Inequality affects economic performance through many mechanisms, both beneficial and harmful. Moreover, some of these mechanisms tend to set in fast while others are rather slow. The present paper ...(i) introduces a simple theoretical model to study how changes in inequality affect economic growth over different time horizons; (ii) empirically investigates the inequality—growth relationship, thereby relying on specifications derived from the theory. Our empirical findings are in line with the theoretical predictions: Higher inequality helps economic performance in the short term but reduces the growth rate of GDP per capita farther in the future. The long-run (or total) effect of higher inequality tends to be negative.
We replicate Reinhart and Rogoff (2010A and 2010B) and find that selective exclusion of available data, coding errors and inappropriate weighting of summary statistics lead to serious miscalculations ...that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies. Over 1946–2009, countries with public debt/GDP ratios above 90% averaged 2.2% real annual GDP growth, not −0.1% as published. The published results for (i) median GDP growth rates for the 1946–2009 period and (ii) mean and median GDP growth figures over 1790–2009 are all distorted by similar methodological errors, although the magnitudes of the distortions are somewhat smaller than with the mean figures for 1946–2009. Contrary to Reinhart and Rogoff's broader contentions, both mean and median GDP growth when public debt levels exceed 90% of GDP are not dramatically different from when the public debt/GDP ratios are lower. The relationship between public debt and GDP growth varies significantly by period and country. Our overall evidence refutes RR's claim that public debt/GDP ratios above 90% consistently reduce a country's GDP growth.
Balanced growth despite Uzawa Grossman, Gene M; Helpman, Elhanan; Oberfield, Ezra ...
The American economic review,
04/2017, Letnik:
107, Številka:
4
Journal Article
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The evidence for the United States points to balanced growth despite falling investment-good prices and a less-than-unitary elasticity of substitution between capital and labor. This is inconsistent ...with the Uzawa Growth Theorem. We extend Uzawïs theorem to show that the introduction of human capital accumulation in the standard way does not resolve the puzzle. However, balanced growth is possible if education is endogenous and capital is more complementary with schooling than with raw labor. We present a class of aggregate production functions for which a neoclassical growth model with capital-augmenting technological progress and endogenous schooling converges to a balanced growth path.
•HSR had impacts on socio-economic, territorial and transport systems in several countries.•The paper analyses the impacts induced by HSR services in Italy after ten years of operation.•Italy ...represents the first case of competitive HSR market without public subsidies.•Competition between HSR operators brought a significant decrease in ticket prices (-40%)•HSR passengers/year passed from 15 to 45 millions (+200%) in 10 years.•HSR contributed, in 10 years, to an increase of the rail-based transport accessibility up to + 30%•HSR contributed to an extra growth of per capita GDP of + 2.6–5.6% in 10 years.•Regional equity in terms of travel time accessibility decreased by 11% in 10 years.•Extension of the HSR network would increase accessibility (+18%), economic growth (+3.6%) and equity (+49%)
The deployment of HSR services in the recent decades has been, arguably, the most significant innovation for intercity travel around the globe. HSR has brought impacts which have been widely studied in different countries in relation to the different socioeconomic, territorial and transport characteristics.
This paper analyses the economic growth, the transport accessibility and the social impacts observed in Italy after ten years of HSR operation, as well as the estimated impacts of the system completion. The Italian case study is of particular interest since along the 1,467 km of new high speed line (300 km/h), a combination of major cities distances and a unique HSR competitive market, producing prices reductions and more daily trains, brought a 200% increase of HSR demand (from 15 to 45 millions of passengers/year). Estimations results show that, on average, HSR in Italy contributed to a significant increase in transport accessibility (+32%) for the zones along the HSR network, while only marginal for the others (+6%). Impacts on the economic growth show that HSR has contributed to an extra growth of per capita GDP of + 2.6% in 10 years and would have contributed to a further increase of 3.6% if the final project scenario (HSR_N) would had been completed by 2018. Regional (horizontal) equity impacts were evaluated in terms of the Gini indexes variations with respect to the distribution of the transport accessibility. It results that HSR in Italy has decreased equity in terms of users’ travel time accessibility of 11%, increasing the differences between the zones served by HSR and those not. If the HSR_N scenario would have been completed equity indices would have increased of 29% with respect to the pre-HSR 2008 scenario, thus reducing regional inequalities in the country.
