Institutions,Informal Economy,and Economic Development

Using cross-national panel data, we examine the evolution of the informal economy through the course of economic development. Borrowing from previously published informal economy estimates for 141 countries over the period 1984-2009 and using panel data estimation techniques, we investigate the relationship between informal economy and the level of economic development, proxied by gross domestic product (GDP) per capita. Our findings suggest that institutional quality strongly interacts with this relationship. Specifically, we find that a higher GDP per capita is associated with a larger informal sector size in countries where the institutional quality is low. The opposite is true in countries with good institutions. These results are also in line with a two-sector dynamic general equilibrium model.     

Do Stock Index Futures Affect Economic Growth? Evidence from 32 Countries

This article investigates the relationship between stock index futures markets development and economic growth using time-series methods for 32 developed and developing countries. Evidence of cointegration between stock index futures and real economy in 29 countries suggests the presence of co-movements among the variables, indicating long-run stationarity in those countries. Our findings show that there is Granger-causality from stock index futures markets development to economic growth for middle-income countries with relatively low real per capita GDP, and Granger-causality in the reverse direction for the countries with high real per capita GDP. Variance decomposition and impulse-response function (IRF) analyses results support the existence of a relationship between stock index futures and real economy.     

The anticipated and concurring effects of the EMU: exchange rate volatility, institutions and growth

Reduced exchange rate volatility and higher and less heterogeneous quality of institutional rules and macroeconomic policies are two of the main (anticipated and concurring) effects expected from a currency union.In this paper, we measure the magnitude of these two effects for the Eurozone countries looking at real effective exchange rates (REER) and at different indicators of quality of institutional rules and macroeconomic policies (QIRMP). We find that the first effect is much stronger than the second when we compare relative changes for Eurozone countries and the rest of the world in the relevant period.We further evaluate the impact of both effects on economic growth on a larger sample of countries. Our findings show that both have significant impact on levels (more robust) and on rates of growth (weaker) of per capita GDP.     

Personal income tax mimicry: evidence from international panel data

This paper investigates personal income tax (PIT) mimicry at the international level. It is the first to empirically investigate the extent to which PIT mimicry varies along the tax schedule and the first to include nations which are not part of the OECD. We use data on international personal income tax schedules from the world tax indicators to estimate marginal and average tax rates at various multiples of per capita gross domestic product (GDP). These tax rates are then used to estimate the extent to which countries respond to their neighbors’ PIT policy. We find evidence of PIT mimicry using a balanced panel of 53 countries over 24 years. This finding is strongest for tax rates at lower multiples of per capita GDP and survives several robustness checks.     

Is Economic Growth Good for Investors?1

When measured over long periods of time, the correlation of countries' inflation‐adjusted per capita GDP growth and stock returns is negative. This result holds for both developed countries (for which the correlation coefficient is –0.39 using data from 1900–2011) and emerging markets (the correlation is –0.41 over the period 1988–2011). And this means that investors would have been better off investing in countries with lower per capita GDP growth than in countries experiencing the highest growth rates. This seems surprising since economic growth is generally assumed to be good for corporate profits. In attempting to explain this finding, the author begins by noting that economic growth can be achieved through increased inputs of capital and labor, which don't necessarily benefit the stockholders of existing companies. Growth also comes from technological advances, which do not necessarily lead to higher profits since competition among firms often results in the benefits accruing to consumers and workers. What's more, it's important to recognize that growth has both an expected and an unexpected component. And one explanation for the negative correlation between growth and stock returns is the tendency for investors to overpay for expected growth. But there is another—and in the author's view, a more important—part of the explanation. Along with the negative correlation between long‐run average stock returns and per capita growth rates, the author also reports a strong positive association between (per share) dividend growth rates and overall stock returns. Such an association is not surprising since unusual growth in dividends is a fairly reliable predictor of increases in future earnings. But another effect at work here is the role of dividends—and, in the U.S., stock repurchases too—in limiting what might be called the corporate “overinvestment problem,” the natural tendency of corporate managers to pursue growth, if necessary at the expense of profitability. One of the main messages of this article is that corporate growth adds value only when companies reinvest their earnings in projects that are expected to earn at least their cost of capital—while at the same time committing to return excess cash and capital to their shareholders through dividends and stock buybacks.     

