Environmental resilience and economic growth: Command economy's optimization and environmental Kuznets curve

This paper constructs a two-sector environmental growth model with explicit mathematical derivation and economic intuition in a social planning economy. Through the optimal allocation of man-made capital between the production sector and the environmental sector, this paper shows that the trade-off between economic growth and environmental protection exists only when an economy deviates from its steady state. We also provide short-run transitions for both the whole economic system and individual control and state variables. In addition, technological progress in the production sector benefits economic growth rate while the improvement of technology in the environmental sector has only level effects on economic variables. This paper ends with a link between the theory and a hot empirical issue — the environmental Kuznets curve (EKC) hypothesis.     

Environmental degradation as engine of undesirable economic growth via self-protection consumption choices

We analyze growth dynamics in an economy where the well-being of economic agents depends on three goods: leisure, a free access environmental good and a private good that can be consumed as a substitute for the environmental resource. The processes of production and consumption of the private good by each agent impose negative externalities on other agents through the depletion of the environmental good.This paper shows that, in such context, the existence of private substitutes for environmental goods may fuel an undesirable economic growth process. This process is driven by the continuous increase in agents' needs for private consumption generated by the progressive reduction in free consumption of the environmental good.     

Environmental performance,corruption and economic growth: global evidence using a new data set

This study investigates the relationship between environmental performance, corruption and economic growth using panel data of 87 countries covering the period from 2002 to 2012. The Environmental Performance Index is used for the first time to evaluate the environmental quality on economic growth. By employing both ‘static’ and ‘dynamic’ panel models, we find that environmental performance is positively related to economic growth and is more significant in non-Organization for Economic Cooperation Development (OECD) countries. Moreover, when corruption is incorporated, the empirical estimation results indicate that although lower corruption helps economic growth in non-OECD countries, the negative coefficients of the three interactive terms show that the positive effect of environment performance on economic growth will drop, while greater environmental performance combined with natural resource abundance inevitably leads to inefficient bureaucracies and hence disadvantageous economic growth. As a result, policymakers in non-OECD countries should carefully ensure better government quality when they exhibit strong environmental performance so as to avoid any disadvantageous impact upon economic growth.     

Adaptive economic growth

This paper develops an evolutionary theory of adaptive growth,understood as a product of structural change and economic self-transformation,based upon processes that are closely connected with but notreducible to the growth of knowledge. The dominant connectingtheme is enterprise, the innovative variations it generatesand the multiple connections between investment, innovation,demand and structural transformation in the market process.The paper explores the dependence of macroeconomic productivitygrowth on the diversity of technical progress functions andincome elasticities of demand at the industry level, and theresolution of this diversity into patterns of economic changethrough market processes. It is shown how industry growth ratesare constrained by higher-order processes of emergence thatconvert an ensemble of industry growth rates into an aggregaterate of growth. The growth of productivity, output and employmentare determined mutually and endogenously, and their values dependon the variation in the primary causal influences in the system.     

Foreign debt and economic growth

This paper empirically examines the relationship between government foreign debt and the growth rate of per capita GDP based on a total sample of 77 countries, as well as sub‐samples of various regions. Cross‐sectional estimates of the coefficient of foreign debt based on the total sample have a negative sign, but are not always statistically significant. Available data from African countries indicate that foreign debt and the growth rate of per capita GDP were negatively related at a high level of significance. For industrialized and Latin American sub‐samples, this relationship is negative but statistically insignificant. The sub‐sample Asian and other developing countries show a positive but insignificant relationship. JEL classification: F34, H6, O23.     

Political persistence and economic growth

Using data for a panel of 62 partly to fully democratic countries in the period 1984–2008, we provide evidence that political persistence (measured as the longest tenure in office of main political entities) is negatively associated with growth, after controlling for country and time fixed effects, and that this association is stronger in countries with low bureaucratic quality, where the cost of red tape is high. This evidence can be rationalized by means of a growth model with quality improvements where political connections with politicians can be exploited by low-quality producers to mitigate red tape costs, defend their monopoly position and prevent entry of higher-quality competitors. The model implies a negative relationship between persistence in office of politicians and economic growth in high red-tape countries, while no association is expected where red tape costs are low.     

HIV infection and economic growth

This paper presents an endogenous growth model based on a simplified ‘learning by doing’ model. In this model, a negative shock, namely HIV infection, leads to a stationary active population. We show it is possible to neutralize the effects of the HIV shock while at the same time insuring steady economic growth. However, this result vanishes in the absence of a policy to fight against the HIV shock. Further, an increase of the HIV infection rate negatively affects the growth rate of the economy. This last finding implies that a high and sustainable economic growth rate is incompatible with a high incidence of HIV infection of the active population.     

Entrepreneurial finance and economic growth

This paper develops a theory of the centralization of firms engaged in multi-market collusive agreements. A centralized organization (called the unitary or U-form) allows price coordination across several markets, whereas with decentralized (the multidivisional or M-form) firms the probability that the antitrust authority will find evidence of collusion on one market while investigating the other is lower. We show that the firm’s choice of internal structure depends to a large extent on product substitutability and the instruments used by the antitrust authority.     

Public deficits and economic growth

Considering an integrated area, this paper deals with the balance between the positive effects in the degree of economic cohesion resulting from R&D subsidies, temporarily granted from an imitator and less developed country, and the external negative effects arising from the eventual creation of excessive public deficits.We propose and numerically solve a model of a monetary union between two countries, one being innovator and the other imitator. Results suggest the pertinence of allowing for a temporary differentiation of fiscal discipline rules in favour of the less developed country. R&D subsidies granted by this country seem to lead to an easier catching-up without producing important negative external effects, also as not hurting severely the conditions for long-run sustainability of public accounts.     