Results show that the HSR project was a country-level “game changer” in Italy, suggesting that the wider economic benefits, the assumptions on market regulation, the effects on regional disparities and the compensatory measures should be included in the ex ante and ex post evaluation of similar projects.
It is often asserted with confidence that foreign direct investment (FDI) is beneficial for economic growth in the host economy. Empirical evidence has been mixed, and there remain gaps in the ...literature. The majority of FDI has been directed at developed countries. Single-country studies are needed, due to the heterogeneous relationship between FDI and growth, and because the impact of FDI on growth is said to be largest in open, advanced developed countries with an educated workforce and developed financial markets (although research has focused on developing countries). We fill these gaps with an improved empirical methodology to check whether FDI has enhanced growth in Spain, one of the largest receivers of FDI, whose gross domestic product growth was above average but has escaped scrutiny. During the observation period 1984-2010, FDI rose significantly, and Spain offered ideal conditions for FDI to unfold its hypothesized positive effects on growth. We run a horse race between various potential explanatory variables, including the neglected role of bank credit for the real economy. The results are robust and clear: The favorable Spanish circumstances yield no evidence for FDI to stimulate economic growth. The Spanish EU and euro entry are also found to have had no positive effect on growth. The findings call for a fundamental rethinking of methodology in economics.
We investigate the extent to which an increase in financial development affects the positive effect of foreign direct investment on economic growth. Although the financial sector is beneficial for ...economic growth, the effect of further financial development on growth is found to become insignificant. Using a dynamic panel threshold model on 62 middle- and high-income countries spanning the period 1987–2016, we re-examine the possible nonlinearity between finance, foreign direct investment, and growth. Consistent with the “vanishing effect” of financial development, we find significant evidence that foreign direct investment fosters growth in general, but the growth effect of foreign direct investment becomes negligible when the ratio of private sector credit to gross domestic product exceeds 95.6%. This finding is robust to different econometric methods, various subsamples and interaction analyses, and distinct financial development indicators.
•We examine how financial development is related to the link between FDI and growth.•We use a dynamic panel threshold model with GMM to address the endogeneity issue.•We identify a potential maximum financial development threshold.•The marginal effect of FDI on growth decreases as credit expands.•Too much finance is not necessarily better for the FDI-growth nexus.
This paper examines the robustness of explanatory variables in cross-country economic growth regressions. It introduces and employs a novel approach, Bayesian Averaging of Classical Estimates (BACE), ...which constructs estimates by averaging OLS coefficients across models. The weights given to individual regressions have a Bayesian justification similar to the Schwarz model selection criterion. Of 67 explanatory variables we find 18 to be significantly and robustly partially correlated with long-term growth and another three variables to be marginally related. The strongest evidence is for the relative price of investment, primary school enrollment, and the initial level of real GDP per capita.
We estimate the effect of broadband infrastructure, which enables high-speed internet, on economic growth in the panel of OECD countries in 1996-2007. Our instrumental variable model derives its ...non-linear first stage from a logistic diffusion model where pre-existing voice telephony and cable TV networks predict maximum broadband penetration. We find that a 10 percentage point increase in broadband penetration raised annual per capita growth by 0.9-1.5 percentage points. Results are robust to country and year fixed effects and controlling for linear second-stage effects of our instruments. We verify that our instruments predict broadband penetration but not diffusion of contemporaneous technologies like mobile telephony and computers.
In order to devise scientific and sustainable development strategy, it is vital to assess the quality of economic growth. As a useful complement to traditional economic indicators, GPI's most reputed ...virtue is its great improvement in evaluating environmental and social costs. In this paper we estimate the GPI for all 31 provinces in mainland China from 1997 to 2016. GPI estimation is highly sensitive to income inequality, climate change damage, and depletion of non-renewables. We address contestable methodological assumptions associated with the three items which have been usually ignored in empirical studies. We use the Atkinson index in place of the Gini index as a measure of income inequality. We avoid the problematic duplicated counting of climate change damage and the unjustified cost escalation factor in depletion of non-renewables. Our results show that: first, GPI per capita has recently declined in some provinces, unveiling a threat to social welfare and sustainability; second, the “relative threshold effect”—the progress of social welfare promotion is slower than the expansion of economic scale—has been found in many provinces; third, resource consumption and environmental pollution, especially water pollution and carbon emissions, would generate substantial welfare losses.
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