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on Financial Development and Growth |
| By: | Bosi, Stefano; Laurent, Thierry |
| Abstract: | This paper aims at providing a simple economic framework to address the question of the optimal share of investments in medical R&D in total public spending. In order to capture the long-run impact of tax-financed medical R&D on the growth rate, we develop an endogenous growth model in the spirit of Barro [1990]. The model focuses on the optimal sharing of public resources between consumption and (non-health) investment, medical R&D and other health expenditures. It emphasizes the key role played by the public health-related R&D in enhancing economic growth and welfare in the long run. |
| Keywords: | Public health ; Medical R&D; Public spending; Endogenous growth |
| JEL: | H51 I18 H23 O31 |
| Date: | 2011–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33789&r=fdg |
| By: | Rodrik, Dan (Harvard University) |
| Abstract: | Novelists have a better track record than economists at foretelling the future. Consider then Gary Shteyngart's timely comic novel "Super Sad True Love Story" (Random House, 2010), which provides a rather graphic vision of what lies in store for the world economy. The novel takes place in the near future and is set against the backdrop of a United States that lies in economic and political ruin. The country's bankrupt economy is ruled with a firm hand by the IMF from its new Parthenon-shaped headquarters in Singapore. China and sovereign wealth funds have parceled America's most desirable real estate among themselves. Poor people are designated as LNWI ("low net worth individuals") and are being pushed into ghettoes. Even skilled Americans are desperate to acquire residency status in foreign lands. This is sheer fantasy of course, but one that seems to resonate well with the collective mood. A future in which the U.S and other advanced economies are forced to play second fiddle to the dynamic emerging economies in Asia and elsewhere is rapidly becoming cliche. This vision is based in part on the very rapid pace of economic growth that emerging and developing economies experienced in the run-up to the global financial crisis of 2008-2009. Latin America benefited from a pace of economic development that it had not experienced since the 1970s, and Africa began to close the gap with the advanced countries for the first time since countries in the continent received their independence. Even though most of these countries were hit badly by the crisis, their recovery has also been swift. Optimism on developing countries is matched by pessimism on the rich country front. The United States and Europe have emerged from the crisis with debilitating challenges. They need to address a crushing debt burden and its unpleasant implications for fiscal and monetary policy. They also need to replace growth models which were based in many instances on finance, real estate, and unsustainable levels of borrowing. Japan has long ceased to exhibit any growth dynamism. And the eurozone's future remains highly uncertain--with the economic and political ramifications of its unraveling looking nothing less than scary. In such an environment, rapid growth in the developing world is the only thing that could propel the world economy forward and generate increasing demand for rich-country goods and services--the only silver lining in an otherwise dreary future. The question I address in this paper is whether this gap in performance between the developed and developing worlds can continue, and in particular, whether developing nations can sustain the rapid growth they have experienced of late. I will not have anything to say on the prospects for the advanced economies themselves, assuming, along with conventional wisdom, that their growth will remain sluggish at best. My focus is squarely on the developing and emerging countries and on the likelihood of continued convergence. |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp11-033&r=fdg |
| By: | Yongsung Chang; Andreas Hornstein |
| Abstract: | Many cases of successful economic development, such as South Korea, exhibit long periods of sustained capital accumulation rates. This empirical feature is at odds with the standard neoclassical growth model which predicts initially high and then declining capital accumulation rates. We show that minor modifications of the neoclassical model go a long way towards accounting for the transition dynamics of the South Korean economy. Our modifications recognize that (1) agriculture essentially does not use reproducible capital, and that during the transition period (2) the relative price of capital declines substantially, and (3) the nonfarm employment share increases substantially. |
| Keywords: | Economic growth ; Business cycles ; Economic development |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedrwp:11-04&r=fdg |
| By: | Barbara Annicchiarico (Faculty of Economics, University of Rome "Tor Vergata"); Alessandra Pelloni (Faculty of Economics, University of Rome "Tor Vergata") |
| Abstract: | We study the implications of having different sources of nominal rigidities on the relationship between productivity growth and shocks volatility in a model with procyclical R&D and imperfect competition in goods and labour markets. We show that the effects of uncertainty on long-term growth not only depends on the source of fluctuations, as recent literature shows, but also, and crucially, on whether prices and/or wages are rigid. |
| Keywords: | Productivity growth, volatility, nominal rigidities, uncertainty |
| JEL: | E32 E52 O42 |
| Date: | 2011–09–26 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:211&r=fdg |
| By: | Martinho, Vítor João Pereira Domingues |
| Abstract: | We built a model analyzing, through cross-section estimation methods, the influence of spatial effects and human capital in the conditional productivity convergence in the economic sectors of NUTs III of mainland Portugal between 1995 and 2002. Taking into account the estimation results, it is stated once again that the indications of convergence are greater in industry, and it can be seen that spatial spillover effects, spatial lag and spatial error, do not condition the convergence of productivity in the various economic sectors of Portuguese region in the period under consideration. In contrast the human capital condition the productivity convergence. |
| Keywords: | endogenous growth theory; spatial econometrics; Portuguese Regions |
| JEL: | O18 C20 C50 R11 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33712&r=fdg |
| By: | Martinho, Vítor João Pereira Domingues |
| Abstract: | We built a model analyzing, through cross-section estimation methods, the influence of spatial effects in the productivity conditional convergence in the economic sectors of NUTs III of mainland Portugal between 1995 and 2002. Taking into account the estimation results, it is stated once again that the indications of convergence are greater in industry, and it can be seen that spatial spillover effects, spatial lag and spatial error, do not condition the convergence of productivity in the several economic sectors of Portuguese region in the period under consideration. |