Technological disemployment and economic growth

Very little early technical advance effects export expansion or import substitution. Because technological disemployment (that much misunderstood process) accompanies it, that advance increases aggregate income little, but merely concentrates it in fewer hands. Without continuing exogenous increase in aggregate demand, there will be little growth. This thesis is believed basic to understanding of economic growth. Corollaries relate to ‘export-led growth’, population growth, and the trend during growth in the distribution of income.     

On economic growth and development

The paper offers a subjectivist approach to economic growth and an institutional view of development. In particular, the term development regards the prevailing rules of the game and their effects on the key variables for economic activity to take off: property rights and productive entrepreneurship. And growth is deemed to be the result of favourable institutional environments where chances are exploited and individuals succeed in improving their living conditions. Methodological and normative investigation questions the validity of the recent and increasing literature on institutional design, where institutional economics actually plays only a modest role. JEL Codes B53, O10     

Energy distribution and economic growth

This research examines the physical constraints on the growth process. In order to run, maintain and build capital energy is required to be distributed to geographically dispersed sites where investments are deemed profitable. We capture this aspect of physical reality by a network theory of electricity distribution. The model leads to a supply relation according to which feasible electricity consumption per capita rises with the size of the economy, as measured by capital per capita. Specifically, the relation is a simple power law with an exponent assigned to capital that is bounded between 1/2 and 3/4, depending on the efficiency of the network. Together with an energy conservation equation, capturing instantaneous aggregate demand for electricity, we are able to provide a metabolic-energetic founded law of motion for capital per capita that is mathematically isomorphic to the one emanating from the Solow growth model. Using data for the 50 US states 1960–2000, we examine the determination of growth in electricity consumption per capita and test the model structurally. The model fits the data well. The exponent in the power law connecting capital and electricity is 2/3.     

Political instability and economic growth

This paper investigates the relationship between political instability and per capita GDP growth in a sample of 113 countries for the period 1950 through 1982. We define political instability as the propensity of a government collapse, and we estimate a model in which such a measure of political instability and economic growth are jointly determined. The main result of this paper is that in countries and time periods with a high propensity of government collapse, growth is significantly lower than otherwise. We also discuss the effects of different types of government changes on growth.     

Self-serving dictators and economic growth

We study the effect of fair institutions on growth. In our model, individuals are endowed with unequal entitlements to the economy's output. They can free-ride or cooperate. Cooperation is individually costly, but increases aggregate output and growth. Experimentally, we observe significantly less cooperation, when dictators chose high instead of low inequality. This effect is not observed when the degree of inequality is chosen randomly. Simple cross-country regressions provide basic macroeconomic support for interaction effects between the degree and the genesis of inequality. We conclude that economies granting equal opportunities are less likely to suffer retarded growth due to free-riding than economies with self-serving dictators.     

Heterogeneous capital, economic growth, and economic development

This paper asks how much does physical capital contribute to economic growth. It postulates that capital is heterogeneous because of embodied progress, and it structures the inquiry to account for differences in economic development. Embedded in data that cover 120 nations over 41 years are 35 derived capital stock series, whose characteristics include average ages stratified by development state. Growth accountancy proceeds by regression analysis cast in a production function context and repeated for each capital type. Those results help to establish the growth contributions of labor quantity and quality and capital quantity and quality. They also bear on neoclassical convergence.     

Population growth and economic growth: a reconsideration

The relationship between population growth and development has long been a controversial topic in the economic development literature. Early work by Hoover and Coale and more recent work by Blanchet suggest that high fertility suppresses per capita income growth. However, recent work by Kelley and Srinivasan are ambivalent about such a neo-Malthusian relationship between population growth and economic growth. The authors examine these conflicting positions. They emphasize that the rates of both population growth and income growth are endogenous variables within a general equilibrium framework. An endogenous growth model with endogenous fertility is then developed. It is found that when all exogenous variables are controlled for, there exists an inverse relation between population growth and economic growth. However, when some exogenous factors change, such as an improvement in technological progress, the relation becomes ambiguous. This suggests that the conflicting findings in the literature may be because of the presence of substantial heterogeneity in unobserved variables across countries and over time in cross-country panel data sets.     

Optimal monetary policy and economic growth

A question at the center of many analyses of optimal monetary policy is, why do central banks never implement the Friedman rule? To the list of answers to this question, we add neoclassical production (specifically, the Tobin effect) as one possible explanation. To that end, we study an overlapping generations economy with capital where limited communication and stochastic relocation create an endogenous transactions role for fiat money. We assume a production function with a knowledge externality (Romer style) that nests economies with endogenous growth (AK form) and those with no long-run growth (the Diamond model). The Tobin effect is shown to be always operative. Under CRRA preferences, a mild degree of social increasing returns is sufficient (but not necessary) for some positive inflation to dominate zero inflation and for the Friedman rule to be sub-optimal, irrespective of the degree of risk aversion.     

Energy,knowledge and economic growth

It is argued that the explosive growth experienced in much of the World since the middle of the 19th Century is due to the exploitation and use of fossil fuels which, in turn, was made possible by capital good innovations that enabled this source of energy to be used effectively. Economic growth is viewed as the outcome autocatalytic co-evolution of energy use and the application of new knowledge associated with energy use. It is argued that models of economic growth should be built from innovation diffusion processes, unfolding in history, rather than from a timeless aggregate production function. A simple ‘evolutionary macroeconomic’ model of economic growth is developed and tested using almost two centuries of British data. The empirical findings strongly support the hypothesis that growth has been due to the presence of a ‘super-radical innovation diffusion process’ following the industrial deployment of fossil fuels on a large scale in the 19th Century. Also, the evidence suggests that large and sustained movements in energy prices have had a very significant long term role to play.     

Introduction to economic growth

This introduces the symposium on economic growth.