.3740 Statistics of Durbin-Watson 0.97980 Source: the valuation was made by author
    Keywords: Azerbaijan, Growth, Impact and scenario analysis
    Date: 2014–07–03
  13. By: G.A. Diah Utari
    Abstract: To be completed. To be completed. To be completed.
    Keywords: Indonesia, Growth, Growth
    Date: 2014–07–03
  14. By: Baotai Wang; D. Ajit
    Abstract: This study investigates the impact of stock market development on economic growth in China. To this end, the quarterly data from 1996 to 2011 are used and the empirical investigation is conducted within the unit root and the cointegration framework. The results show that the relationship between the stock market development, proxied by the total market capitalization, and economic growth is negative. This result is consistent with Harris’ (1997) finding that the stock market development generally does not contribute positively to economic growth in developing countries if the stock market is mainly an administratively-driven market. See above See above
    Keywords: China, Finance, Growth
    Date: 2013–06–21
  15. By: Muhammad Fadli Hanafi; Berly Martawardaya; Andi M. Alfian Parewangi
    Abstract: In order to systematically analyze how savings collected from the budget surplus and loan distributed for investment by economic sectors, working capital by economic sectors, and loan affect growth in the long term. The research uses the Solow and Swan model as explained by Mankiw, Romer, and Weil (1992). Type of data is data panel using OLS and GMM estimation technique, and also Granger Test using VECM for the long run bidirectional analysis Savings and Loan perform positive and significant role on economic growth
    Keywords: Indonesia, Growth, Growth
    Date: 2014–07–03
  16. By: Mercado, P. Ruben; Cicowiez, Martin
    Abstract: Most developing countries are small open economies; they have quite limited absorptive capacity for new physical and human capital; face credit constraints in international financial markets; and, last but not least, they are usually far from the steady state. Thus, transitional dynamics starting from actual initial conditions matters, and matters a lot. To account for these features in the simplest way, we develop a small intertemporal model suitable for growth analysis in developing countries. We discuss each model equation, variable and parameter from an empirical point of view; we analyze the model’s main dynamic features; and we present illustrative simulations for a “typical” developing economy. We find a rich transitional dynamics induced by the existence of absorptive capacity functions and a foreign debt constraint. We also find that for many relevant variables and parameters there are still problems of lack of data and estimates. Thus, a good deal of empirical work on these issues is needed to make growth analysis in developing countries operational for applied policy analysis.
    Keywords: economic growth modeling, developing countries
    JEL: O11 O41
    Date: 2013–03
  17. By: Ana Paula Ribeiro; Paula Gracinda Teixeira Santos; Vitor Carvalho
    Abstract: From the late 70s onwards, the literature has produced numerous studies, mostly for developing countries, relating exports and economic growth. Since several European Union (EU) countries face strong recessions in the sequence of the economic crisis and the related fiscal consolidation measures, exports emerge as a meaningful source of growth for developed countries with rather stagnant domestic markets. In this context, we assess if and how the product and the destination structures of exports shape the growth dynamics for the EU countries. Estimation of fixed effects model using panel data of 23 European Union (EU) members over the period 1995-2010. We find that economic growth is foster through export specialization in high value-added products, such as manufactures and high-technology. Moreover, we find evidence that higher growth is fostered by export diversification across partners while enlarging the portfolio of partners, mainly to less developed and more distant countries, has negative impacts on European growth. Unambiguously, relative concentration of exports should be directed towards higher growth countries.
    Keywords: European Union (EU)., Growth, Macroeconometric modeling
    Date: 2013–06–21
  18. By: Sungmoon Jung; Yeo Yeongjun; Jeong-Dong Lee
    Abstract: In the article, we analyze that how the innovative activity affects to income redistribution, which have been considered for prolonged period. The effect of spending on R&D usually affects to higher income level; however, the lower income group also becomes easier to approach to high-tech devices since the internet have developed. Both of groups could earn same information in the same time in spite of different income level. According to the fact, we examine how the R&D investment impact to the each income group. We employ the dynamic Computational General Equilibrium (CGE) model in order to measure the aggregate effect, reflecting the channels of the positive and negative effects and considering the reactions of individual industries and economic agents that it follows in change of public and private R&D expenditure. The result reveals that the R&D spending affect positively to economic growth, but it brings about negative effect on income distribution. In addition, we find a skill-biased technological change in South Korea.
