Institutions, infrastructure, and economic growth

This paper develops a structural model of infrastructure and output growth that takes account of institutional and economic factors that mediate in the infrastructure–GDP interactions. Cross-country estimates of the model indicate that the contribution of infrastructure services to GDP is substantial and, in general, exceeds the cost of provision of those services. The results also shed light on the factors that shape a country's response to its infrastructure needs and offer policy implications for facilitating the removal of infrastructure inadequacies.     

The relationship between insurance and economic growth in Europe: a theoretical and empirical analysis

The role of insurance companies, although growing in importance in financial intermediation, has received less attention than bank and stock markets and if so, mainly as a provider of risk transfer in single country or very heterogeneous samples. We investigate both the impact of insurance investment and premiums on GDP growth in Europe. We conduct a cross-country panel data analysis from 1992 to 2005 for 29 European countries. We find a positive impact of life insurance on GDP growth in the EU-15 countries, Switzerland, Norway and Iceland. For the New EU Member States from Central and Eastern Europe, we find a larger impact for liability insurance. Furthermore our findings emphasise the impact of the real interest rate and the level of economic development on the insurance-growth nexus. We argue that the insurance sector needs to be paid more attention in financial sector analysis and macroeconomic policy.

Public investment and budgetary consolidation in Portugal

In this paper we find that public investment in durable goods has a positive effect on long-term economic performance in Portugal. We also find that these positive effects are not strong enough for public investment to pay for itself in the form of future tax revenues. Therefore, cuts in public investment in durable goods, although costly in terms of long-term economic performance seem to be an effective way of alleviating pressure on the public budget. It is important to note, however, that this general result contrasts sharply with the evidence found in this paper for public investment in equipment, a small component of public investment in durable goods, as well as with evidence elsewhere for public investment in transportation infrastructures. For these, the effects on output are strong enough for public investment to pay for itself. Therefore, cuts in these two types of public investment, would have negative long-term economic effects as well as negative long-term budgetary effects. Clearly, not all public investment is created equal. We would like to thank the editor as well as two anonymous referees for unusually useful comments and suggestions. The usual disclaimers apply.     

Human capital,innovation capability and economic growth in Portugal, 1960-2001

In maintaining that the main flaw in empirical studies on economic growth derives from the fact that they employ Solow-style neoclassical growth models, rather than testing actual endogenous growth theory, we examine the human capital-innovation-growth nexus, thus testing new growth theory more directly. We test its insights against the economic evolution of an individual country, Portugal, using time series data from 1960 to 2001. Estimates based on vector autoregressive and cointegration analysis seem to confirm that human capital and indigenous innovation efforts were enormously important to the economic growth process in Portugal during the period of study. In particular, the indirect effect of human capital through innovation, emerges here as being critical, showing that a reasonably high stock of human capital is necessary to enable a country to reap the benefits of its indigenous innovation efforts.Received: November 2003, Accepted: November 2004, JEL Classification: C22, J24, O30, O40 Correspondence to: Aurora A.C. TeixeiraThe authors are grateful to two anonymous referees, Paulo Brito and the participants of the 2003 Portuguese Society for Economics Research (SPiE) in Lisbon, Portugal for helpful comments and suggestions. CEMPRE - Centro de Estudos Macroeconómicos e Previsão - is supported by the Fundação para a Ciência e a Tecnologia, Portugal, through the Programa Operacional Ciência, Tecnologia e Inovação (POCTI) of the Quadro Comunitário de Apoio III, which is financed by FEDER and Portuguese funds.     

A quantitative reassessment of the finance–growth nexus: evidence from a multivariate VAR

The long-run relationship between financial development and economic growth is examined in a multivariate vector autoregression (VAR) framework using 10 sample countries. Difficulties surrounding the cross-country regressions and bivariate time series studies are outlined. The long-run financial development and output relationships are identified in a cointegrating framework through tests of over-identifying restrictions. We find bi-directional causality between financial development and economic growth in all the sample countries, conclusions that stand distinct from those in the existing empirical literature. We attribute our findings to: (i) analysis of a higher dimensional system, (ii) a new method of identifying the long-run economic relationships, and (iii) a new approach to long-run causality testing.     

