Corruption and economic growth: New empirical evidence

The nexus between corruption and economic growth has been examined for a long time. Many empirical studies measured corruption by the reversed Transparency International's Perception of Corruption Index (CPI) and ignored that the CPI was not comparable over time. The CPI is comparable over time since the year 2012. We employ new data for 175 countries over the period 2012–2018 and re-examine the nexus between corruption and economic growth. The cumulative long-run effect of corruption on growth is that real per capita GDP decreased by around 17% when the reversed CPI increased by one standard deviation. The effect of corruption on economic growth is especially pronounced in autocracies and transmits to growth by decreasing FDI and increasing inflation.     

Institutions and geography: Empirical test of spatial growth models for European regions

This article provides an empirical assessment of the growth experiences of European regions, during the period 1991–2004, by taking into account the spatial effects due to both institutions and geography. These effects have been modelled by means of specific controls and by using a non-conventional spatial weight matrix. Results favour a model dealing with substantive spatial externalities. Within this framework, the country-specific institutions are strongly and positively related to the regional productivity's growth rate. In addition, the geo-institutional proximity increases the spatial dependence of the regional output per worker and raises the speed of convergence. By contrast, the pure geographical metrics is underperforming, while underestimating the convergence dynamics.     

Inflation and economic growth in Latin America: Some panel time-series evidence

In this paper we investigate the role of macroeconomic performance, mainly in terms of rates of inflation, in determining economic growth in four Latin American countries which suffered hyperinflationary bursts in the 1980s and early 1990s, but that also differ in terms of development levels. The data set covers the period between 1970 and 2007, and the empirical results, based on panel time-series data and analysis, confirm the anecdotal evidence which suggests that inflation has had a detrimental effect to growth in the region. All in all, we highlight the fact that excessive inflation has clearly offset the Mundell–Tobin effect and consequently the high costs that inflation has had on economic activity in the region.     

Foreign direct investment,economic freedom and economic growth: International evidence

In this paper, we investigate the systemic link between economic freedom, foreign direct investment (FDI) and economic growth in a panel of 85 countries. Our empirical results, based on the generalized method-of-moment system estimator, reveal that FDI by itself has no direct (positive) effect on output growth. Instead, the effect of FDI is contingent on the level of economic freedom in the host countries. This means the countries promote greater freedom of economic activities gain significantly from the presence of multinational corporations (MNCs).     

A smooth coefficient quantile regression approach to the social capital–economic growth nexus

This analysis assesses the role of social capital in generating heterogeneity in growth processes across U.S. counties by estimating growth regressions, using the novel semiparametric smooth coefficient quantile regression method in which parameters are unspecified functions of a measure of social capital. The results indicate substantial differences across the quantiles of economic growth in the profile shapes of the coefficient estimates over the level of social capital. Moreover, the coefficient function estimates are highly nonlinear over the level of social capital, providing evidence that the growth process that links initial income, education attainment, ethnic diversity, inequality, population density, and government activity to growth varies with social capital in a nonlinear way.     

Experiencing change and the evolution of adaptive skills: Implications for economic growth

We distinguish learning in a static environment from that in a dynamic environment to show the existence of an important interaction between the development of new technologies and human capital accumulation. Because technological progress creates a more dynamic environment, it complements education in the production of human capital by enhancing adaptive skills. Higher levels of adaptability and human capital in turn determine the profitability of new inventions and the incentive to invest in new R&D. Differences in the history of technological progress produce different levels of adaptability and our results suggest why countries that have comparable levels of education and per capita incomes may differ significantly in their growth performance.     

Population heterogeneity and growth

I investigate the robustness of the link between growth and heterogeneity in a population along ethnic, linguistic, religious, and socio-economic class lines using cross-country data covering the period 1960–92 and 72 countries. In addition to 21 distinct explanatory variables extensively used in the empirical growth literature, I consider several fragmentation and polarization indices capturing the heterogeneity in a population to deal with measurement uncertainty, and utilize Bayesian Model Averaging techniques to address uncertainty issues regarding model specification. My results indicate that while substantial data evidence favors the inclusion of population heterogeneity as a theory when proxied by fragmentation indices, it does not support the inclusion of this theory when proxied by polarization indices. Furthermore, the religious fragmentation index has the strongest evidence in favor of its inclusion as opposed to ethnic and linguistic fragmentation indices and income inequality.     