Global-scale assessment of potential future risks of food insecurity

This paper presents an approach of combining biophysical, social, and economic factors for spatially explicit assessment of potential future risks of food insecurity at a global scale over the period of 2000–2020 under a certain scenario. In doing that, two indicators, namely per capita food availability and per capita Gross Domestic Product (GDP), were selected to cover the four dimensions of food security, with the former representing the status of food availability and stability, and the latter reflecting the situation of food accessibility and affordability. These two indicators were then linked to an integrated modeling framework. Under this framework, a GIS-based EPIC model was adopted to estimate the potential yields of different crop types under a given biophysical and agricultural management environment, a crop choice decision model was used to model the changes in crop areas through tracking the crop choice decisions, and the IFPSIM model was utilized to evaluate the crop price in the international market. Based on these two indicators, the potential risks of food insecurity were assessed with a spatial resolution of six arc-minutes. The results show that both changes in per capita food availability and changes in per capita GDP during 2000–2020 vary across regions worldwide. Some regions such as China, most eastern European countries, and most southern American countries where there is an increase in per capita food availability or an increase in the capacity to import food between 2000 and 2020 might be able to improve their food security situation. On the contrary, certain regions such as southern Asia and most African countries will likely remain hotspots of food insecurity in the future. In these regions, both the per capita food availability and the capacity of being able to import food will decrease between 2000 and 2020. Although most developed countries will also experience both a decrease in per capita food availability and a decrease in per capita GDP, these countries are likely to be food-secure due to their higher income and purchasing power.     

THE THREE FACES OF THE INTERNATIONAL COMPARISON PROJECT

Purchasing power parities (PPPs), this article confirms, arethe correct converters for translating GDP and its componentsfrom own-currencies to dollars (the usual numeraire); the alternativemeasure, exchange rates, obscures the relationship between thequantity aggregates of different countries. Drawing on the reportsof the United Nations International Comparison Project (ICP),the article contends that exchange rates systematically understatethe purchasing power of the currencies of low-income countriesand thus exaggerate the dispersion of national per capita incomes.Where full-scale (benchmark) PPP estimates are not available,estimates based on shortcut methods better approximate whatthe benchmark estimates would be than do the exchange rate conversions.The ICP results also illuminate price and exchange rate relationshipsamong countries by providing a measure of the difference inthe levels of prices in different countries. ICP price comparisonsfor components of GDP make possible the analysis of comparativeprice and quantity structures of different countries and providethe raw materials for many types of analytical studies.      

Globalization, Poverty, and Inequality since 1980

One of the most contentious issues of globalization is the effectof global economic integration on inequality and poverty. Thisarticle documents five trends in the modern era of globalization,starting around 1980. The first trend is that growth rates inpoor economies have accelerated and are higher than growth ratesin rich countries for the first time in modern history. Developingcountries’ per capita incomes grew more than 3.5 percenta year in the 1990s. Second, the number of extremely poor peoplein the world has declined significantly—by 375 millionpeople since 1981—for the time in history. The share ofpeople in developing economies living on less than $1 a dayhas been cut in half since 1981, though the decline in the shareliving on less than $2 per day was much less dramatic. Third,global inequality has declined modestly, reversing a 200-yeartrend toward higher inequality. Fourth, within-country inequalityin general is not growing, though it has risen in several populouscountries (China, India, the United States). Fifth, wage inequalityis rising worldwide. This may seem to contradict the fourthtrend, but it does not because there is no simple link betweenwage inequality and household income inequality. Furthermore,the trends toward faster growth and poverty reduction are strongestin developing economies that have integrated with the globaleconomy most rapidly, which supports the view that integrationhas been a positive force for improving the lives of peoplein developing areas.      

我国能源消费影响因素实证分析

随着经济的快速发展,能源的消费量也在不断上升.能源消费水平是衡量一个国家或地区现代化水平的重要标志.保持能源的稳定供应,不断提高能源利用率,是支持经济增长的重要保证.为了分析影响能源消费需求的因素,本文选取了国内生产总值GDP、人均生活电力消费、能源加工转换率、年末总人口数和工业品出厂价格指数-原材料、燃料作为主要的参考指标,利用EVIEWS3.1进行分析和检验,并建立最终的数学模型.根据最终的数学模型可以对能源消费进行分析与预测.最后,本文在做出结论的基础上提出了一些政策性的建议.     

Modeling the macroeconomic effects of AIDS, with an application to Tanzania.

