Path-dependent economic growth with technological trajectory

This paper develops an integrated model of neoclassical and endogenous growth, which accounts for both income inequalities across countries and the convergence hypothesis, while all the growth stylized facts are satisfied. The model in this paper assumes that an economy industrializes in two stages. In the first stage, the economy starts industrialization through factor accumulation (the Solow stage); and after sufficient factor accumulation, it switches to the second stage of endogenous growth through innovation (the AK stage). Therefore, it becomes crucial to determine when switching from the Solow to the AK stages is implemented. We model this switching problem as a two-stage optimal control and show that the growth rate declines during the Solow stage, while in the AK stage it becomes constant. In addition, we draw several policy implications.     

结构负利：流通业比重与地区经济增长*

作为国民经济中的基础性和先导性产业,流通业在国民经济中的比重呈现先下降后上升的U型演变趋势。本文利用扩展的索罗模型和中国省际地区面板数据探讨流通业比重变化对地区总体生产率和经济增长的影响。研究结果表明,首先,地区总体生产率与流通业比重呈显著的负相关关系。其次,地区人均产出增长率与当期流通业比重呈负相关关系,而与上期流通业比重呈正相关关系。流通业比重对地区人均产出增长率的净效应既受到地区总体生产率与流通业比重之间负向关系的影响,也受到地区经济增长收敛性的影响。根据模拟实验,2009-2014年中国流通业比重上升导致人均产出增长率约下降136个百分点。最后,地区流通效率在“流通业比重-总体生产率-经济增长”关系中发挥着明显的调节作用。在流通效率越高的地区,流通业比重上升对地区总体生产率和地区人均产出增长率的负向作用越弱。因此,地方政府可以通过提高本地区流通效率来缓解流通业比重上升带来的“结构负利”。     

Convergence and the Caribbean

This paper examines the convergence experience of selected Caribbean countries. It examines evidence of reduced dispersion in real per capita income—Sigma convergence—and ‘catch up’ growth across the group—Beta convergence. Estimation of the Solow—Swan cross-section model for the Caribbean shows weak evidence of β and σ convergence. However, structural instability and evidence of divergence over the sample period, suggest this convergence to be spurious. Further tests on individual country data showed an absense of steady state convergence for any country over time. Institutional structures and adjustments to economic shocks appear to have been important for the determination of per capita income in the long run.     

Autocatalytic Growth and Development and the South-North Convergence

Abstract:

This article engages with the issue of income convergence between North and South by using the autocatalytic hypothesis of growth and development. Two system models describe positive and negative feedback loops which govern economic flows between North and South. The analysis of endogenous and exogenous negative feedbacks points to the process that would slowly push the world economy towards vanishing growth rates and, eventually, halt its material growth. The present work rejects convergence in per capita GDP between North and South from the theoretical perspective. Such an outcome would stand against one of the fundamental properties of autocatalytic dynamics—centripetality— that has its causal roots in the competitive process and capitalist institutions. In that sense, the autocatalytic hypothesis provides a theoretical explanation for those empirical analyses that dismisses convergence.     

Economic openness and income growth in developing countries: a regional comparative analysis

This article examines and compares the openness–growth relationship between the high-performing Asian economies (HPAEs) and the rest of the developing world (Sub-Saharan Africa-SSA, South East Asia-SEA and Latin America and Caribbean-LAC). We applied the SYS-GMM estimator to a dynamic standard endogenous growth model which relates economic openness to real per capita income growth. A few key findings emerged from this study. First, economic openness led to increase in real per capita GDP growth in HPAEs and SSA, but not in LAC and SEA. Second, openness to trade accelerated income convergence among countries in SSA, SEA, and HPAEs, however, whereas foreign direct investment inflows accelerated income convergence only in SSA, it rather de-accelerated income convergence in HPAEs. Thirdly, the HPAEs recorded higher positive effect of openness on real per capita GDP growth than any of the other developing regions because they created sufficient stock of human capital that enhanced their absorptive capacity of imported advanced technology. They also created a more stable macroeconomic environment which consolidated the income growth gains from openness. The results of this study highlight the importance of the implementation of policies that are complementary to economic openness in promoting economic growth in the developing world.     

International capital flows and convergence in the neoclassical growth model

To analyze how capital mobility affects economic growth and convergence, this paper will use the analytical solution to the neoclassical growth model with a constant saving rate, beginning with the closed-economy Solow growth model. An introduction to international capital flows will follow. In an open economy, free capital mobility assures an instantaneous convergence in interest rates that, under a perfect competence situation, implies the instantaneous convergence in income levels among homogeneous countries. Taking into account this question and to reconcile these results with empirical evidence, that is, with the gradual convergence observed, the assumption is introduced that in spite of free capital mobility, there are international credit restrictions. In this case, we will show how the rate of convergence depends on the international capital inflows received. The authors would like to thank Maria Isabel Abradelo for her help in translating this paper.     

