The endogeneity of the natural rate of growth

The aim of this paper is to estimate the sensitivity of thenatural rate of growth to the actual rate of growth for 15 OECDcountries over the period 1961–95, on the hypothesis thatthe natural rate of growth is not exogenously given. To do this,we estimate the natural rate of growth and, then, how it changeswhen the actual growth rate is different from the natural rate.As a side test of the endogeneity hypothesis, we also test forthe direction of causality between national output and factorinputs for the same set of countries. Our results support theidea that the natural rate of growth is not independent of theactual rate of growth and bring to the fore the importance offocusing on demand as well as supply for an understanding oflong-run growthrate differences between countries.     

Okun’s law revisited: a threshold in regression quantiles approach

This article proposes, for the first time, a threshold in regression quantiles approach to the analysis of Okun’s law. By applying to US data over the 1948Q1–2016Q4 period, we have three major findings. First, a single threshold is detected for both multiple and individual quantiles cases. However, the effect of threshold nonlinearity is only present in the middle to upper quantiles of the conditional unemployment distribution in the individual quantiles case. Second, the first-order autoregressive coefficients of unemployment are significantly larger in the lower-growth regime, indicating that shocks to unemployment appear to be more persistent during recessions. Finally, the Okun’s coefficients are all negative across the recessionary and expansionary regimes, confirming the validity of Okun’s law. Moreover, the Okun’s coefficients are smaller (more negative) in the lower-growth regime, suggesting that the effect of differenced output on differenced unemployment is asymmetric, and is more pronounced in recessions.     

A sectoral approach to Okun’s Law

The study adds to the existing literature on the relationship between output and unemployment by using a sectoral specification of Okun’s Law to capture the differential sensitivity of the unemployment rate to output developments in the services and manufacturing sectors. Using quarterly data for the period between 2000 and 2012, we show that Malta’s unemployment rate has been more sensitive to output developments in the services sector than to those in the manufacturing sector. We use different equation specifications and the youth unemployment rate to show that the impact resulting from developments in the manufacturing sector occurs mainly via lay-offs while developments in the services sector affect the unemployment rate via the hiring of new entrants into the labour market.     

The endogeneity of the natural rate of growth – an empirical study for Latin‐American countries

The aim of this paper is to analyse the sensitivity of the natural rate of growth to the actual rate of growth for a sample of 11 Latin‐American countries, assuming the natural rate to be determined endogenously by changes in the actual rate of growth. The natural rates of growth are estimated in a system of SUR estimations over the period 1986–2003. In order to determine whether they react endogenously to changes in the actual rate of growth, a dummy variable for boom periods is added to the system of regressions. The results confirm the hypothesis about the endogeneity of the natural rate of growth.     

Regional growth and unemployment in the medium run: asymmetric cointegrated Okun’s Law for UK regions

This article tests for the presence of a medium-run asymmetric Okun’s Law relationship between regional output and regional unemployment rate in UK regions. The test is performed with a panel data version of the hidden cointegration technique suggested by Granger and Yoon. A novelty of the article is to combine the method of hidden cointegration with a panel data method of removing cross-sectional dependence. The medium-run Okun relationship for regions in the UK appears to confirm results found elsewhere in the literature on countries as a whole, although the coefficients tend to be smaller.     

Testing Okun’s law with Swiss industry data

Okun’s law postulates a stable relationship between quarterly output growth and changes in (un)employment. This proposition has so far been tested with macroeconomic data at the highest level of aggregation. The article goes beyond that in extending the analysis to industry data from Switzerland, applying a method suggested by the International Monetary Fund. Another focus is on whether expansions in production have become more ‘jobless’ over the most recent business cycle compared to earlier ones. This does not seem to be the case in Switzerland, except in the construction industry.     

Revisiting the Okun relationship

Our article revisits the Okun relationship between observed unemployment rates and output gaps. We include in the relationship the effect of labour market institutions as well as age and gender effects. Our empirical analysis is based on 20 OECD countries over the period 1985–2013. We find that the share of temporary workers (which includes a high and rising share of young workers) played a crucial role in explaining changes in the Okun coefficient (the impact of the output gap on the unemployment rate) over time. The Okun coefficient is not only different for young, prime-age and older workers but also it decreases with age. From a policy perspective, it follows that an increase in economic growth will not only have the desired outcome of reducing the overall unemployment rate but it will also have the distributional effect of lowering youth unemployment.     