The 1956 Solow growth model is expanded to study the effects of the AIDS epidemic on the growth path of the economy and per capita GDP (gross domestic product). AIDS and no-AIDS scenarios are compared analytically and via simulations based upon Tanzanian demographic and macroeconomic data. The 1st section discusses various channels through which AIDS might affect the macroeconomy and describes its expected demographic impact in Tanzania. The model incorporating these key channels is then developed in the 2nd section. It is employed specifically to discuss the likely effect on the ratio of capital to labor and on output per capita as the economy moves from a no-AIDS situation toward a new steady state in which AIDS is assumed to be endemic. A simple simulation model in the 3rd section forecasts the time paths of macro aggregates in Tanzania as the prevalence of AIDS increases. These time paths are then compared with simulated results for a no-AIDS situation to determine the severity of the impact of the disease on the growth path of the Tanzanian economy, Bulatao's 1990 demographic scenarios are input in the simulated version of the model. The 4th section concludes by considering the policy implications of the analysis. The analysis indicates that without decisive policy action AIDS may reduce the GDP of Tanzania in the year 2010 by 15-25% over what it would be if AIDS did not exist. Per capita income levels are expected to fall by 0-10% by the year 2010.     

Unit roots and infrequent large shocks: new international evidence on output

The nature and magnitude of the economic shocks that have affected the per capita GDP of 16 OECD countries are analyzed over a long period using the outlier method. Strong proof of infrequent large permanent and transitory shocks were found, essentially resulting from the two major wars in the twentieth century, the recession in the 1920s, the Great Depression, among others. We also examine the nature of the output trend by combining different tests of non-stationarity on different GDP series corrected by the outliers detected. It is shown that the per capita GDP series cannot reject the unit root hypothesis in 13 of the 16 countries examined. No conclusion could be drawn for the other countries because the test results were contradictory.     

我国税收结构与经济增长关系的实证检验

根据我国1985～2008年样本数据,利用多元线性回归模型对我国税收结构与经济增长的关系进行实证检验,结果表明:流转税、所得税(尤其是个人所得税)份额的增加有利于人均GDP的增长,财产税的经济效应尚未体现,宏观税负和赤字融资的增加已经抑制了人均GDP的增长。目前我国需要进一步完善税制,加强征收管理,提高所得税份额,减少债务融资规模。     

Further results on the macroeconomic effects of AIDS: the dualistic, labor-surplus economy.

Analyses by Cuddington in 1993 and forthcoming work from Cuddington and Hancock model the macroeconomic effects of the AIDS epidemic using a modified Solow growth model. This single-sector framework rests upon the assumption that labor and capital are always efficiently allocated throughout the economy with neither market failures nor policy-induced distortions resulting in resource misallocation. Economies in low-income developing countries in sub-Saharan Africa, however, are not operating at capacity. Impact models based upon the potential growth path of economies will therefore significantly overstate the effect of an AIDS epidemic. The author thus incorporates the presence of underemployment and dual labor markets to redress the limitations of these earlier impact models. The dual-economy simulations of the economic impact of AIDS using Tanzanian data suggest that the macroeconomic consequences of the epidemic are of the same order of magnitude as those obtained using a single-sector, full-employment model: gross domestic product (GDP) is 15-25% smaller by 2010 than it would have been without AIDS, and per capita GDP is 0-10% smaller. Output lost from AIDS in the dual-economy framework is approximately the same as the output gain achievable through policies designed to increase labor market flexibility. Findings suggest that serious economic reform in economies fraught with AIDS may lessen the negative economic effects of the epidemic.     

The Equity Premium: Consistent with GDP Growth and Portfolio Insurance

We find that the long‐term equity premium is consistent with both GDP growth and portfolio insurance. We use a supply‐side growth model and demonstrate that the arithmetic average stock market return and the returns on corporate assets and debt depend on GDP per capita growth. The implied equity premium matches the U.S. historical average over 1926–2001. Separately, we find that the equity premium tracks the value of a put option on the S&P 500. Our theory predicts a smaller equity premium in the future, assuming that the recent regime shifts in dividend policies, interest rates, and tax rates are permanent.     

Export Sophistication: A Dynamic Panel Data Approach

In this article, we analyze export sophistication based on a large panel dataset (2001–2015; 101 countries) and using various estimation algorithms. Using Monte Carlo simulations, we evaluate the bias properties of estimators and show that GMM-type estimators outperform instrumental-variable and fixed-effects estimators. Based on our analysis we document that GDP per capita and the size of the economy exhibit significant and positive effects on export sophistication; weak institutional quality exhibits negative effect. We also show that export sophistication is path-dependent and stable even during a major economic crisis, which is especially important for emerging and developing economies.     