| Keywords: | endogenous growth theory; spatial econometrics; Portuguese Regions |
| JEL: | O18 C20 C50 R11 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33711&r=fdg |
| By: | ZHOU, Ge |
| Abstract: | This paper revisits the relationship between money and long-run growth when liquidity demand at the rm level is explicitly modelled. Through a set of sensitivity analyses, I nd that this relationship could be positive, negative, or display a hump shape depending on the size of average liquidity demand and the level of nancial development. These results explain why existing empirical studies report mixed ndings on the relationship. |
| Keywords: | Liquidity Demand; Endogenous Growth; Monetary Supply |
| JEL: | O42 E51 O16 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33765&r=fdg |
| By: | Edwyna Harris |
| Abstract: | Empirical studies have established that franchise extension has positive effects on long-run growth because democratisation leads to greater equality of access to resources. However, in the short-run franchise may lead to a redistribution of resources away from important sectors of an economy. This paper examines this proposition by considering the case of land reform in the colony of New South Wales between 1862 and 1882. Reform was a direct result of franchise extension in preceding years that attempted to reallocate land away from the wool sector to small agriculturalists. Wool producers tried to avoid redistribution of their holdings by expending resources on evading reform legislation. These were resources that could have been invested in productive activities and therefore, it is expected that franchise reduced short-run growth because of the institutional changes it induced. The results presented here confirm that evasion efforts acted to reduce both pastoral sector and total GDP in the short-run. |
| Keywords: | franchise, land reform, evasion, short-run growth |
| JEL: | P48 N57 N17 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2011-19&r=fdg |
| By: | Norris, Pippa (Harvard University) |
| Abstract: | Does democratic governance expand wealth and prosperity? There is no consensus about this issue despite the fact that for more than half a century, rival theories about the regime-growth relationship have been repeatedly tested against the empirical evidence, using a variety of cases, models and techniques. To consider the issues, Part I of this paper reviews and summarizes theories why regimes are expected to influence economic growth directly, either positively or negatively. After considering these debates, Part II discusses the technical challenges facing research on this topic and how it is proposed to overcome these. Part III presents the results of the comparative analysis for the effects of democratic governance on economic growth during recent decades. The descriptive results illustrate the main relationships. The multivariate models check whether these patterns remain significant after controlling for many other factors associated with growth, including geography, economic conditions, social structural variables, cultural legacies, and global trends. The evidence supports the equilibrium thesis suggesting that regimes combining both liberal democracy and bureaucratic governance are most likely to generate growth, while by contrast patronage autocracies display the worst economic performance. The conclusion considers the implications. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp11-035&r=fdg |
| By: | Junko Koeda (Faculty of Economics, University of Tokyo) |
| Abstract: | This paper applies a tractable two-regime macro-finance affine term structure model to empirically investigate macroeconomic effects on Japanese government bond (JGB) yields in and out of a zero interest rate environment. The estimated results qualitatively assess how differently deflation and low growth contribute to lowering longer-term JGB yields between the normal and zero rate regimes. |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf254&r=fdg |
| By: | Kenji Fujiwara (Kwansei Gakuin University) |
| Abstract: | This paper explores some implications of the comparison between feedback Nash and Stackelberg equilibria for growth and welfare in a `voracity' model. We show that as compared to the Nash equilibrium, the Stackelberg equilibrium involves a lower growth rate while it leaves both the leaders and the followers better o, i.e., the Stackelberg equilibrium is Pareto superior to the Nash equilibrium. |
| Keywords: | Dynamic game, Growth, Welfare, Feedback Nash equilibrium, Feedback Stackelberg equilibrium |
| JEL: | C73 O41 |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:77&r=fdg |
| By: | Cimoli, Mario; Porcile, Gabriel |
| Abstract: | The Latin American Structuralism (LAS) is a significant part of the heterodox tradition in the theory of long run growth, with a focus on the problems of developing economies which started their industrialization process when other regions had already accumulated substantial technological capabilities. The emergence of a centre-periphery system posed specific problems to growth and distribution in laggard economies which LAS discusses in a systematic way. In this paper we presented a simple model which,firstly, captures key insights of the LAS school, such as the persistency of technological asymmetries and structural heterogeneity; secondly, it can be used to analyze the impacts of shocks and policies based on how they affect supply-side and demand side parameters of the model; thirdly, it links more closely (Post-) Keynesian macroeconomics based on the BOP constraint with the evolutionary microeconomics concerned with the dynamics of learning; lastly, it can be used as a toolbox and a teachable model in the analysis of the interactions between structural change, technological catching up and long run growth. |
| Keywords: | technology gap - structural change -- structuralist model |
| JEL: | E12 E24 B50 O33 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:33800&r=fdg |
| By: | Subhayu Bandyopadhyay; Sajal Lahiri; Javed Younas |
| Abstract: | We examine the interaction between foreign aid and binding borrowing constraint for a recipient country. We also analyze how these two instruments affect economic growth via non-linear relationships. First of all, we develop a two-country, two-period trade-theoretic model to develop testable hypotheses and then we use dynamic panel analysis to test those hypotheses empirically. Our main findings are that: (i) better access to international credit for a recipient country reduces the amount of foreign aid it receives, and (ii) there is a critical level of international financial transfer, and the marginal effect of foreign aid is larger than that of loans if and only if the transfer (loans or foreign aid) is below this critical level. |
| Keywords: | Foreign aid program |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2011-023&r=fdg |