Income and Price Elasticities of Demand in South Africa: An Application of the Linear Expenditure System

This paper investigates the expenditure patterns of South African households using detailed cross‐sectional expenditure and price data that varies across region and time. Linear expenditure system parameter estimates are used to calculate income and price elasticities for a number of product categories at different points of the income distribution. We find substantial variation in the price and income elasticities of demand for items across the income distribution, with the bottom quartile being extremely sensitive to increases in the price of food and clothing items, and the top quartile being as sensitive as households in developed countries.     

Searching for empirical linkages between demographic structure and economic growth

Demographic structure could affect economic growth through many channels. However, little is known about how demographic structure affects economic growth since no study has examined an extensive collection of channels through which demographic structure could affect economic growth in a single context. This paper overcomes this limitation by examining 45 potential mediating variables between demographic structure and economic growth. A causal search algorithm is used to identify channels through which demographic structure affects economic growth. Our results suggest that demographic structure affects economic growth differently between developed and developing countries. For developed countries, we find that an increase in the share of middle-aged workers has a positive effect on economic growth through institutions, investment and education channels. On the other hand, an increase in the share of the senior population has a negative effect on economic growth through institutions and investment channels. For developing countries, we find (but with weak evidence) that an increase in the share of young workers has a negative effect on economic growth through investment, financial market development and trade channels.     

Debt,seigniorage, and the Growth Laffer Curve in developing countries

The endogenous growth literature established the existence of an inverted-U curve between taxes and economic growth, namely a Growth Laffer Curve, but empirical evidence on this relationship in developing countries is rather limited. Given that seigniorage and public debt are also important means of financing public spending in these countries, we take into account in this paper their respective impacts on growth, as they might deform the existing relationship between taxes and growth. To this end, we develop a growth model with public investment as the engine of perpetual growth, and look for the effect of debt, tax and money financing on economic growth. We study in particular the way fiscal and monetary policies deform the Growth Laffer Curve in developing countries. An empirical section based on a panel of 100 developing countries over the period 1980–2010 provides both OLS-Fixed Effects and GMM-system estimations that support our theoretical conclusions, namely the existence of Growth Laffer Curves indexed by the levels of debt and of seigniorage.     

THE GINI CONCENTRATION INDEX: A REVIEW OF THE INFERENCE LITERATURE

More than a century ago, Corrado Gini proposed his well-known concentration index for measuring the degree of inequality in the distribution of income and wealth. His index is still extremely relevant and widely used in several fields of research and application. In this paper, we focus on the inferential properties of the Gini index, and discuss the main directions of analysis proposed in the literature. The aim of the paper is to provide a comprehensive review of the main developments on the inferential aspects of the Gini concentration ratio. We feel that this work can provide a valuable contribution to those scholars who are approaching the large amount of literature on the inferential properties of the Gini index.     

Population,pensions, and endogenous economic growth

We study the effect of a declining labor force on the incentives to engage in labor-saving technical change and ask how this effect is influenced by institutional characteristics of the pension scheme. When labor is scarcer it becomes more expensive and innovation investments that increase labor productivity are more profitable. We incorporate this channel in a new dynamic general equilibrium model with endogenous economic growth and heterogeneous overlapping generations. We calibrate the model for the US economy and obtain the following results. First, the effect of a decline in population growth on labor productivity growth is positive and quantitatively significant. In our benchmark, it is predicted to increase from an average annual growth rate of 1.74% over 1990–2000 to 2.41% in 2100. Second, institutional characteristics of the pension system matter both for the growth performance and for individual welfare. Third, the assessment of pension reform proposals may depend on whether economic growth is endogenous or exogenous.     

Does the labor-income process contain a unit root? Evidence from individual-specific time series

Calibrations of models related to life-cycle behavior of consumption and saving often invoke the important assumption of a unit root in individuals׳ labor-income process. We for the first time test this assumption using methods for univariate time series. Based on longitudinal register data from 1968 to 2005, we first estimate an autoregressive model for each individual using a method for approximately median-unbiased estimation. We then exploit the resulting distribution of the individual-specific estimates to draw inference about the presence of a unit root. Results indicate that earnings for the representative worker are governed by a process where shocks to earnings have moderate persistence and are both economically and statistically significantly different from having permanent effects. These results question the heavy use of unit-root processes for earnings.     

Production complementarities and flexibility in a model of entrepreneurship

The focus of this paper is the flexibility in working hours as a motive for entrepreneurship. The model exhibits inflexibilities for workers and entrepreneurs, which arise due to complementarities in production. In addition, it allows for volatile value of leisure to make flexibility in hours desirable. Differences in occupation-specific flexibility, disciplined with the observed patterns in hours (level, persistence, dispersion) and income (persistence, dispersion), can explain relatively low income levels of entrepreneurs in the US and the occupation-specific distributions of working hours and income. Policy relevance of the model features is discussed using experiments of workweek restrictions and income taxation.     

Country Differences in Material Deprivation in Europe

This paper assesses to what extent differences in the characteristics of individuals (micro‐level perspective) and country‐specific factors (macro‐level perspective) can explain country differences with respect to material deprivation levels. Thus, our work aims to simultaneously consider the macro dimension and the predominantly individually‐oriented study field of material deprivation using multilevel techniques. We make use of the European Union Statistics on Income and Living Conditions. Our results show that country‐specific factors seem to be much more relevant than individual effects in explaining country differences in material deprivation. We estimate that the introduction of country‐specific factors reduces the proportion of total variance due to between‐country differences in deprivation by 72.7 percent, while individual‐level variables reduce this proportion by only 9.4 percent. We also show, through interaction variables, that the effect of sociodemographic characteristics can be shaped by institutional and structural factors, especially by the level of GDP.     

Urban-rural imbalance and Tourism-Led Growth in China

This study investigates the structural effect of tourism on alleviating the urban-rural dichotomy and the moderating effect of a dual urban-rural economic structure on Tourism-Led Growth (TLG). A theoretical framework followed by an empirical analysis based on relevant data from 31 Chinese provinces for the years 1998–2013 is presented. The main conclusions of the econometric analysis are that tourism growth can help reduce the urban-rural gap in China, but that the larger the gap between urban and rural economies, the less substantial is the influence of tourism on economic growth in China. Tourism may play an important role in Central-Western and Inland China, but their relatively greater urban-rural economic gap may threaten the positive effect of tourism.     

Economic consequences of war: Evidence from Sri Lanka

We propose a theoretical and econometric framework to evaluate the impact of war on economic growth of a developing country with an open economy. The theoretical framework encompasses both the neoclassical and endogenous growth models. We test this framework using Sri Lankan data. The war had significant and negative effects both in the short and long-run (annual average of 9% of GDP). High returns from investment in physical capital did not translate in sizable positive externalities. Only short-run significant effects of openness on growth are found. Inconsistent politically driven policies towards openness are the likely reason.