Resource abundance and economic growth in the United States

It is a common assumption that regions within the same country converge to approximately the same steady-state income levels. The so-called absolute convergence hypothesis focuses on initial income levels to account for the variability in income growth among regions. Empirical data seem to support the absolute convergence hypothesis for US states, but the data also show that natural resource abundance is a significant negative determinant of growth. We find that natural resource abundance decreases investment, schooling, openness, and R&D expenditure and increases corruption, and we show that these effects can fully explain the negative effect of natural resource abundance on growth.     

Economic growth,exports and foreign direct investment in Least Developed Countries: A panel Granger causality analysis

This paper investigates potential Granger causality among the real GDP, real exports and inward FDI in Least Developed Countries for the period between 1970 and 2009. A new panel-data approach developed in Kónya (2006) [Kónya (2006), Exports and growth: Granger causality analysis on OECD countries with a panel data approach, Economic Modelling, 23, 978–992] which is based on SUR systems and Wald tests with country specific bootstrap critical values has been employed. The results indicate direct, one-period-ahead, unidirectional causality from exports to GDP in Haiti, Rwanda and Sierra Leone, and from GDP to exports in Angola, Chad and Zambia. Considering the FDI–Growth nexus, there is evidence of FDI Granger-causing GDP in Benin and Togo, and GDP Granger-causing FDI in Burkina Faso, Gambia, Madagascar and Malawi. While studying EXP–FDI relations, this paper finds that the causality is from FDI to real exports in Benin, Chad, Haiti, Mauritania, Niger, Togo and Yemen, and from real exports to FDI in Haiti, Madagascar, Mauritania, Malawi, Rwanda, Senegal and Zambia.     

The effects of economic reforms on manufacturing dualism: Evidence from India

Dualism is a pervasive feature of the manufacturing sectors of less-developed countries, with large differences in productivity between the informal and the formal sectors. Policy distortions are viewed as an important factor behind the prevalence of manufacturing dualism. We examine whether tariff reforms, industrial de-licensing and the withdrawal of reservation of products for small firms implemented since the mid-1980s have had any effects on efficiency differentials between informal and formal firms in Indian manufacturing. We find strong evidence that economic reforms have exacerbated dualism by increasing the productivity differentials between the more efficient formal firms and the less efficient informal firms.     

On competing theories of economic growth: cross-country evidence

In the recent literature on economic growth, four approaches compete to explain growth trends in per capita GDP of the world set of countries: (1) the Solovian approach; (2) the New Theory of Endogenous Growth; (3) the Abramovitz–Baumol ‘catching up’ approach; (4) the Kaldor approach of increasing returns and cumulative causation. Approaches (3) and (4) are formalized here in a single model and then tested against approaches (1) and (2) on a common database and sample of countries. The main conclusions are the following: that labour is not the limiting factor on growth, as implied by (1) and (2); that catching up is an important and a non-declining process; that increasing returns to output rather than to capital are very important and accelerate the catch-up with the US trend; that a lack of social capabilities and technological push may reverse catching up into falling behind with respect to the US productivity level; and that the pattern of growth changes between 1960–73 and 1973–88 because physical investment becomes less important while R&D becomes more important, and because cumulative causation through export growth ceases.     

Research publications and economic growth: evidence from cross-country regressions

The effects of the quality of tertiary education on economic growth have been examined across countries. Professors’ research publication is used as a proxy for the quality of education at the university level. Research outputs in basic science and engineering are found to have a positive and significant effect on economic growth. Economics and business research also have immediate growth effects although the effects are a bit smaller. The results are, in general, consistent with the findings in the growth literature. The convergence hypothesis is also supported by the data.     