Age effects in Okun’s law with different indicators of unemployment

We reassess the results from the literature on the relationship between the youth unemployment rate and GDP growth (Okun’s law), based on the concern that the unemployment rate is not an ideal indicator for teenagers and young adults. Using the unemployment ratio instead, we find that youth unemployment (15–24 years old) is not significantly more responsive to economic growth than prime-age (25–64) unemployment. However, compared to prime-age unemployment, teenagers’ unemployment (15–19) is relatively unresponsive, whereas young adult’s (20–24) unemployment is more strongly correlated with economic growth. These results are quite different than those obtained with the unemployment rate as the dependent variable.     

On the endogeneity of exchange rate regimes

The literature has identified three main approaches to account for the way exchange rate regimes are chosen: (i) the optimal currency area theory; (ii) the financial view, which highlights the consequences of international financial integration; and (iii) the political view, which stresses the use of exchange rate anchors as credibility enhancers in politically challenged economies. Using de facto and de jure regime classifications, we test the empirical relevance of these approaches separately and jointly. We find overall empirical support for all of them, although the incidence of financial and political aspects varies substantially between industrial and non-industrial economies. Furthermore, we find that the link between de facto regimes and their underlying fundamentals has been surprisingly stable over the years, suggesting that the global trends often highlighted in the literature can be traced back to the evolution of their natural determinants, and that actual policies have been less influenced by the frequent twist and turns in the exchange rate regime debate.     

Balance-of-payment-constrained growth in unbalanced productive structures: disregarded terms of trade negative effects

Abstract:

The aim of this paper is to analyze the relation between foreign asset formation (FAF) and terms of trade (TOT) in countries characterized by unbalanced productive structures (UPS). This is done by modifying the structuralist thesis about the (overstated) positive effects of a rise in TOT on the balance-of-payment equilibrium gross domestic product growth rate. The theoretical analysis follows Thirlwall’s law and its subsequent modifications. The paper’s main contribution will be to explain and formalize the low—and even null—effects of TOT on balance-of-payment constraints due to the quasi-rent generated in the export sector of a UPS. To reinforce this idea, the empirical section econometrically shows the existence of a significant and positive relationship between TOT and FAF in developing countries.     

A note on the effect of patents in endogenous growth models

This note examines the effect of patent protection in an endogenous growth model with a generic innovation process. It indicates that increasing patent breadth stimulates innovation when R&D is less intermediates-intensive than production, whereas it has a non-monotonic effect on innovation when the former is more intermediates-intensive than the latter.     

Gender equality and economic growth in Brazil: A long-run analysis

This paper studies the long-run impact of policies aimed at fostering gender equality on economic growth in Brazil. The first part provides a brief review of gender issues in the country. The second part presents a gender-based, three-period OLG model that accounts for women’s time allocation between market work, child rearing, human capital accumulation, and home production. Bargaining between spouses depends on relative human capital stocks, and thus indirectly on access to infrastructure. The model is calibrated and various experiments are conducted, including investment in infrastructure, a reduction in gender bias in the market place, and a composite pro-growth, pro-gender reform program. The analysis showed that fostering gender equality, which may partly depend on the externalities that infrastructure creates in terms of women’s time allocation and bargaining power, may have a substantial impact on long-run growth in Brazil.     

GDP dynamics and unemployment changes in developed and developing countries

We design a new specification of Okun’s model that takes the following features into account: estimation of the relation in first differences, the possible lagged effect of GDP dynamics on unemployment changes, the persistence of unemployment rate dynamics, the possible different values of Okun coefficients under recession (with respect to periods of increases in GDP), the existence of cross-country institutional and structural differences (i.e. country-specific Okun coefficients), the additional effect on unemployment caused by large adverse shocks such as financial crises.

A distinctive feature of this article is its consideration of a large set of countries for which we find differentiated Okun coefficients. Moreover, we focus in particular on the distinction between developed and developing countries, and on the additional impact of financial crises. From an econometric point of view, the model developed belongs in the family of linear mixed-effects models. The estimation method uses an expectation-maximization (EM) algorithm. Our results confirm the general validity of ‘Okun’s law’; they show the Okun coefficient differences between high- and low-income countries; and they evidence an additional impact of some types of financial crisis on the unemployment dynamics of developed economies.     