    Keywords: South Korea, General equilibrium modeling, Growth
    Date: 2014–07–03
  19. By: Marilyne HUCHET-BOURDON; Chantal Le Mouël; Mariana Vijil
    Abstract: Reviewing the existing literature on openness and growth shows that there is not a clear definition of trade openness. For many authors trade openness implicitly refers to trade policy orientation and what they are interested in is to assess the impact of trade policy or trade liberalization on economic growth. For other authors however, trade openness is a more complex notion covering not only the trade policy orientation of countries but also a set of other domestic policies (such as macroeconomic policies or policies related to law and institutions for instance) which altogether make the country more or less outward oriented. In such a case, what the authors are interested in is to measure the impact of global policy orientation on economic growth. Finally, one may adopt an even more global view of trade openness covering not only the policy dimension but also all other non-policy factors that clearly have an impact on trade and on the outward orientation of countries. Factors such as geography and infrastructures, for instance, do affect trade and the outward orientation of countries, whatever their policy orientation. Many different measures of trade openness have been proposed and used in empirical analyses of the relationship between openness and growth. They more or less relate to the three alternative definitions of openness mentioned above. In line with the trade policy orientation definition, some authors have retained measures based on trade restrictions/distortions, such as average tariff rates , average coverage of quantitative barriers, frequency of non-tariff barriers or collected tariff ratios (see, e.g., Pritchett, 1996; Harrison, 1996; Edwards, 1998, Yanikkaya, 2003). Obviously these indicators are very imperfect partial measures of the overall restrictions/distortions induced by trade policies. Furthermore, data required to compute such indicators are most often available for only a limited set of countries and years. Corresponding to the global policy orientation definition, various “qualitative” indices allowing for classifying countries according to their trade and global policy regime have been proposed (see, e.g., the 1987 World Development Report outward orientation index, the Sachs and Warner, 1995, openness index or the Wacziarg and Welch, 2003). Such indices unfortunately provide only a very rough classification of countries (from rather closed to rather open). Also many of the data required to construct these indices are available only for a few countries and at one point in time. Finally, measures based on trade volumes, which have been very commonly used in empirical analyses, rather relate to the most global definition of trade openness. Trade dependency ratios are the most popular of these measures (see, e.g., Frankel and Romer, 1999; Irwin and Tervio, 2002; Frankel and Rose, 2002; Dollar and Kraay, 2004 and Squalli and Wilson (2011) for a recent contribution). Their main advantage is that the data required to compute them are available for nearly all countries and over a rather long period. Their main weakness is that they are outcome-based measures and as such are the result of very complex interactions between numerous factors so that it is never clear finally what such measures empirically capture exactly. Another limitation of these trade dependency ratios lies in their endogeneity in growth regressions, which requires specific estimation techniques (such as instrumental variables techniques as in Frankel and Romer, 1999, and Irwin and Tervio, 2002, or identification through heteroskedasticity techniques as in Lee et al., 2004). This last limitation may in fact be extended to all trade openness measures and constitutes the second shortcomings in existing empirical evidence on openness and growth that has been pointed out by Rodriguez and Rodrik (2001). As argued by Lee et al. (2004), all measures of openness are generally closely linked to the growth rate. Hence, this is likely that all measures of openness are jointly endogenous with economic growth, which may cause biases in estimation resulting from simultaneous or reverse causation. Various methods have been used to remedy this problem and there is still a debate among scientists about which method is the most appropriate (see, e.g., Dollar and Kray, 2004, and Lee et al., 2004). In this paper, we adopt the most global definition of trade openness and our aim is to contribute to the on-going debate on the growth effect of trade openness. Relative to the existing literature, our contribution is the following. Firstly, we argue that trade openness is a multidimensional concept that cannot be summarized to a single measure such as the most commonly used trade share (calculated as the sum of imports and exports over GDP). Secondly, recent developments in growth theory and in international economics have provided new insights on the relationship between trade and growth, which call for additional measures of trade openness. Hence, we propose a more elaborated way of measuring openness taking into account two additional dimensions of countries’ integration in world trade: quality and diversification. Endogenous growth theory has provided results on the positive growth effect of trade through innovation incentives, technology diffusion and knowledge dissemination (see, e.g., Young, 1991; Grossman and Helpman, 1991). Inspired from these theoretical developments, Hausmann et al. (2007) proposed an analytical framework linking the type of goods (as defined in terms of productivity level) a country specializes in to its rate of economic growth. In order to test empirically for this relationship, they then defined an index aimed at capturing the productivity level (or the quality) of the basket of goods exported by each country. Their growth regression results showed that countries exporting goods with higher productivity levels (or higher quality goods) have higher growth performances. These results suggest that what countries export matter as regards the growth effect of trade. Hence our measurement of trade openness should consider this quality dimension as a complement to the volume (or the dependency) dimension. Monopolistic competition trade models with heterogenous firm and endogenous productivity provide theoretical results supporting the positive growth effect of trade through both increased variety of products and improved productivity due to the exit of less efficient firms (e.g., Melitz, 2003). Based on this literature, Feenstra and Kee (2008) developed a model allowing to link, for each country, relative export variety to average productivity and then to GDP growth. Using Feenstra (1994)’s index of export variety, they tested this relationship on the basis of exports to the US for a panel of 48 countries over the period 1980-2000. Their empirical results indicated that there is a positive and significant relationship between export variety and average productivity. Once again these results suggest that the structure of countries’ exports matter regarding the growth effect of trade. Hence, our measurement of trade openness should also consider this variety/diversification dimension. Our empirical application draws on the Barro and Lee (1994)’s model, which has been extended to take into account our set of three indicators of trade openness: trade dependency ratio, quality index and diversification index. Barro and Lee (1994) study the empirical determinants of growth. They are in line with the endogenous growth theory which calls into question diminishing returns. Unlike the usual neoclassical growth model for a closed economy (Solow (1956)), endogenous growth model questioned the source of technology (human capital, role of government for instance). Openness may play an important role for developing countries in particular: it may help them to import technology from developed countries and thus increase human capital in these countries. We include some proxy for openness in our empirical model. Estimations are performed on annual data over the period 1980-2004 for an unbalanced panel of 170 countries. We use a generalized method of moments (GMM) estimation approach developed for dynamic panel data models in order to deal with potential endogeneity biases due to omitted variables, simultaneity and measurement error. Our results confirm that countries trading higher quality products grow more rapidly. The preliminary results of the impact of diversification are less obvious. They seem to depend on the indicator of diversification that is used. It is expected that countries trading more diversified products could grow more rapidly.
