nep-gro New Economics Papers
on Economic Growth
Issue of 2016‒10‒23
five papers chosen by
Marc Klemp
Brown University

  1. Demographic Dynamics and Long-Run Development: Insights for the Secular Stagnation Debate By Cervellati, Matteo; Sunde, Uwe; Zimmermann, Klaus F.
  2. Informality in the Process of Development and Growth By Norman V. Loayza
  3. Foreign Direct Investment, Institutional Framework and Economic Growth By Hayat, Arshad
  4. Entrepreneurship as a Driver of Economic Growth: Evidence from Enterprise Development in Nigeria By FARAYIBI, Adesoji
  5. Sustainable water resource and endogenous economic growth By Zhang, Ning; Wu, Tao; Wang, Bing; Dong, Liang; Ren, Jingzhen

  1. By: Cervellati, Matteo; Sunde, Uwe; Zimmermann, Klaus F.
    Abstract: This paper takes a global, long-run perspective on the recent debate about secular stagnation, which has so far mainly focused on the short term. The analysis is motivated by observing the interplay between the economic and demographic transition that has occurred in the developed world over the past 150 years. To the extent that high growth rates in the past have partly been the consequence of singular changes during the economic and demographic transition, growth is likely to become more moderate once the transition is completed. At the same time, a similar transition is on its way in most developing countries, with profound consequences for the development prospects in these countries, but also for global comparative development. The evidence presented here suggests that long-run development dynamics have potentially important implications for the prospects of human and physical capital accumulation, the evolution of productivity and the question of secular stagnation.
    Keywords: demographic transition; income growth; long-term development; secular stagnation
    Date: 2016–10
  2. By: Norman V. Loayza (World Bank)
    Abstract: “Informality” is a term used to describe the collection of firms, workers, and activities that operate outside the legal and regulatory systems. It is widespread in the majority of developing countries—in a typical developing economy, the informal sector produces about 35 percent of gross domestic product and employs 70 percent of the labor force. This paper studies informality in the context of economic development by presenting a model and projections that link informality, regulations, migration, and economic growth. This analytical framework highlights the trade-offs between formality and informality, the relationship between the different types of informality, and the connection between them and the forces of labor, capital, and productivity growth. The paper models the behavior of the informal sector based on the following fundamental asymmetry: formal firms confront higher labor costs while informal firms face higher capital costs and lower productivity. Using mandated minimum wages as the policy-induced distortion, the model first studies the static allocation of formal and informal capital and labor in a modern economy. Second, it opens the possibility of labor migration from a rudimentary economy with an ample supply of labor (rural areas or less advanced neighboring countries). Third, the model analyzes the dynamic behavior of the formal and informal sectors, considering how they affect and are affected by economic growth and labor migration. Then, the paper presents projections for the size of labor informality, in the modern and rudimentary economies, in the next two decades for a large group of countries representing all regions of the world. The projections are based on the calibration and simulation of the model and serve to discuss its usefulness and limitations.
    Keywords: Shrinkage, Informality, Minimum Wage, Labor Costs, Economic Growth, Migration, Labor Market, Financial Constraints, Productivity
    JEL: E26 E24 J46 O17 O11 O15 O40 O47
    Date: 2016–10
  3. By: Hayat, Arshad
    Abstract: The paper explores the role of institutional quality on economic growth and more specifically the role it plays through foreign direct investment. The paper uses an economic performance relevant indicators of institutional quality (both in aggregate and individual indicators) to evaluate its direct impact on economic growth and an indirect impact on economic growth via foreign direct investment. The paper applied instrumental variable model to a larger dataset of 106 countries and found that besides a strong direct positive effect on economic growth the aggregate institutional quality variable as well as all individual variables except for the rule of law have a small but significant indirect impact on economic that takes place through boosting foreign direct investment.
    Keywords: Foreign Direct Investment, Institutional Quality, Economic Growth, Instrumental Variable
    JEL: E14 F23 F43
    Date: 2016–10–14
  4. By: FARAYIBI, Adesoji
    Abstract: This study provides an econometric analysis of the role of entrepreneurship in economic growth in Nigeria. The study also assesses the areas where the country has developed enterprise and innovations. Findings from empirical analysis confirm the roles of entrepreneurs as good drivers of economic growth in the country. Specifically, results reveal that credit to SMEs is statistically significant in the determination of economic growth, implying that increase in entrepreneurial financing has significant effect on economic growth in Nigeria. Particularly, the increase in the operations and activities of SMEs in Nigeria remains indispensable to the pursuit of economic growth and development as a nation. However, the major hindrance inhibiting entrepreneurship as a growth driver in Nigeria include; poor infrastructural facilities, inadequate start-up process, financial management problems, lack of strategic planning and other socio-cultural problems. The study recommends building an in-country entrepreneurial capacity by incorporating requisite enterprise trainings and development progammes into the nation’s education system at all levels. Also, government, banking institutions and the organized private sector should increase financial support for entrepreneurial oriented initiatives.
    Keywords: Entrepreneurship, Enterprise Development, SMEs, MSMEs, SMEDAN, YouWin
    JEL: L1 M2 M21
    Date: 2015–08–10
  5. By: Zhang, Ning; Wu, Tao; Wang, Bing; Dong, Liang; Ren, Jingzhen
    Abstract: Poyang Lake suffers from a severe shortage of water, due to the construction of the Three Gorges Dam and other hydropower stations along the upper Yangtze River. In this paper, we propose a two-sector endogenous growth model to investigate the effects of extractive water use and impoundment activities on the optimal sustainable growth path. To offset the negative impact of the extractive use on the regenerative capacities of water resources, the impoundment activities should grow at a constant rate. We also provide a numerical example to illustrate the mechanisms of the endowment and the regenerative capacities of water resources on the long-run economic growth path. We find out some theoretical evidence to support the construction of a water conservancy project to restore regeneration capacities of Poyang Lake.
    Keywords: Endogenous economic growth; Renewable water resources; Poyang Lake; Extractive use; Impoundment activities; Water sustainability
    JEL: O13 O4
    Date: 2015–12–27

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