Spatial growth with exogenous saving rates

Economic growth has traditionally been analyzed in the temporal domain, while the spatial dimension is captured by cross-country income differences. Data suggest great inequality in income per capita across countries, and a slight but noticeable increase in inequality across nations between 1960 and 2000. Seeking to explore the mechanism underlying the temporal evolution of the cross sectional distribution of economies, we develop a spatial growth model where saving rates are exogenous. Capital movements across locations are governed by a mechanism under which capital moves toward locations of relatively higher marginal productivity, with a velocity determined by the existing stock of capital. This augments the capital accumulation equation by a nonlinear diffusion term. Our results suggest that under diminishing returns, the growth process leads to a stable spatially nonhomogeneous distribution for per capita capital and income in the long run. Insufficient savings may lead to the emergence of persistent poverty cores where capital stock is depleted in some locations.     

Growth vs. level effect of population change on economic development: An inspection into human-capital-related mechanisms

This paper studies the different mechanisms and the dynamics through which demography is channeled to the economy. We analyze the role of demographic changes in the economic development process by studying the transitional and the long-run impact of both the rate of population growth and the initial population size on the levels of per capita human capital and income. We do that in an enlarged Lucas–Uzawa model with intergenerational altruism. In contrast to the existing theoretical literature, the long-run level effects of demographic changes, i.e. their impact on the levels of the variables along the balanced growth path, are deeply characterized in addition to the more standard long-run growth effects. We prove that the level effect of the population rate of growth is non-negative (positive in the empirically most relevant case) for the average level of human capital, but a priori ambiguous for the level of per capita income due to the interaction of three transmission mechanisms of demographic shocks, a standard one (dilution) and two non-standard (altruism and human capital accumulation). Overall, the sign of the level effects of population growth depends on preference and technology parameters, but numerically we show that the joint negative effect of dilution and altruism is always stronger than the induced positive human capital effect. The growth effect of population growth depends basically on the attitude to intergenerational altruism and intertemporal substitution. Moreover, we also prove that the long-run level effects of population size on per capita human capital and income may be negative, nil, or positive, depending on the relationship between preferences and technology, while its growth effect is zero. Finally, we show that the model is able to replicate complicated time relationships between economic and demographic changes. In particular, it entails a negative effect of population growth on per capita income, which dominates in the initial periods, and a positive effect which restores a positive correlation between population growth and economic performance in the long term.     

要素配置、收入差距与经济增长的实证研究

本文基于要素配置的动态性和路径选择性构建模型,测算无劳动力、资本错配下的收入差距,并且实证研究要素错配对收入差距与经济增长关系的影响。研究结果表明：与实际状态相比,无要素错配状态下地区间收入差距变小,意味着要素错配恶化了地区间收入差距;要素错配加剧收入差距对经济增长的阻碍作用,如2016年由于要素错配的存在,收入差距对经济增长的阻碍效应提高20.5%,且整体上引起经济增长缺口达到4.6%;较高的收入差距对人力资本、物质资本和人均消费均有显著的阻碍作用,而要素错配又加剧这种阻碍效应,提高对经济增长的负面效果。     

Health human capital and economic growth in Sub-Saharan African and OECD countries

This paper investigates the effects of health human capital on the growth rate of per capita income in Sub-Saharan African and OECD countries. Using an expanded Solow growth model, panel data, and a dynamic panel estimator, we find that the growth rate of per capita income is strongly and positively influenced by the stock of, and investment in, health human capital after controlling for other variables. The stock of health human capital affects the growth rate of per capita income in a quadratic way: the growth impact of health human capital decreases at relatively large endowments of health stock. Our estimates suggest that 22% and 30% of the transition growth rate of per capita income in Sub-Saharan African and OECD countries respectively, can be attributed to health. The structure of the relationship between health human capital and the growth rate of income in Sub-Saharan African countries is similar to the structure of the relationship in OECD countries. This implies that increased stocks of health human capital leads to higher steady state income. Our results have interesting policy implications.     

Bridging the barriers: knowledge connections,productivity and capital accumulation

The paper contributes to the explanation of the large differences in cross-country productivity performance by modelling and testing the effects of social barriers to communication on productivity and capital accumulation. In an optimal growth model, social barriers to communication, which impede the formation of knowledge connections, are shown to reduce both transitory and steady-state levels of total factor productivity (TFP), per capita consumption and reproducible capital. Empirical testing yields a robust and theoretically consistent result: linguistic barriers to communication reduce productivity and capital accumulation. The findings provide an explanation for cross-country differences in TFP, and fresh insights into how productivity ‘catch up’ may be initiated.

Who Gains from the Demographic Dividend? Forecasting Income by Age

Changes in the population age structure are known to influence the total income per person, but little is known about whether the changes are equally shared across the population or are concentrated on particular age groups and/or birth cohorts. The answer to this question has potentially important implications for income inequality, human capital investment, and fertility decision-making. We propose a new model of intergenerational transfers which distinguishes between the effects of changes in population structure and the effects of changes in family age structure. Using age-specific data from annual income and expenditure surveys of Taiwan between 1978 and 1998, we show that changes in age structure have had a very favorable effect on Taiwan's income growth. The gains are not equally shared by all age groups, however. Children and young adults have benefited the most, while the elderly have benefited the least. The population and family age structures have independent effects on per capita income; the effect of the population age structure is most important. Generational differences in per capita income are closely related to intergenerational differences in earnings, suggesting only a weak form of altruism. Finally, we predict that, on average, population aging will adversely influence the per capita income growth in Taiwan in the coming decades.     