Growth miracles and failures in a Markov switching classification model of growth

In this paper economic growth is interpreted as a sequence of transitions between distinct growth regimes that countries visit with different frequencies. Countries featuring similar growth dynamics are endogenously grouped into three different clusters. The first cluster comprises successful countries that are characterized by lengthy periods of high or very high growth. Moderately successful countries in the second cluster experience both periods of reasonable growth and periods of stagnation, whereas failing countries in the third cluster suffer from highly volatile growth rates with frequent episodes of crisis. Successful countries are characterized by better initial conditions, policies and institutions compared to the other countries. Neither initial conditions nor institutions distinguish moderately successful from failing countries; what makes them different is policy in the form of investments into infrastructure and human capital, trade liberalization and limited policy volatility.     

Dynamic heterogeneity in cross-country growth relationships

Empirical literature examining cross-country growth within the simple Solow framework invariably chooses to let the relationships between growth and its determinants stay constant over time. In an era of rapidly changing economies, this may not be wise. We track these correlations from 1982 until 2003. We find that the relationships between the standard determinants and growth are for the most part, quite stable; however, one-quarter of them do change in a significant way. Theoretically, the findings are interesting because of the possible causes for the structural changes, and the fact that three-quarters of the relationships are stable when maybe they shouldn't be. Methodologically, the findings are interesting because modelers using these variables should account for this heterogeneity to reduce bias when drawing inference from data spanning this period.     

Political regime type and variation in economic growth rates

Research about the effects of regime type on economic growth rates did not establish any robust differences in average growth rates between democracies and autocracies. Here, it is suggested that we may have asked the wrong question. There still might be a difference in variances. Democracy implies similar constraints on rulers and thereby might lead to quite similar economic performances. Among autocracies, however, constitutional and institutional constraints are likely to be weak and variable. Moreover, personal inclinations of autocrats might matter much more than personality differences between democratic rulers. Data from the 1960–87 period supply some evidence that there is indeed greater variation in growth rates among autocracies than among democracies.     

Testing convergence of European regions: A semiparametric approach

We provide a reappraisal of income convergence across European regions over the last two decades by using a semiparametric partially linear model to approximate the relationship between the average growth rate of GDP per capita and the initial GDP per capita. Estimation results point out both country heterogeneity and non-linearity in the convergence process. The findings suggest that low income regions, in particular those from new adhesion countries, diverge while medium income regions converge and that there is no evidence of convergence for high income regions.     

Natural capital, subjective well-being, and the new welfare economics of sustainability: Some evidence from cross-country regressions

The measurement of natural capital and its management during the economic development process are important aspects of the capital approach to sustainable development. However, the assessment of social welfare in terms of genuine savings (or changes in total wealth per capita) is arguably too limited. This paper tries to make a case for the incorporation of subjective well-being measures in debates about sustainable development by exploring the macro-level relationship between subjective well-being and natural capital in a cross-country setting. It is tested whether natural capital per capita is correlated with subjective well-being in a sample of fifty-eight developed and developing countries, using natural capital data from the World Bank's Millennium Capital Assessment. Bivariate regressions indicate that it is. When multiple regression models are estimated that include (a) major country-level determinants of subjective well-being (GNI per capita, social capital, income distribution, unemployment, inflation), and (b) regional dummy variables for ex-Soviet Union and Latin American countries, the positive correlation remains. The role of data outliers is carefully explored, and the sensitivity of the results to the use of alternative subjective well-being measures (i.e. life satisfaction, happiness, and a combined life satisfaction and happiness index) is investigated. This does not change the nature of the results. The findings arguably strengthen the case for a ‘new welfare economics of sustainability’ that takes subjective well-being measures into account.     

Directly unproductive schooling: How country characteristics affect the impact of schooling on growth

The rapid rise in schooling in developing countries in recent decades has been dramatic. However, many cross-country regression analyses of the impact of schooling on economic growth find low and insignificant coefficients. This empirical ‘puzzle’ contrasts with theoretical arguments that schooling, through raising human capital, should raise income levels. This paper argues that poor results are to be expected when regression samples include countries that vary greatly in their ability to use schooling productively. Data on corruption, the black market premium on foreign exchange and the extent of the brain drain for developing countries are used as indicators of an economy's productive use of schooling. Regression analysis shows that the impact of schooling on economic growth is substantially higher in countries that are adjudged to use schooling productively.