Funded social security and economic growth

This paper investigates the relationship between economic growth and a fully funded social security system in an overlapping generations model with family altruism. It is shown that funded social security may harm growth if there are operative bequests within the family.     

The minority ethic: Rethinking religious denominations,minority status,and educational achievement across the globe

We test whether major religious denominations correlate with education in a uniform way across the world and the extent to which minority status contributes to the correlation. Using individual data from the World Values Survey for 77 countries, we first find that no denomination is consistently associated with education and, in fact, for each denomination we study there are countries where its correlation with education is significantly positive, significantly negative, or statistically insignificant. To explain this unexpected result, we relate our first finding to minority status and find that denominations that are a minority in a given country positively correlate with the level of education of their followers in that country. Both findings uphold a series of robustness checks, including changing the definition of minority religions, excluding outliers, and changing the measure of education.     

Educational Production in East Asia: The Impact of Family Background and Schooling Policies on Student Performance

Abstract. East Asian students regularly take top positions in international league tables of educational performance. Using internationally comparable student-level data, I estimate how family background and schooling policies affect student performance in five high-performing East Asian economies. Family background is a strong predictor of student performance in Korea and Singapore, while Hong Kong and Thailand achieve more equalized outcomes. There is no evidence that smaller classes improve student performance in East Asia. But other schooling policies such as school autonomy over salaries and regular homework assignments are related to higher student performance in several of the considered countries.     

Terms of trade volatility,government spending cyclicality,and economic growth

This paper presents estimates of the effects that terms of trade volatility has on real gross domestic product (GDP) per capita growth. Based on 5‐year nonoverlapping panel data comprising 175 countries during 1980 to 2010, the paper finds that terms of trade volatility has significant negative effects on economic growth in countries with procyclical government spending. In countries where government spending is countercyclical, terms of trade volatility has no significant effect on growth. Conditional on the mediating role of government spending cyclicality, the GDP share of domestic credit to the private sector has no significant effect on the relationship between growth and terms of trade volatility.     

Schooling and Citizenship in a Young Democracy: Evidence from Postwar Germany

This paper examines whether schooling has a causal impact on individuals' political behavior. Between 1949 and 1969, the number of compulsory years of schooling in the Federal Republic of Germany was gradually increased across all federal states. These legislative changes provide an opportunity to investigate the causal impact of schooling on political behavior. Years of schooling are found to be positively correlated with several political outcomes. However, there is little evidence of a causal effect. This study conjectures that there is ample historical evidence to support the hypothesis that the fundamentals of democracy were already learned earlier in school, potentially outweighing the political returns of schooling in Germany.     

A century of economic growth in Latin America

This paper makes a contribution to the study of economic growth in developing countries by analyzing the six largest Latin American economies over 105 years within a two-equation framework. Confirming previous findings, physical and human capital prove to be key determinants of GDP per head growth. However, a more controversial result is an overall negative conditional correlation between trade openness and GDP per head growth — though openness has a positive link via investment. The evidence also shows that macroeconomic instability has been a drag on long-term growth in the region.     

The quality of human capital,educational reform and economic growth

Using a general equilibrium growth model with a costly schooling process, this paper analyses the effect on economic growth of educational reform that allocates more resources to the schooling sector to raise the quality of human capital. It shows that the positive effect of improved quality on the economic growth could be offset by the reverse effect of reduced human capital formation that arises from the distortion of resource reallocation. An appropriate tax-subsidy scheme is shown to remove this reverse effect of educational reform.     

The human capital of black soldiers during the American Civil War

Analyzing three datasets on black and white soldiers and the black and white populations from the same birth years, this paper finds that black soldiers during the American Civil War had much higher human capital than the black population.     

Schooling,wages and profits: Negative pecuniary externalities from schooling and their consequences for schooling investments

This paper tests the hypothesis that the schooling of the poor reduces profits for landowners, and that such negative pecuniary externalities in turn adversely affect schooling investments made by local governments. A theoretical model of occupational choice in the presence of credit and labor market constraints, combined with existing political economy models of the delivery of local public goods delivers such a result. This hypothesis is tested using household data from India. The empirical analysis shows that profits are reduced by the schooling of the poor and that this is primarily because of the effect of schooling on wages. It also shows that the negative effect of wages on profits reduces government provided schooling inputs.     

Endogenous lifetime and economic growth

Endogenous mortality is introduced in a two-period overlapping generations model: probability of surviving from the first period to the next depends upon health capital that is augmented through public investment. High mortality societies do not grow fast since shorter lifespans discourage savings; development traps are possible. Productivity differences across nations result in persistent differences in capital-output ratios and relatively larger gaps in income and mortality. High mortality also reduces returns on education, where risks are undiversifiable. When human capital drives economic growth, countries differing in health capital do not converge to similar living standards, ‘threshold effects’ may also result.     

Fiscal deficits and growth in developing countries

This paper examines the relation between fiscal deficits and growth for a panel of 45 developing countries. Based on a consistent treatment of the government budget constraint, it finds evidence of a threshold effect at a level of the deficit around 1.5% of GDP. While there appears to be a growth payoff to reducing deficits to this level, this effect disappears or reverses itself for further fiscal contraction. The magnitude of this payoff, but not its general character, necessarily depends on how changes in the deficit are financed (through changes in borrowing or seigniorage) and on how the change in the deficit is accommodated elsewhere in the budget. We also find evidence of interaction effects between deficits and debt stocks, with high debt stocks exacerbating the adverse consequences of high deficits.     