中国大企业持续成长内在驱动因素

许多大企业发展到一定的规模,便失去了持续发展的动力,辉煌一时的诸多企业都纷纷沦为亏损、倒闭或发展停滞。如何保持持续成长已成为中国大企业普遍面临的一大问题。正是基于这样一个背景,试图探究中国大企业持续成长的内在驱动因素。首先对企业成长驱动因素理论与企业生命周期理论进行了回顾,然后在简述中国大企业特征的基础上,分析了中国大企业持续成长的五个内在驱动因素,包括创新、人员、质量、组织制度与风险控制,接着构建持续成长驱动体系,最后提出了对中国大企业的一些建议。庆立军     

Disutility of pollution and endogenous growth

Endogenous growth is generally built on a positive externality hypothesis which is the opposite of a negative externality caused by pollution. We study a linear technology with simple assumption: an aggregate capital stock which represents a learning by doing effect and a pollution flow proportional to production. In this framework, we analyse the precise effects on growth of the disutility of pollution and its interaction with the utility of consumption in an economy without abatement technology. The decentralized equilibrium always leads to unlimited growth, but optimal growth is often limited (the negative effect of pollution dominating the positive effect of learning by doing). In this case, the optimal policy which leads the decentralized economy to follow the optimal growth path is to tax capital; in contrast with the optimal subsidy policy in an economy without pollution. When an abatement technology is introduced, the optimal solution can lead the economy to unlimited growth, whatever the form of the utility function.     

Unemployment and output dynamics in CIS countries: Okun’s law revisited

Okun’s law is a well-known relationship between the change in the unemployment rate and output growth. The main objective of this article is to provide a rigorous econometric analysis of Okun’s law for several CIS countries using different models and theoretically justified econometric methods. The traditional approach to Okun’s law estimation using OLS regressions does not account for possible endogeneity of regressors and the implied inconsistency of the estimates obtained. These problems point out to incorrectness of applications of the standard OLS estimation techniques. Our study addresses these issues by using econometrically justified instrumental variable regression methods. The article provides the results and discussions on practical use of Okun’s relationships for evaluation of average effects of economic growth on the unemployment rate, and vice versa; importance of accounting for confidence intervals in applications of Okun’s models to economic development analysis and cross-country comparisons and evaluation of effects of crises and other structural shocks on the economies considered. We also discuss in detail the results of formal econometric tests and economic motivation for validity of instrumental variables used in the study. The formal econometric tests, together with economic arguments, allow us to determine the most appropriate Okun-type models for each of the CIS countries under consideration.     

Social Capital Accumulation and the Exercise of Power: The Case of P2 in Italy

This article addresses the production of legitimate forms of power in our democracies by framing the rise and fall of “Propaganda 2” (P2) — a masonic lodge active in Italy during the 1970s — in the analysis of social capital proposed by Pierre Bourdieu. This lens emphasizes the role played by networks in the accumulation of symbolic capital and their interaction with the historical and institutional context in the exercise of symbolic violence. The experience of P2 is then analyzed to describe, on one hand, the characteristics of the networks that are critical to its success and, on the other, the lodge’s capacity to interfere with the economic and political systems within the context of the Cold War in Italy. The willingness to control and provoke institutional change expressed by P2’s affiliates also shows to what extent the accumulation of social capital, in combination with other forms of capital, may represent a threat to public welfare. By illustrating the interaction between networks and the normative framework underlying our institutions, this case study suggests that the experience of P2 is not an exception in the functioning of our democracies.     

From endogenous growth to stationary state: The world economy in the mathematical formulation of the Ricardian system

We analyse international trade in a Pasinetti–Ricardo growth model in the world economy scenario in which several small trading countries coexist and international commodity prices are determined by the interplay of supply and demand amongst them. We demonstrate that all the trading countries eventually reach the stationary state, though this process is not monotonic and the dynamics of capital and population may actually push some countries towards the stationary state and others away from it. We also use our model to assess an argument which Malthus employed in the second edition of An Essay on the Principle of Population (1803) to support a policy of agricultural protectionism.     

Multiple steady states,indeterminacy, and cycles in a basic model of endogenous growth

The goal of this paper is to demonstrate that a basic model of endogenous growth with learning by doing may produce a rich array of outcomes. Starting point of our analysis is the Romer (1986a) approach. In contrast to Romer, however, we assume that one unit of investment shows different effects concerning the building up of physical and human capital, so that these variables cannot be merged into one single variable. With this assumption, it can be shown that multiple steady states, indeterminacy of equilibria, and persistent cycles may result in our model.     

Welfare effects of bubbles in an endogenous growth model

This paper examines welfare effects of asset bubbles in an endogenous growth model with overlapping generations. In our model, a steady-state equilibrium with bubbles exists only if the presence of bubbles raises the welfare level of the initial generation. Bubbles can be beneficial to generations born at relatively early dates, whereas they reduce the welfare level of sufficiently distant future generations. Increasing the rate of supply of the useless asset improves the lifetime utilities of future generations.