The pattern of specialization and economic growth: The resource curse hypothesis revisited

This paper explores the relation between countries’ pattern of trade specialization and long-term economic growth. It shows that countries specializing in the export of natural resource based products only fail to grow if they do not succeed in diversifying their economies and export structure. This conclusion follows from an empirical investigation that has three innovative features. First, it uses a dynamic panel data analysis. Secondly, it employs disaggregated trade data sets to elaborate different measures of trade specialization that distinguish between unprocessed and manufactured natural resource products and are informative about the countries’ trade diversification experience, their link to world demand trends and involvement in intra-industry trade. The final innovative aspect of the paper relates to our empirical findings: it is only specialization in unprocessed natural resource products that slows down economic growth, as it impedes the emergence of more dynamic patterns of trade specialization.     

Political versus economic institutions in the growth process

After a decade of research on the relationship between institutions and growth, there is no consensus about the exact way in which these two variables interact. In this paper we re-examine the role that institutions play in the growth process using data for developed and developing economies over the period 1975–2005. Our results indicate that the data is best described by an econometric model with two growth regimes. Political institutions are the key determinant of which regime an economy belongs to, while economic institutions have a direct impact on growth rates within each regime. These findings support the hypothesis that political institutions are one of the deep causes of growth, setting the stage in which economic institutions and standard covariates operate.     

Rapid Economic Growth: Contributing Factors and Challenges Ahead*

The sustained improvement in the underlying conditions for growth for more than two decades has resulted in lifting the Indian economy from the bottom of the growth heap to one of the fastest growing economies in the world. This paper presents the factors that have contributed to the growth acceleration in India over the past 25 years and the challenges faced by the growth process in the years ahead. The inadequate and poor quality of infrastructure, particularly electricity, the emerging scarcity of skilled labor, and a lagging agricultural sector pose serious medium‐term challenges to the sustainability of high growth, while management of the macroeconomic environment poses more immediate challenges in view of the proliferation of unsustainable and sometimes invisible subsidies, sharp increases in the world prices of food and fuel, and pressure on the exchange rate executed by strong capital inflows.     

Information Technology and the World Growth Resurgence

Abstract. This paper analyzes the impact of investment in information technology (IT) on the recent resurgence of world economic growth. We describe the growth of the world economy, seven regions, and 14 major economies during the period 1989–2004. We allocate the growth of world output between input growth and productivity and find, surprisingly, that input growth greatly predominates! Moreover, differences in per capita output levels are explained by differences in per capita input, rather than variations in productivity. The contributions of IT investment have increased in all regions, but especially in industrialized economies and Developing Asia.     

Imports and growth in China

In this paper, we analyze the role played by imports and investment on labor productivity and output in China from 1964 to 2004. In doing so, our analysis focuses on the role of technological progress incorporated into the Chinese economy through capital accumulation and imports, which could be a cause of significant technology transfer from abroad that facilitated industrialization and rapid growth in China. However, as we know that there could be other factors influencing economic development, we have also considered the role played by domestic innovation activities, competitiveness and foreign economic conditions. We focus on examining the short- and long-run effects of the considered variables as well as the direction of their causality. In addition, we investigate the role played by the exchange rate on growth and discuss some policy implications of this effect on the current debate on the appreciation of the Yuan. The empirical results provide evidence that both imports and investment encourage output and labor productivity in the long run, but neither investment causes imports nor imports cause investment. Moreover, we found that during the period considered the real exchange rate influenced output, but not productivity. These findings provide interesting insights on the future Chinese economic policy.     

Economic growth, liquidity, and bank runs

We construct an endogenous growth model in which bank runs occur with positive probability in equilibrium. In this setting, a bank run has a permanent effect on the levels of the capital stock and of output. In addition, the possibility of a run changes the portfolio choices of depositors and of banks, and thereby affects the long-run growth rate. These facts imply that both the occurrence of a run and the mere possibility of runs in a given period have a large impact on all future periods. A bank run in our model is triggered by sunspots, and we consider two different equilibrium selection rules. In the first, a run occurs with a fixed, exogenous probability, while in the second the probability of a run is influenced by banks’ portfolio choices. We show that when the choices of an individual bank affect the probability of a run on that bank, the economy both grows faster and experiences fewer runs.     