人均收入差距导向的投资战略

除了税收手段直接调整人均收入差距之外,政府可利用投资配置来影响生产过程,进而调整人均收入差距。在总量封闭经济的框架下,本文以人均收入差距最小化为目标,通过引入多地区多产业Cobb-Douglas生产函数、劳动一资本比率、资本时变率,改造最优经济增长模型。实验表明,通过权衡不同地区、不同产业的重要程度,调整投资在不同地区、不同产业之间的配置比率,政府可缩小人均收入差距。     

Education,moral hazard,and endogenous growth

We build an overlapping generations model of endogenous growth driven by human capital formation. Young people differ in their innate abilities, but these differences are not known even by the individuals themselves when they are going through the process of education. So there are no adverse selection problems. The probability of successful completion of schooling depends on both innate abilities and effort level. Moral hazard arises because effort is not observable. Successful students become skilled workers while unsuccessful ones become unskilled workers. A utilitarian government that cares about income distribution within each generation transfers income from the rich (skilled workers) to the poor (unskilled ones). This is anticipated by the young pupils and reduces incentive for hard work. This results in a lower rate of graduation, and has an adverse effect on the growth rate of human capital and output. Comparative statics results across balanced growth paths are derived. The parameters of interest are the students' rate of time preference, their degree of effort aversion and the relative price of the skill-intensive consumption good.     

Development threshold,capital flows,and financial turbulence

We study capital flows in a panel of 130 countries, and derive the implications for the observed patterns of capital flows and capital controls before and into the crisis of 2008–11. We find that the size of capital flows is positively correlated with country's income level. In addition, capital flight has a non-linear relationship with the income level. Using the Hansen threshold estimation, we identify a three-stage threshold effect: for low-income countries (GDP per capita below US$ 3,000), capital flight increases as the income level rises; and only after the economy passes a threshold level (GDP per capita above US$ 5,000), capital flight declines with income. We conclude with a case study of Brazil and Korea, observing that the decisions to implement capital control measures tend to be pushed around by the feedbacks among economic growth, currency appreciation, and the global financial conditions.     

The role of insurance growth in economic growth: Fresh evidence from a panel of OECD countries

Insurance is one of the key activities in a globalised financial and economic environment. Through its benefits, it offers income, life and property protection to the insured and their keens, as well as income accumulation that can be used at retirement to help preserve the desired lifestyle or living standards. Motivated by this end of insurance, the goal of this paper is to study the contribution of insurance growth to economic growth, by employing the benefit side of the insurance activity, next to the acquisition side that has already been considered. More precisely, the findings provide evidence that gross claims payments and gross operating expenses are significantly and positively related to economic growth. At the same time, the results confirm the findings of the existing literature that gross premia and insurance penetration are also significantly and positively related to economic growth. The outcomes hold true for total, life and non-life insurance, both during the pre- and post- 2008-crisis periods, even though less strong after the crisis. Furthermore, the positive and statistically significant impact of gross capital formation, government expenditure, secondary schooling, FDI inflows, trade openness and financial development is validated, in line with certain theoretical expectations.     

中美两国经济实力与潜力的比较分析

改革开放以来,经过30多年的发展,中国已重新成为全球经济大国之一。本文利用C-D生产函数和索洛增长模型对中国中长期经济发展进行预测,在国内外研究成果的基础上对美国中长期经济发展进行预测,探讨了在不同情况下中美两国经济的对比分析和追及问题。本文预测结果表明,中国经济只要保持平稳增长,将在2030年前实现多个目标：一是GDP总量超过美国;二是人均GDP超过1.7万美元;三是人均国民总收入接近高收入国家行列;四是商品零售额、商品进口额等宏观指标赶上美国。     

Commodity Price Volatility and the Sources of Growth

This paper studies the impact of the growth and volatility of commodity terms of trade (CToT) on economic growth, total factor productivity, physical capital accumulation and human capital acquisition. We use the standard system generalized methods of moments (GMM) approach as well as the dynamic common correlated effects pooled mean group (CCEPMG) methodology for estimation to account for cross‐country heterogeneity, cross‐sectional dependence and feedback effects. Using both annual data for 1970–2007 and 5‐year non‐overlapping observations, we find that while CToT growth enhances real output per capita, CToT volatility exerts a negative impact on economic growth operating mainly through lower accumulation of physical and human capital. Productivity, however, is not affected by either the growth or the volatility of CToT. Our results also indicate that the negative growth effects of CToT volatility offset the positive impact of commodity booms. Therefore, we argue that volatility, rather than abundance per se, drives the ‘resource curse’ paradox. Copyright © 2014 John Wiley & Sons, Ltd.     