Financial intermediation and growth: causality and causes without outliers

In a seminal paper, Levine et al. (J Monet Econ 46:31–77, 2000) provide cross-sectional evidence showing that financial development has positive average impact on long-run growth, using a sample of 71 countries. We argue that the evidence is sensitive to the presence of outliers.

Explaining the nonlinear effects of financial development on economic growth

Using different indicators of financial development, recent empirical studies have discovered various patterns of nonlinearity in the relationship between financial development and economic growth. By adding consumption loans, which are nonproductive, into a standard model of asymmetric information, this paper generates a model that is able to replicate all possible nonlinear finance–growth relationships found in recent empirical studies.      

中国经济增长的特征、可持续性与潜在增长率估算:一个综述

在本文通过对中国经济增长的表现特征、可持续性和潜在增长率估算三方面的理论综述,进一步论述了中国经济增长的发展脉络,并在此基础上提出研究中国经济增长理论尚需改进的空间.     

Resource constraint,sustainable economic growth pattern and transformation of economic system in China

Over the past 20 years, China has made spectacular achievements in economic growth as well as in thetransformation of economic growth pattern. Industrial structure is being updated, and technology is playing a more andmore important role in economic development. The energy and resource consumption in many industries and enterprisesare reducing. However, we should realize that there are still many problems in changing the economic growth pattern,such as high input, high consumption, high discharge, inharmony, recycling difficulty, and low efficiency, which havegreatly impaired and restrict Chinese economic development. Therefore, the fundamental change of the economic growthpattern is inevitable. Based on the analysis on the status quo and the exploit of resources, this paper suggests that thetransformation from unsustainable to sustainable growth is the only choice in changing the economic growth pattern. Inaddition, the transformation should not completely rely on the fundamental effects of market mechanism. We should makefull use of the power of governments to speed up the transformation of economic system.     

Financial development and growth: An empirical analysis

Over the last two decades several countries experienced currency crises. These were characterized both by a huge disruption of economic activity and an extreme speed of diffusion within countries. The financial turmoil happened in a period of very high degree of international financial integration. As a result financial liberalization was associated with greater incidence of crises and this brought an intense debate in both academic and policy circles about the consequences of free capital movements.     

Dollarization, economic growth, and employment

Dollarization brought price stability and higher economic growth to Ecuador. Nevertheless, unemployment remained stubbornly high. Two opposing forces explain this result: sustained growth led to higher labor demand but price stabilization triggered substitution effects by cheaper intermediate goods and capital.     

Tax-spending policies and economic growth: Theoretical predictions and evidence from the OECD

We present an endogenous growth model to study the growth effects of the composition of government expenditure and the associated tax burden. When we use data from a set of 23 OECD countries during 1970–2000, our econometric results support the predictions of the theory. The share of productive government expenditure is associated with higher growth, and this result is more robust when we use effective average tax rates and statutory tax rates as measures of the tax burden. With respect to the tax burden, different tax rates have different growth effects.     

Education public financing and economic growth: an endogenous growth model versus evidence

Using an Endogenous Growth Model with physical and human capital and unemployment (Mauro and Carmeci in J Macroecon 25:123–137, 2003), we study the effects of subsidies to education in economic growth. According to the model, we conclude that government subsidies to education only enhance economic growth conditional on unemployment and that this relationship is negatively influenced by unemployment. We provide evidence from a broad panel data of countries that confirms the importance of unemployment in the relationship between subsidies to education and economic growth but dismiss its importance as a direct determinant of economic growth.      