ICT and Growth: The Role of Rates of Return and Capital Prices

We revisit the widely discussed contribution of investment in ICT to economic growth, focusing on differences in productivity and quality of ICT across countries and time. In a growth accounting approach, we look at the way rates of return and rates of asset price decline measure these aspects. Conducting a sensitivity analysis with data from the EU KLEMS database for the years 1990–2007, we introduce a constant rate of return and a constant rate of ICT price decline. Both alternative measurements somewhat downplay the role investment played relative to growth in multifactor productivity in the U.K. and the U.S. during 1995–2000. Moreover, we show that more than half of the ICT contribution to labor productivity growth results from changes in capital quality and composition rather than from quantity.     

Technical change and total factor productivity growth: The case of Chinese provinces

In the literature technical change (TC) is mostly assumed to be exogenous and specified as a function of the time trend or time dummies. However, some exogenous external factors other than time can also affect TC. In this paper we model TC via time trend (external non-economic) as well as other exogenous (external economic) factors (technology shifters). For this we define technology indices based on the external economic factors and the time trend. The specification of production function is then amended to accommodate these technology indices which are not necessarily separable from the traditional inputs. That is, these technology indices allow for non-neutral shift in the production function. In doing so we are able to decompose TC (a component of TFP change) into two parts. One part is driven by time and the other part is related to producer-specific external economic factors. The latter can further be decomposed into each external economic factors. The empirical model uses panel data on Chinese provinces. We identify a number of key technology shifters and their effect on technical change and TFP growth of provinces are examined.     

The Financial Resource Curse*

In this paper, we present a model of the financial resource curse (i.e., episodes of abundant access to foreign capital coupled with weak productivity growth). We study a two‐sector (i.e., tradable and non‐tradable) small open economy. The tradable sector is the engine of growth, and productivity growth is increasing with the amount of labor employed by firms in the tradable sector. A period of large capital inflows, triggered by a fall in the interest rate, is associated with a consumption boom. While the increase in tradable consumption is financed through foreign borrowing, the increase in non‐tradable consumption requires a shift of productive resources toward the non‐tradable sector at the expenses of the tradable sector. The result is stagnant productivity growth. We show that capital controls can be welfare‐enhancing and can be used as a second‐best policy tool to mitigate the misallocation of resources during an episode of financial resource curse.     

SOCIAL STATUS AND THE GROWTH EFFECT OF MONEY*

It has been shown that in a standard one‐sector AK model of endogenous growth with wealth induced preferences for social status, the economy's growth rates of real output and nominal money supply are positively related when the cash in advance constraint is applied solely to the household's consumption purchases. However, a positive output growth effect of money/inflation is not consistent with the existing empirical evidence. We show that when gross investment must be financed by real money balances as well, this result is overturned, i.e. higher inflation is detrimental to economic growth, because of a dominating portfolio substitution effect.     

A General Approach to Welfare Measurement through National Income Accounting*

A framework is developed for analyzing national income accounting using a revealed welfare approach that is sufficiently general to cover, both the standard discounted utilitarian and maximin criteria as special cases. We show that the basic welfare properties of comprehensive national income accounting, previously ascribed only to the discounted utilitarian case, extend to this more general framework. In particular, under a wider range of circumstances, it holds that real NNP growth (or, equivalently, a positive value of net investments) indicates welfare improvement. We illustrate the applicability of our approach in the Dasgupta–Heal–Solow model of capital accumulation and resource depletion.     

Of Yeast and Mushrooms: Patterns of Industry-Level Productivity Growth

Abstract. In this paper we analyse labour productivity growth in the United States, four European countries (France, Germany, the Netherlands and United Kingdom), Australia and Canada between 1987 and 2003 from an industry perspective. Rather than analysing broad industry groups, we compare the pattern of growth in all industries through Harberger diagrams. We introduce new summary measures, which indicate the pervasiveness of growth patterns. These indicators show that investment in both information and communication technology (ICT) and non-ICT capital is fairly balanced or 'yeasty', driven by overall macro-economic conditions. However, growth of total factor productivity (TFP) is much more localized or 'mushroom-like'. In particular we find a clear distinction between countries in continental Europe, in which TFP is decelerating after 1995 and becoming more localized, and Anglo-Saxon countries in which TFP growth is accelerating and becoming more broad-based, especially after 2000. The increased breadth of Anglo-Saxon TFP growth is consistent with delayed effects of intangible investments that are complementary to ICT investments.     

