Environment,Directed Technical Change and Economic Policy

We study the effects of an economic policy in an endogenous growth general equilibrium framework where production of consumption goods requires two resource inputs: a polluting non-renewable resource and a non-polluting labour resource. The use of the former contributes to the accumulation of pollution in the atmosphere, which affects welfare. There is a specific research sector associated with each of those resources. We provide a full welfare analysis, and we describe the equilibrium paths in a decentralized economy. We go on to study the effects of three associated economic policy tools: a tax on the polluting resource, and two research subsidies. We show that the optimal environmental policy has two main effects; it delays the extraction of the resource and with it the level of polluting emissions and it reallocates research efforts, decreasing the amount put into “grey” research to the benefit of “green” research. We also show that the environmental policy is grey-biased in the short-term, and green-biased in the long-term. Finally, we compute the optimal values for these tools.      

FDI, domestic capital and economic growth: Evidence from panel data at China’s provincial level

Based on panel data at the provincial level in China, this paper found that direct effects foreign direct investment (FDI) had on economic growth were of insignificance. However, through improving technical efficiency and “crowding” in domestic investment, FDI produced positive effects on China’s economy. The state sector still played a major part in the total fixed investment, therefore, direct effects on growth were significant. Although private sector was increasingly important for the whole economy, it had no direct influences on economic growth. Meanwhile, neither the state sector nor private sector made contribution to the improvement on technical efficiency. __________ Translated from Shijie Jingji Wenhui 世界经济文汇 (World Economic Papers), 2006, (4): 27–43     

Roles played by financial development in economic growth: application of the flexible regression model

This study presents the nonlinear relationship that exists between financial development and economic growth. This study applies the flexible nonlinear regression model of Hamilton (Econometrica 69(3):537–573, 2001) because it imposes no specification restrictions. Two empirical results are obtained. First, an inverted U-shaped relation between banking sector development and economic growth is identified. Namely, the two variables are positively linked before the turning point, but negatively linked after it. Second, a positive relationship with asymmetric √-shape between stock market development and economic growth is found.     

Economic Growth and Development: Towards a Catchup Model

We develop a model for economic growth applicable to a group of countries, constituting around half of the gross global production, that have been consistently “catching up” to the US since 1960 or so. This group can be termed “the convergence club.” The model has a theoretical basis developed in other publications (cited), but the present work is essentially empirical. It demonstrates that there is a very strong correlation between “catchup” growth, with respect to the US, and an energy proxy (EP). The energy proxy that works best is a linear combination of domestic electric power consumption petroleum (oil) consumption, per capita, compared to the US levels. The results presented here do not constitute a theory of growth, but they are consistent with theory presented elsewhere. On a practical level, we argue that consistent “catchup” trends over the past 40 years can safely be extrapolated for a few more decades for scenario construction purposes. We also believe that the observed catchup trends can be regarded as “potential” mid-term or long-term growth trajectories for transition economies and others that have recently been adversely affected by conflict or mismanagement.     

International Integration and Growth: A Further Investigation on Developing Countries

The paper examines empirically the linkages between international integration and economic growth in a panel of 47 developing countries and 18 trade blocs over the period 1970–1989. Specifically, it attempts to identify through which channel(s) – notably, specialization according to comparative advantage and increased efficiency, exploitation of increasing returns from larger market, and technology spillovers through investment and trade–trade blocs can affect the economic growth of their member countries. The results suggest that (1) intra-bloc trade does not affect growth significantly; (2) income diversion among member countries contributes positively and significantly to growth; and (3) the size of the trade bloc does matter in the sense that the bigger is not always the better for the welfare of the member countries.     