Political democratization, economic liberalization, and growth volatility

This study empirically investigates the effects of political and economic liberalization on growth volatility using a difference-in-difference method for a sample of 158 countries over the 1970-2005 period. The results show that, when examined separately, economic liberalization leads to a significant reduction in volatility while democratization is not followed by a decrease in growth volatility. For countries that undertake only one liberalization, opening up the economy to international trade reduces volatility in growth; becoming a democracy, on the other hand, seems to increase macroeconomic instability. For countries that implement both political and economic liberalizations, no statistically significant effect on volatility is detected. These results serve to provide additional support for the policy recommendation that developing countries should liberalize their economy first and then consider political liberalization.     

Globalization and growth in the low income African countries with the extreme bounds analysis

The relationship between globalization and economic growth, especially in the poorer developing countries, is controversial. Previous studies have used single globalization indicators such as the ratio of exports plus imports to GDP. This paper uses a comprehensive measure of a globalization of Dreher (2006), which is based on measures of globalization of the economic, social and political sectors. Panel data estimates with data of 21 low income African countries show a small but significant positive permanent growth effects. The sensitivity of this growth effect is examined with the extreme bounds analysis (EBA). Contrary to the findings by Levine and Renelt (1992) that cross-country growth relationships are fragile, the effects of globalization and some other determinants of the long run growth rate are found to be robust by EBA.     

“The people want the fall of the regime”: Schooling,political protest,and the economy

We provide evidence that economic circumstances are a key intermediating variable for understanding the relationship between schooling and political protest. Using the World Values Survey, we find that individuals with higher levels of schooling, but whose income outcomes fall short of that predicted by their biographical characteristics, in turn display a greater propensity to engage in protest activities. We discuss a number of interpretations that are consistent with this finding, including the idea that economic conditions can affect how individuals trade off the use of their human capital between production and political activities. Our results could also reflect a link between education, “grievance”, and political protest, although we argue that this is unlikely to be the sole explanation. Separately, we show that the interaction between schooling and economic conditions matters too at the country level: Rising education levels coupled with macroeconomic weakness are associated with increased incumbent turnover, as well as subsequent pressures toward democratization.     

The political economy of linguistic cleavages

This paper uses a linguistic tree, describing the genealogical relationship between all 6912 world languages, to compute measures of diversity at different levels of linguistic aggregation. By doing so, we let the data inform us on which linguistic cleavages are most relevant for a range of political economy outcomes, rather than making ad hoc choices. We find that deep cleavages, originating thousands of years ago, lead to better predictors of civil conflict and redistribution. The opposite pattern emerges when it comes to the impact of linguistic diversity on growth and public goods provision, where finer distinctions between languages matter.     

Swedish economic growth and education since 1800

Abstract.  The contribution of this paper is twofold. First, it builds and makes use of long-run data from Sweden on formal education that have never been used to date. Second, it provides a quantitative application of recent theoretical work on the link between demographic changes and economic growth through their effect on education. It concludes that changes in longevity may account for as much as 20% of the observed rise in education over the period from 1800–2000 via a horizon effect, but have little impact on income growth over the period. On the contrary, changes in population density and composition are central, mainly thanks to their effect on productivity. Most income growth over this period would not have materialized if demographic variables had stayed constant since 1800.     

Estimates of the steady state growth rates for selected Asian countries with an extended Solow model

This paper develops an extended version of the Solow (1956) growth model in which total factor productivity is assumed a function of two important externalities viz., learning by doing and openness to trade. Using this framework we show that these externalities have played an important role to improve the long run growth rates of six Asian countries viz., Singapore, Malaysia, Thailand, Hong Kong, Korea and the Philippines. A few broad policies to improve the long run growth rates of these countries are suggested.     

Accounting for human capital externalities with an application to the Nordic countries

Externalities caused by human capital accumulation have taken up considerable space in theoretical work on economic growth. However, less attention has been paid to this externality in traditional growth accounting exercises. This paper takes up the issue of growth accounting, suggesting a framework for quantifying human-capital externalities and illustrating it empirically using data from the five Nordic countries. Four sources of growth are identified, i.e. capital accumulation, labor force growth, and total factor productivity growth (TFP), where the traditional TFP measure is split into a part explained by human-capital formation and an unexplained part. By doing this I am able to attribute between 12 per cent and 33 per cent of growth in the Nordic countries to human capital investment.     

Remittances,financial development,and growth

Despite the increasing importance of remittances in total international capital flows, the relationship between remittances and growth has not been adequately studied. This paper studies one of the links between remittances and growth, in particular how local financial sector development influences a country's capacity to take advantage of remittances. Using a newly-constructed dataset for remittances covering about 100 developing countries, we find that remittances boost growth in countries with less developed financial systems by providing an alternative way to finance investment and helping overcome liquidity constraints. This finding controls for the endogeneity of remittances and financial development, does not depend on the particular measure of financial sector development used, and is robust to a number of robustness tests, including threshold estimation. We also provide evidence that there could be an investment channel trough which remittances can promote growth especially when the financial sector does not meet the credit needs of the population.