Do Multinational Enterprises Contribute to Convergence or Divergence? A Disaggregated Analysis of US FDI*

It is widely held that foreign direct investment (FDI) has a positive effect on economic growth. To test this hypothesis, we perform convergence regressions derived from a theoretical model on the impact of FDI on endogenous technological change in small economies. The model includes FDI externalities that enhance growth, but also shows that FDI can crowd out host country income and reduce local innovation. The empirical analysis employs disaggregated US data for various FDI‐related activities—in addition to the conventionally used aggregate FDI stocks and flows. We estimate the net FDI impact on the convergence rate of per‐capita income to US levels, controlling for human development, financial development, and trade. We find that FDI accelerates convergence for high‐income countries only, otherwise slowing it down.     

Inequality-growth nexus under progressive income taxation

Within heterogeneous-household extensions of Romer’s (1986) one-sector representative agent model of endogenous growth, this paper finds that changes made to the U.S. statutory income tax in the past decades account for a substantial portion of the following stylized facts: (i) U.S. income inequality significantly deteriorates since the mid-1980s; (ii) the inequality-growth nexus displays a positive slope before and after the implementation of the Tax Reform Act of 1986 (TRA-86); and (iii) the slope of the inequality-growth nexus sharply declines between the pre- and post-TRA-86-reform periods, indicating less deterioration in real GDP per capita growth when pursuing a more equal income distribution after 1986. In addition to income inequality, the responses of several other measurements of inequality to changes in the tax code parameters are also explored.     

Koopmans recursive preferences and income convergence

Stiglitz (Econometrica 37 (1969) 382) shows income convergence in a many-agent Solow growth model with integrated capital markets (ICM). The many-agent Ramsey model (MARM) without ICM also gives income convergence. With a MARM, equal discount rates, and ICM, convergence of incomes (as opposed to product per capita) cannot occur. These results depend upon fixed saving propensities (Stiglitz) or separable additive preferences (Ramsey). Non-convergence of incomes is shown when preferences are identical Koopmans separable (KS). Endogenous discount rates may violate KS. A model for that case is developed when, even under favourable assumptions, oscillations or chaotic dynamics may result.     

On the Dynamics of Basic Growth Models: Ratio Stability vs. Convergence and Divergence in State Space

Abstract. We show for a class of basic growth models that convergence in ratios does not imply the pathwise convergence to the corresponding balanced growth path in the state space. We derive conditions on parameters and on the elasticity of the savings function for convergence or divergence and apply our results to the Solow model, an augmented Solow model as well as to an optimal growth model. An implication for the convergence debate is that two economies that differ only in the initial capital stock and converge in per capita terms might diverge to infinity in absolute terms.     

The Savings Ratio and Financial Repression in Trinidad and Tobago *

This paper investigates the hypothesis financial repression in the context of the Determinates of the private savings ratio in Trinidad and Tobago, using the Multivariate, cointegration time-series methodology. Four alternative proxies are Used to represent financial repression, including the real interest rate, the real interest Rate differential between the world and domestic economy and two alternative Measures of exchange rate misalignment, We find that there is strong evidence to Support the hypothesis of financial repression in Trinidad and Tobago over the sample Period and that financial liberalization may significantly enhance the growth of real Per capita income. [E2, F4, O1]     

Reopening the convergence debate: A new look at cross-country growth empirics

There are two sources of inconsistency in existing cross-country empirical work on growth: correlated individual effects and endogenous explanatory variables. We estimate a variety of cross-country growth regressions using a generalized method of moments estimator that eliminates both problems. In one application, we find that per capita incomes converge to their steady-state levels at a rate of approximately 10 percent per year. This result stands in sharp contrast to the current consensus, which places the convergence rate at 2 percent. We discuss the theoretical implications of this finding. In another application, we perform a test of the Solow model. Again, contrary to prior reults, we reject both the standard and the augmented version of the model.     

我国经济增长的多重均衡现象——基于动态门槛面板数据模型的研究

本文首次应用动态门槛面板数据模型，对我国经济增长的多重均衡现象进行了研究，研究表明我国经济增长具有明显的多重均衡现象。当人均收入低于1007元时，存在着经济增长障碍，经济处于低水平陷阱；一旦突破低收入门槛，在同一的收入状态里省区经济增长率趋向收敛。然而，由于较高收入状态的省区收入收敛速度快于较低收入状态的省区，因此，我国富裕省区与相对落后省区的人均收入差距还在不断扩大；我国目前还没有达到增长极限，不存在高水平陷阱现象。     

Jointly determined saving and fertility behaviour: theory,and estimates for Germany,Italy, UK and USA

This study uses new theories of capital accumulation and fertility in a comparative framework to test predictions with time-series data for Germany, Italy, the UK, and the US. The exogenous-fertility model is based on models of Barro and Becker. The endogenous-fertility models are based on models of Veall and Nishimura and Zhang. It is assumed that life cycle periods are youth, middle age, and old age. Several theoretical frameworks are tested with endogenous and exogenous fertility and altruism and nonaltruism. Data are obtained during 1950-90. Dependent variables are the total lifetime fertility rate and real per capita household savings. Explanatory variables include social security, the real social security deficit per capita, the real rate of interest, the real per capita disposable income, the average male real wage rate, the average female real wage rate, and the real child benefit rate. The explanatory variables are individually graphed to show differences by country over time. Findings suggest that fertility is endogenous in a nonaltruistic model. The only model not rejected by the data was the model in which fertility and intergenerational transfers were explained by nonaltruistic concerns. Fertility was positively affected by the male wage rate in all countries. Fertility was negatively affected by the female wage rate in all countries. Disposable income was insignificant in the UK and Germany and positive and significant in Italy and the US. The interest rate was significant in only 1 model. Child benefits had a positive and significant effect on fertility in the UK. In savings models, disposable income was significant and positive, and child benefits and wage rates were insignificant. Social security coverage had a negative effect on fertility and a positive effect on savings, except in Germany. Findings indicate that saving and fertility are jointly determined.     