A Micro‐Decomposition Analysis of Aggregate Human Development Outcomes*

We show how differences in aggregate human development outcomes over time and space can be additively decomposed into a pure mean income (growth) component, a component attributed to differences in the distribution of income, and components attributed to ‘non‐income’ factors and differences in the model linking outcomes to income and non‐income characteristics. The income effect at the micro level is modelled non‐parametrically, so as to flexibly reflect potentially complex distributional changes. Our proposed method is illustrated using data for Morocco and Vietnam, and the results offer some surprising insights into the observed aggregate gains in schooling attainments.     

The precious bane

Are natural resources harmful to growth? We address this question using a two-sector, endogenous growth model in which human capital is the engine of growth. By increasing the rewards to unskilled labor, natural resources make schooling more expensive. As long as the intertemporal elasticity of consumption substitution is not too high, this slows down human capital accumulation and growth. The presence of production spillovers from human capital, however, implies that a planner could react to a resource boom by increasing human capital accumulation even though the decentralized solution yields the exact opposite. The paper also shows that as the production complementarity between natural resources and unskilled labor declines, the growth effects of natural resources become increasingly sensitive to whether or not there is free trade in goods. The empirical evidence lends support to the main channel – natural resources to human capital to growth – that is suggested in the paper.     

Development Accounting with Spatial Effects

Abstract

The aim of this paper is to show how the spatial autocorrelation phenomenon often observed in the world distribution of income per capita, can be introduced structurally as the outcome of spillovers effects into a development accounting equation. Neglecting spatial autocorrelation potentially biases our vision of the role played by physical capital in the development process. We show that the total contribution of physical capital accounts for almost 90% of the differences between developing countries and the richest countries.     

Education,economic growth,and brain drain

This paper constructs a two-sector overlapping-generations model of endogenous growth to study the effects of brain drain on growth, education and income distribution. It is shown that brain drain reduces the economic growth rate and generally hurts the non-emigrants through the static income-distributional effects and the dynamic damage on economic growth and human capital accumulation. If the initial rate of human capital accumulation is relatively low, brain drain could deteriorate both the sum of discounted income and lifetime discounted utility of a representative non-emigrant. The government can choose to spend more on education to lessen the detrimental growth effects of brain drain.     

What has caused China’s economic growth?

Economic growth is driven by numerous factors. However, traditional economic theory focuses on certain key reasons, while ignoring the impact of other factors. Since 1978, China has achieved unprecedented economic growth, but also faces low per capita GDP. To clarify the driving forces behind this situation, we used per capita GDP to represent China’s economic growth and performed total factor analysis based on 13 variables in 7 socioeconomic dimensions using panel data from 30 Chinese provinces over the 40 years since China opened to the west in 1978. We found similar determinants in different regressions. Internal trade, privatization and investment were the primary factors driving Chinese economic development. Surprisingly, we found that the contribution of foreign trade to economic growth (per capita GDP) was weak. Education had a much smaller contribution than science and technology. Using per capita income as the dependent variable to provide a robustness test, we found that China’s income distribution has not paralleled its economic development and the distribution of the benefits of GDP growth to citizens must be improved. China’s experience demonstrates that promoting economic growth requires coordinated development of many factors, and that different policy preferences should be adopted to meet different economic development conditions.     

Specifying Human Capital

A review of the measures of the stock of human capital used in empirical growth research – including adult literacy rates, school enrollment ratios, and average years of schooling of the working‐age population – reveals that human capital is mostly poorly proxied. The simple use of the most common proxy, average years of schooling, misspecifies the relationship between education and the stock of human capital. Based on human capital theory, the specification of human capital is extended to allow for decreasing returns to education and for differences in the quality of a year of education. The different specifications give rise to hugely differing measures of the stock of human capital across countries, and development‐accounting results show that misspecified human capital measures can lead to severe underestimation of the development effect of human capital.     

Does Education Matter for Economic Growth?

Empirical growth regressions typically include mean years of schooling as a proxy for human capital. However, empirical research often finds that the sign and significance of schooling depends on the sample of observations or the specification of the model. We use a non‐parametric local‐linear regression estimator and a non‐parametric variable relevance test to conduct a rigorous and systematic search for significance of mean years of schooling by examining five of the most comprehensive schooling databases. Contrary to a few recent articles that have identified significant nonlinearities between education and growth, our results suggest that mean years of schooling is not a statistically relevant variable in growth regressions. However, we do find evidence (within a cross‐sectional framework), that educational achievement, measured by mean test scores, may provide a more reliable measure of human capital than mean years of schooling.     

A hump-shaped transitional growth path as a general pattern in long-run development

Long-run development is defined as the income transition between the traditional and the modern steady state, in which the speed of the transition is low near the two steady states but high and volatile in between them. This transition implies a hump-shaped relation between the level of per capita income and its growth rate. A hump-shaped growth-income path can be simulated with a two-sector growth model, in which the traditional sector is gradually replaced by the modern sector. Kernel regressions reveal a noisy but robust hump-shaped relation between the growth rate and the level of per capita income in stacked cross-country panel data.