Political constraints to growth in an economic union

This paper studies the political economy of growth in an economic union such as the EU. In the spirit of Acemoglu, Aghion and Zilibotti [Acemoglu, D., Aghion, P. and Zilibotti, F., 2006a, Distance to frontier, selection and economic growth, Journal of the European Economic Association, 4:1, 37–74; Acemoglu, D., Aghion, P., and Zilibotti, F., 2006b, Growth, development and appropriate versus inappropriate institutions, mimeo MIT.], as the economy approaches the world technology frontier, structural reforms that increase competition in intermediate goods sectors are necessary to boost innovation and productivity growth. Reforms, however, raise the opposition of incumbents and, therefore, are politically difficult to implement. When there are important cross-border policy spillover effects, national governments are more easily captured by vested interests, as they fail to internalize the benefits of reforms on the rest of the union. In this situation, productivity growth may be sluggish and the economy can fail to converge to the frontier. On the other hand, when policy is chosen by a union government (or a collective body that takes into account union welfare), the internalization of spillovers raises the perceived benefit of reforms and, consequently, lowers the ability of lobbies to obtain high levels of protection.     

Public deficits and economic growth

Considering an integrated area, this paper deals with the balance between the positive effects in the degree of economic cohesion resulting from R&D subsidies, temporarily granted from an imitator and less developed country, and the external negative effects arising from the eventual creation of excessive public deficits.We propose and numerically solve a model of a monetary union between two countries, one being innovator and the other imitator. Results suggest the pertinence of allowing for a temporary differentiation of fiscal discipline rules in favour of the less developed country. R&D subsidies granted by this country seem to lead to an easier catching-up without producing important negative external effects, also as not hurting severely the conditions for long-run sustainability of public accounts.     

Federal transfers, environmental policy and economic growth

We study the effects of commonly used cross-country transfer programs on uncoordinated national environmental policies, economic growth and natural resources in a federal economy. Natural resources are a federation-wide public good. In each member country, production degrades the environment, but clean-up policy can improve it. Clean-up policy is financed by taxes on polluting firms’ output and cross-country redistributive transfers. We solve for a symmetric Nash equilibrium among national governments. Transfer policies that lead to higher pollution taxes make existence harder, and are harmful not only to growth but also to the environment. The best way to improve environmental quality is to implement a taxation system that stimulates growth and broadens tax bases to finance national clean-up policies.     

Distributive politics and economic growth: the Markovian Stackelberg solution

Summary. We generalize the result of Alesina and Rodrik (1994) by showing that their static solution is also a time consistent Stackelberg solution of a differential game between the government and the median voter.Received: 11 June 2001, Revised: 7 February 2003, JEL Classification Numbers: O15, O40, E61, C73.We would like to thank Claus Peter Ortlieb, Nikolaus A. Siegfried, and two anonymous referees for useful comments. The first version of this work was written while Holger Strulik was Marie Curie Research Fellow at the Department of Applied Economics, University of Cambridge, U.K. A research grant of the European Commission is gratefully acknowledged. Correspondence to: H. Strulik     

The sustainability and transition of economic growth in China：from a perspective of factor structure

After more than 20 years＇ high speed growth, the sustainable growth of Chinese economy faces serious limitation of resources and factors now and in the future. In order to maintain the economic growth. China has to trans-form the way of economic growth, Based on the analysis on the related theories of economic growth and the structural transformation in factors of production, this paper proposes that the transformation of the economic growth way has to impel the optimization and the promotion of the utilization structure of factors of production. Finall.v, based on the analysis of the necessity to change the pattern of economic growth, this paper proposes＇ the strategic measures to promote the continuous economic growth and the transformation of patterns of economic growth.     

The allocation of volatile aid and economic growth: Theory and evidence

We analyse, both theoretically and empirically, the growth effects associated with two components of volatile foreign financial assistance: ‘directly productive’ (or ‘tied’) aid and ‘pure’ aid. We find that scenarios in which aid can hurt the recipient's growth rate emerge only in cases where foreign aid is volatile. As a result, we conclude that it is only in conjunction with the presence of aid variability that aid allocation determines whether foreign aid hurts or promotes long-run growth.