The driving forces of the level and the growth rate of real per capita income in Indonesia

We investigate the driving forces behind the level and the growth rate in real per capita Gross Domestic Product (GDP) in Indonesia. The ultimate reasons and the proximate causes underlying Indonesia's economic growth since the mid-1960s are still unclear. In the literature there have been at least three ways of investigating the driving forces of economic growth in Indonesia, namely: growth accounting system, regression and causality. The difference and improvement in this article is that we employed a two-step bounds testing approach to cointegration, which has not been done before; it uses the endogenous growth model to consider 12 policy variables and two external factors that potentially affect per capita income, this number is more than that has been done before. The empirical results that we obtained using this two-step bounds testing approach help us draw policy implications that if or when implemented would be expected to increase the growth of real per capita income, as well as the welfare of the people of Indonesia. Economic growth in Indonesia is largely driven by government policy, so the ability to increase Indonesia's economic growth rate, in the long run, will largely depend on the implementation of appropriate government policies.     

Long-run growth and government consumption

This paper tests the null hypothesis implied by exogenous growth that the share of government consumption in output affects the level of output but not its growth rate against the alternative hypothesis implied by endogenous growth that the growth rate is also affected. The results provide evidence that cross-country differences in income per capita result from differences in their public policies, but no evidence that differences in trend growth rates result.     

Financial reforms and credit growth in Nigeria: empirical insights from ARDL and ECM techniques

In the last 37 years, Nigeria has undergone several stages of financial reforms with different impacts on the economy. This paper analyses the impact of these financial reforms on credit growth in Nigeria using annual data from 1980 to 2016. The research work hinges on the theoretical underpinning of McKinnon-Shaw hypothesis on the relevance of financial reforms in a lagging economy. Analysing the data with autoregressive distributed lag error correction representation and bounds testing techniques, we find evidence supporting this hypothesis, and specifically that at higher real interest rates there is increased financial intermediation evidenced by credit growth. Other findings are that in the long-run, financial system deposits, inflation rate and per capita GDP are strong asymmetrical predictors of credit growth and real interest rates (the financial reform indicator), while the short-run relationships are indicator-specific. We further show that a long-run cointegration relationship exists between domestic credit and other covariates and likewise between the real interest rate and its regressors.     

Malthus to Solow

"A unified growth theory is developed that accounts for the roughly constant living standards displayed by world economies prior to 1800 as well as the growing living standards exhibited by modern industrial economies. Our theory also explains the industrial revolution, which is the transition from an era when per capita incomes are stagnant to one with sustained growth.... [The authors] use a standard growth model with...[several] technologies. The first, denoted the 'Malthus' technology, requires land, labor and reproducible capital as inputs. The second, denoted the 'Solow' technology, does not require land. [The authors] show that in the early stages of development, only the Malthus technology is used and, due to population growth, living standards are stagnant despite technological progress. Eventually, technological progress causes the Solow technology to become profitable and both technologies are employed. At this point, living standards improve since population growth has less influence on per capita income growth. In the limit, the economy behaves like a standard Solow growth model."     

Cross-country output convergence and growth: Evidence from varying coefficient nonparametric method

This article uses a nonparametric varying coefficient panel data model to study the convergence of real GDP per capita among 120 world economies for the sample period of 1980–2010. The estimates show that the indirect contribution of initial income via the control variables is important. The mediating effect of control variables to affect growth is positive. The conditional speed of convergence is larger than the absolute counterpart at all levels of initial income. The convergence hypothesis does not hold for economies with extremely low level of development. The conclusion is robust for regional subsamples of Europe, Asia, Latin America and Africa.     

中国跨越“中等收入陷阱”的路径突破与政策应对*——基于地区收入差距视角

“中等收入陷阱”在本质上是收入与增长非线性相关系,而威廉姆森拐点决定着中国经济发展是否落入“中等收入陷阱”的关键。本文基于空间自相关理论提出空间基尼系数的一个分解框架,并运用威廉姆森“倒U型”理论构建“中等收入陷阱”理论模型。结果表明：中国地区收入差距与人均GDP之间存在“倒U型”非线性关系,更确切地说是S型关系。以平滑转化回归模型测算,中国存在人均GDP为4 18930美元拐点,并于2005年越过拐点,但进入地区差距收敛的“高体制”路径仍有一定差距。因此,中国在政策应对上要进一步通过实施高起点的区域协调发展战略,健全宏观配套政策,配合深化收入分配体制改革,从而成功地跨越“中等收入陷阱”。