Towards a Disequilibrium Theory of Endogenous Economic Growth

This paper discusses the need for a new approach to economic growth theory. The standard theory of growth-in-equilibrium driven by exogenous, uncaused, productivity gains has an implication that is both unjustified and perverse from a policy perspective: that government intervention of any kind can only introduce constraints and reduce option space, thus decreasing potential growth. It is argued that growth theory should (1) acknowledge the importance of natural resources, especially fossil fuels, as a driver of past and present economic growth, (2) incorporate an explicit recognition that growth is a consequence of technological innovation, especially radical innovation, that often responds to natural resource scarcities or other societal needs and (3) explicitly reflect the fact that the important (i.e. scarce) factors of production in economics can and do change over time, i.e. from a rural ‘cowboy’ economy of the past to an urbanized ‘spaceship’ economy of the future. In short, it should reflect the fact that ‘necessity is the mother of invention’. The first and third of these modifications have been proposed before, but not in combination. The third seems to be new.     

Testing the balanced growth hypothesis: evidence from China

We investigate whether China’s experience during 1952–2004 supports the balanced growth entailment of the neoclassical growth model. Estimation of long-run relations among output, consumption and investment for the full period reject the balanced growth hypothesis for both the national and regional economies. When the economic reforms of the late 1970s are modelled as a structural break by the methods of Johansen et al. (Economet J 3(2):216–249, 2000) and Perron (Econometrica 57(6):1361–1401, 1989), we find some evidence of balanced growth in the pre-break period but in the post-break period the ‘great ratios’ are trend-stationary, precluding fully balanced growth, though permitting a common (stochastic) productivity trend.      

Income inequality and economic growth—the Kuznets curve revisited

In a neoclassical growth framework with a typical political-economy mechanism, this paper reexamines the relationship between the income inequality and economic growth by introducing government spending into the production function and the utility function. It demonstrates that Kuznets’ famous inverted-U shape relationship between inequality and economic growth will hold—the growth rate will be first increasing with the income inequality before the growth rate decreases with inequality. __________ Translated from The Journal of World Economy (世界经济), 2005,(5) (in Chinese)     

Knowledge, consumption, and endogenous growth

In neoclassical theory, knowledge generates increasing returns – and therefore growth – because it is a public good that can be costlessly reused once created. In fact, however, much knowledge in the economy is actually tacit and not easily transmitted –and thus not an obvious source of increasing returns. Several writers have responded to this alarming circumstances by affirming hopefully that knowledge today is increasingly codified, general, and abstract – and increasingly less tacit. This paper disputes such a trend. But all is not lost: for knowledge does not have to be codified to be reused and therefore to generate economic growth.     

Endogenous structural change and crisis in a multiple time-scales growth model

The slow and endogenous twist of economic macro-structure makes up an important evolutionary feature of capitalist economies, and may be at the root of structural crisis. In this line, a Goodwinian growth model with increasing returns and profit-sharing that tries to picture a simple scenario of the seventies crisis is considered. It is shown that the exhaustion of the Kaldor-Verdoorn “productivity law” can entail, in a nonlinear framework, a “catastrophic” bifurcation from a “high” to a “low” growth path. Slow/fast dynamical systems then allow one to formalize a multiple time-scales dynamics where the growth path is shaped by the structural framework in which it takes place, but has also a long -un feedback. Structural change and crisis appear as long term and endogenous outcomes.     

税收增速大于GDP增速的产业结构分析

Recently, qualitative and comparatively simple positive research on tax revenue increase faster than that of GDP are mostly based upon some factors, such as economic growth, levy technology enhancement, difference between structure of GDP and that of tax, excessive increase of high-tax industries due to local governments’ land-leasing behavior, etc. We firstly develop a theoretical model and responding algorithm about this phenomenon based on industry structure and their tax burden. Our model explicitly takes into account every industry’s contribution to this phenomenon. We attempt to provide a path for explaining tax revenue increase faster than GDP increase and suggestion for forecasting the change of macro-tax burden. __________ Translated from Shuliang Jingji Jishu Jingji Yanjiu 数量经济技术经济研究 (The Journal of Quantitative & Technical Economics), 2008, (10): 108–118     