    Keywords: 170 countries, Trade issues, Growth
    Date: 2013–06–21
  20. By: Lucas Bretschger (ETH Zurich, Switzerland); Alexandra Vinogradova (ETH Zurich, Switzerland)
    Abstract: Climate physics predicts that the intensity of natural disasters will increase in the future due to climate change. One of the biggest challenges for economic modeling is the inherent uncertainty of climate events, which crucially affects consumption, investment, and abatement decisions. We present a stochastic model of a growing economy where natural disasters are multiple and random, with damages driven by the economy's polluting activity. We provide a closed-form solution and show that the optimal path is characterized by a constant growth rate of consumption and the capital stock until a shock arrives, triggering a downward jump in both variables. Optimum mitigation policy consists of spending a constant fraction of output on emissions abatement. This fraction is an increasing function of the arrival rate, polluting intensity of output, and the damage intensity of emissions. A sharp response of the optimum growth rate and the abatement share to changes in the arrival rate and the damage intensity justifies more stringent climate policies as compared to the expectation-based scenario. We subsequently extend the baseline model by adding climate-induced fluctuations around the growth trend and stock-pollution effects, demonstrating robustness of our results. In a quantitative assessment of our model we show that the optimal abatement expenditure at the global level may represent 0.9% of output, which is equivalent to a tax of $71 per ton carbon.
    Keywords: Climate policy; uncertainty; natural disasters; endogenous growth.
    JEL: O10 Q52 Q54
    Date: 2014–08
  21. By: Yadulla Hasanli
    Abstract: The purpose of the research is to unveil conditions for sustainable development by studying relationship between natural (I) and non-natural (II) wealth based on Carl Marx’ re-production scheme. General Equilibrium Model extented to Marx's Production Schema Realization results of the model showed that the growth of the oil industry's tend to be higher than non-oil sector . The process continues in this manner creates the move toward an increase in the income share of the oil sector . This leads to the one-sided development of the economy ( in the oil sector ) that is regarded as a sign of "Dutch disease". Note that natural resources ( natural capital ) by its nature can be divided into renewable and nonrenewable resources . Renewable natural resources ( natural capital ) , for example , is water. For nonrenewable resources can be show as oil, gas and ferrous metals. The volume of production of oil and gas resources are falling sharply after the exhaustion of these resources. Thus, physical capital and labor resources gathered in the oil and gas sector ( human capital ) is ineffective , therefore, the capital , as well as low levels of the workforce is employed. The main reasons for the growth of the income in oil sector compared to th other sectors is that natural resouces not fully paid for their contribution in total income. This factor reduces the demand in oil sector for the of non-oil sector, and in turn the growth rate of non-oil sector comes down. From our scheme it becomes clear that repayment of money to the the restoration of natural capital from share of income in the oil sector could be the main condition for the balanced development of the economy .
    Keywords: Azerbaijan, General equilibrium modeling, Impact and scenario analysis
    Date: 2014–07–03
  22. By: Marc Klemp (Brown University); Oded Galor (Brown University)
    Abstract: This research presents the first evidence that moderate fecundity was conducive to long-run reproductive success within the human species. Exploiting an extensive genealogy record for nearly half a million individuals in Quebec during the seventeenth and eighteenth centuries, the study traces the number of descendants of early inhabitants in the subsequent four generations. Using the time interval between the date of marriage and the first live birth as a measure of reproductive capacity, the research establishes that while a higher fecundity is associated with a larger number of children, an intermediate level maximizes long-run reproductive success. The finding further indicates that the optimal level of fecundity was below the population median, suggesting that the forces of natural selection favored individuals with a lower level of fecundity. The research lends credence to the hypothesis that during the Malthusian epoch, natural selection favored individuals with a larger predisposition towards child quality, contributing to the onset of the demographic transition and the evolution of societies from an epoch of stagnation to sustained economic growth.
    Date: 2014

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