Recent Technological and Economic Change among Industrialized Countries: Insights from Population Growth*

Cross‐country observations on the effects of population growth are used to show why differences in rates of growth in working‐age population may be a key to understanding differences in economic performance across industrialized countries over the period 1975–1997 versus 1960–1974. In particular, we argue that countries with lower rates of adult population growth adopted new capital‐intensive technologies more quickly than their high population growth counterparts, therefore allowing them to reduce their work time without deterioration of growth in output‐per‐adult.     

Intangible Investment and Changing Sources of Growth in Korea

We examine how intangible investments change the sources of growth in the Korean economy. After constructing a novel industry‐level data set on intangibles, we estimate the contribution of intangible‐intensive industries and other industries to aggregate productivity growth in 1981–2008. The contribution of intangible‐intensive industries to aggregate labour productivity growth has significantly increased, whereas that of other industries has substantially decreased. The increased contribution of intangible‐intensive industries is mainly associated with total factor productivity growth rather than with input growth. This suggests that innovations related to intangible investments in these industries might become a new key source of productivity growth in Korea.     

The Political Economy of India's Economic Reforms*

This paper analyzes the history of the relationship between the state and the private sector in India. It concludes that India's economic reforms, which made development policy more dependent on international trade and private initiative, depended on the evolution of technocratic and political conviction. Reformers needed the support of financial crises for overcoming the powerful vested interests opposed to reforms. Successful reforms involved largely homegrown strategies of policy and institutional change. They have produced impressive growth rates and have benefited the rich and the middle class. The challenge for development and sustainable reforms is to make it more inclusive for poor farmers and unorganized workers.     

Taxation In The Two‐Sector Neoclassical Growth Model With Sector‐Specific Externalities And Endogenous Labour Supply*

This paper examines the long‐run impacts of selective (or sector‐specific) commodity, payroll, and profit taxes in a two‐sector endogenous growth model with sector‐specific production externalities, in which one sector produces consumption goods and the other produces investment goods. The novelty of the model is that it allows not only for endogenous labour supply but also for the intersectoral allocation of resources, which may together lead to indeterminacy. We analytically show that the stability properties of the long‐run equilibrium critically affect the long‐run effects of these selective taxes, which may reverse the standard results of the growth effects of distortionary taxes.     

金融效率与经济增长

本文中的金融效率的含义是指金融部门在其活动中直接或间接作用于经济时所显示的有效功能,根据金融活动作用于经济的不同效应,本文从Pagano的金融-增长联结机制中将金融效率切分为分置效率、转化效率和配置效率等三个方面;基于对金融活动作用于经济三种效应的探究,本文构建了一个蕴涵着这几种效应的经济增长模型,从而开辟出了测算金融效率的另一种模式(同时也构建了一种新类别的经济增长模型)。通过对该模型的求解、分析和估值,本文最后得出结论:在样本期内,我国金融部门的资金转化效率与资金分置效率大约都在60%左右。     

金融发展与经济增长:从动员性扩张向市场配置的转变

本报告在回顾中国金融体制结构与经济增长特征的基础上,运用干中学的信用扩张模型,结合开放经济中平衡信贷规模扩张与通货膨胀机制的探讨,揭示出中国高速经济增长中的货币、金融政策的特定制度安排。本报告认为,这样的制度安排可以有效解释中国转轨时期的高增长和低通胀,同时指出该制度作用下所存在的成本和风险,并提出从动员型金融向市场配置型金融转型的相应对策。     

PRODUCTIVITY AND BUSINESS CYCLES IN JAPAN: EVIDENCE FROM JAPANESE INDUSTRY DATA*

Constructing a database of 37 industries, we examine whether the measured productivity in Japan is pro‐cyclical and investigate the sources of this pro‐cyclicality by using the production function approach employed by Hall (1990) and Basu and Fernald (1995). The aggregate Solow residual displays pro‐cyclicality. A large number of industries show constant returns to scale. No significant evidence for the presence of thick‐market externalities is found. Our results also hold when we consider labour hoarding, part‐time employment, and the adjustment cost of investment. The results indicate that policies to revitalize the Japanese economy should concentrate on promoting productivity growth.