Money, cycles and capital formation: von Mises the 'Austrian' vs. Robertson the 'Dynamist'

A ‘disequilibrium’ between saving and investmentdecisions determines a maladjustment in production, the disruptionof capital, and a downturn in economic activity, according tothe ‘Austrian’ approach. By contrast, the ‘Dynamists’argue that it may lead to economic growth, as disequilibriummay well be instrumental to capital accumulation. What explainsthese different predictions in otherwise similar models? Thekey is in the interplay between the analytical features andthe ideological options underlying each of these approaches:alternative lines of thought, entirely compatible with theiranalytical models, were abandoned by some of these authors whenthey conflicted with their pre-analytical views. This paperillustrates the argument by exploring the models of two ‘fathers’,von Mises and Robertson.     

The economic case for international labour standards

This paper explores the economic case for international labourstandards. Granting workers rights of free association and collectivebargaining confers both static and dynamic economic efficiencies.Static efficiencies refer to one-time gains from improvementsin economic practice. Dynamic efficiencies refer to gains fromimprovements to the growth path resulting from a shift awayfrom a ‘low road’ development path to a ‘highroad’ path. These efficiencies raise wages, employmentand output in developing countries, and they can also benefitworkers in developed countries. Labour standards are an institutionalmechanism for raising the quality of growth in both developingand developed countries. In this sense, they are a ‘win–win’institution.     

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.      

The evolution of debt and equity markets in economic development

Summary. As noted by Gurley and Shaw, there is a typical pattern of economic development in which the evolution of the financial system is an essential aspect of the growth process. We focus on one component of this evolution: the increasing importance of equity markets as an economy grows. We develop a growth model where capital accumulation is financed externally through a combination of debt and equity. We illustrate why equity market activity might grow – often very rapidly – as an economy develops. We also illustrate why access to equity markets may not be needed in the early stages of economic development. Received: December 30, 1997; revised version: May 26, 1998     

增长失衡与政府责任:基于社会性支出角度的分析

There exists a kind of growth imbalance in China’s current development process, which is essentially characterized by the imbalance between the nation’s wealth and the people’s welfare. This paper points out that growth imbalance results mostly from insufficient government social spending on people’s welfare. Consequently, the government should shoulder the basic responsibility for the provision of education, health and social security, quicken the transformation of government expenditure structure and increase the share of social spending, in order to improve the people’s welfare and achieve the rebalancing of growth. The increase in social spending can also promote the accumulation of human capital, which will help the conversion of economic growth pattern and the realization of sustainable and healthy economic development. Translated from Jingji Yanjiu 经济研究 (Economic Research Journal), 2006, (10): 4–17     