Country experience in providing for basic needs

The basic needs approach to development--i.e., providing such basic needs as health and education to the poorest sectors of the population--replaced a previous emphasis on general economic development. Basic needs include food, nutrition, health services, education, water, sanitation, and shelter. A World Bank study to evaluate the success of developing countries in meeting their populations' basic needs discloses great disparity among countries. The study used literacy and life expectancy figures for the evaluation. All developing countries had improved their provision of basic goods and services in the time between 1960 and 1977, but the improvement was not uniform. The countries' previous performance in this area and the national level of per capita income influenced their improved performance. Countries having egalitarian income distributions tended to perform better than would have been expected from the per capita income alone; countries with maldistributed incomes tended to perform worse. The following 3 types of economies were most successful in providing basic goods/services for their populations: 1) rapidly growing, market-oriented economies; 2) centrally planned economies; and 3) "mixed" economies with welfare intervention. Very poor economies, those with rapid growth and no substantial poverty reduction, and those with moderate growth and moderate poverty reduction were less successful. Macroeconomic frameworks can provide guidelines.     

The Great Moderation in China: A Disaggregated Analysis

This paper examines whether the major components of China's real gross domestic product (GDP) have exhibited smoother, less volatile growth since the late 1990s, and, if so, what has caused this "great moderation" in their growth. Employing unknown-structural-breakpoint tests and constructing a counterfactual analysis based on vector autoregression models, the authors show that the growth rates of all the major components of China's real GDP have followed a relatively steady course since the late 1990s, with the most marked decrease in growth volatility (i.e., volatility of growth rate of the components of real GDP) occurring in the consumption sector. Empirical results reveal that systematic policy improvements account for less than 30 percent of the drop in the volatility of growth in aggregate consumption, while policy improvements do not explain investment and rates of net export growth.     

The Puzzle of Persistently Negative Interest‐Rate–Growth Differentials: Financial Repression or Income Catch‐Up?

The interest‐rate–growth differential (IRGD) plays a critical role in determining the sustainability of government debt. Yet it is striking that IRGDs are correlated with income levels, and are generally negative in emerging and developing economies, which contradicts standard economic theory. Negative IRGDs constitute a powerful debt‐stabilising force, driving down debt ratios or keeping them stable even in the presence of persistent primary deficits. Motivated by the puzzling facts, this paper examines the IRGDs for a large panel of advanced and non‐advanced economies by utilising a newly assembled data set. The evidence shows that large negative IRGDs in emerging and developing economies are largely due to real interest rates well below market equilibrium – stemming from financial repression and captive and distorted markets – whereas the income catch‐up process plays a relatively modest role. Therefore, the IRGD in non‐advanced economies is likely to rise with financial market development and financial global integration, perhaps even before their GDP per capita converges to advanced‐economy levels.     

CHOOSING THE RIGHT FINANCIAL SYSTEM FOR GROWTH

Well‐functioning financial systems promote economic growth by channeling funds from those who save to those who invest in the productive capacity of economies. What are the main features of a well functioning system? Are well developed capital markets essential to the process? Or are commercial banks and other “private” sources of capital capable of bringing about the same levels of growth and prosperity? In this article, the authors use information about the financial systems of a large number of both developed and developing countries to examine various relationships between a country's financial structure and its overall economic performance. Perhaps most important, the authors report a significantly positive correlation, using data for 34 countries, between the size of a country's financial system—measured by the total of commercial bank assets, equity market capitalization, and bonds outstanding—and economic development (as measured by GDP per capita). At the same time, the authors also provide evidence that banks (or loans) and capital markets (or securities) are complements, not substitutes, in promoting economic development, and that the presence of foreign‐owned banks (though not state‐owned banks) has a positive association with growth. In other words, both private banks and capital markets are likely to play important, though different roles in channeling funds from savers to investors.     

Are investors moonstruck? Further international evidence on lunar phases and stock returns

This study uses an alternative model specification to re-examine the influences of the new moon and the full moon on the daily returns of 62 international stock indices for the period 1988 to 2008. The fixed effects panel model incorporates the prior day effect and two calendar anomalies, i.e., the Monday effect and the turn-of-the-month effect, to assess variations in the lunar influences. A covariate, based on per capita gross domestic product (GDP), examines how the results vary between countries. The prior day effect is greater for less developed countries. The overall enhanced new moon effect is independent of GDP. An overall full moon effect is absent. These lunar effects are weakly influenced by the calendar anomalies.