Economics,Democracy, and the Distribution of Capital Ownership

This article holds that widespread, practical access to capital acquisition is essential for sustainable widespread economic prosperity and democracy. The founders of the U.S.A. agreed that sustainable democracy required widespread ownership of land to provide a viable earning capacity sufficient to support robust participation in democratic government. The importance of widespread land ownership to individual prosperity and sustainable democracy was supported not only by the prevailing philosophical views of property, it was also apparent to the common man and woman. Compared to Europe, America offered widespread access to land ownership, higher wages, better work conditions, cheaper staples and greater individual freedom, equal opportunity, prosperity, and political participation. This conviction that widespread access to ownership is a necessary condition for widespread prosperity and sustainable democracy continued throughout most of the nineteenth century, but today public discourse reveals virtually no trace of this once universally held opinion. This article suggests that the disappearance of this conviction can be traced to an erroneous view shaped by neoclassical economics and Keynesian economics. According to this view, (1) the disappearance of the American frontier and industrialization made the goal of widespread capital ownership either impractical or of little or no economic significance and (2) by way of technological advance, sufficient earning capacity and consumer demand to promote growth and sustain democracy can be achieved, without widespread ownership, primarily through jobs and welfare. Although differing in many respects, both mainstream schools, along with Adam Smith’s classical economics, share one common but unstated economic assumption: the broader distribution of capital acquisition (in itself) has no fundamental relationship to the fuller employment of people and capital, the broader distribution of greater individual earning capacity, and growth. Contemporary thinking, shaped by these economic schools, also tacitly assumes that widespread capital ownership is not essential for the sustainable individual earning capacity needed to support robust democracy. This erroneous “ownership-neutrality assumption” (1) contradicts both the views of America’s founders and the colonial experience, and (2) provides theoretical justification for structuring capital markets and capital acquisition transactions to unfairly and dysfunctionally favor existing owners at the expense of broader ownership distribution, more widely shared prosperity, greater efficiency, ecologically friendly growth, and a vital democracy. America’s conscientious founders would be shocked by the diminished importance of the distribution of ownership in the mainstream analysis of prices, efficiency, production, growth, and democracy. Rather than enhancing democracy, they would view the “ownership-neutrality assumption” of mainstream economics as contributing to its deterioration and corruption. They would openly search for economic analysis built on an alternate assumption more consistent with their understanding of the requisite conditions for sustainable democracy. This article advances an economic analysis that suspends the ownership-neutrality assumption, replaces it with a “broader-ownership-growth assumption,” and suggests a voluntary market strategy for substantially broadening capital ownership, enhancing individual earning capacity, and providing the widespread economic prosperity needed for robust democracy.     

Human capital composition, growth and development: an R&D growth model versus data

The effect of human capital composition on growth and development has been somewhat neglected in economic literature. However, evidence has suggested the importance of engineering and technical (high-tech) skills to economic growth, and international organizations have suggested their shortage in developed countries. Using a standard increasing variety growth model, we propose various measures of human capital composition that are related with economic growth and development. When compared to data, the model does well in explaining the rate of growth and the level of development as a function of these measures. “the British colonies had a better educated population (...). Education was secular with emphasis on pragmatic skills and yankee ingenuity (...). The 13 British colonies had nine universities in 1776 for 2.5 million people. New Spain, with 5 million, had only two universities (...) which concentrated on theology and law.” –(Maddison, 2001)     

The Cambridge challenge to the Ricardian analysis of poverty

The Ricardian economists’ famous model of economic growth employed the Malthusian population doctrine, the law of diminishing returns, and the classical or iron law of wages. This analysis was based on utilitarian moral philosophy. The gloomy Stationary State conclusions of the Ricardian growth model — maldistribution of income and widespread poverty — were challenged by both economists and moral philosophers. A particularly important challenge was that offered by William Whewell (1794–1866), Professor of Moral Philosophy and the dominant figure at the University of Cambridge. Whewell is remembered today for his early contributions to mathematical economics. This article begins with a review of the Ricardian growth model. Next, Whewell’s system of moral philosophy is examined and the scientific and religious basis of Whewell’s antagonism to Ricardian economics is considered. After considering Whewell’s treatment of agricultural progress, economic classes, and rent doctrine, his own model of economic growth is analyzed. Finally, Whewell’s appraisal of the duty of government to those harmed by development is explored.     

Ambiguity attitude, R&D investments and economic growth

The process aimed at discovering new ideas is an economic activity the returns from which are intrinsically uncertain. We extend the neo-Schumpeterian growth framework to investigate the role of strong uncertainty in the innovative process. In particular, we postulate that, when deciding upon R&D efforts, investors hold ‘ambiguous beliefs’ about the exact probability of arrival of the next vertical innovation, and that they face ambiguity via the α −MEU decision rule (Ghirardato et al., J Econ Theory 118:133–173, 2004). Along the balanced growth path, the higher the agent’s ambiguity aversion (α), the lower the R&D efforts and the economic performance. Consistent with cross-country empirical evidence, this causal mechanism suggests that, together with the profitability conditions of the economy, different ‘cultural’ attitudes towards ambiguity may help explain the different R&D efforts observed across countries.