Complementarities and costly investment in a growth model

We develop a one-sector growth model whose key aspect is the combination of the assumptions of internal costly investment in capital and complementarities between capital goods in the production function. Despite the nonlinearity generated by these assumptions, the model delivers a single equilibrium.      

Institutions and economic growth in Portugal: a quantitative exploration

This paper presents a broad diagnostic of the level of institutional development in Portugal in the legal, corporate governance and financial systems. A comparative assessment suggests that Portuguese institutions are less developed than their European Union and East Asian counterparts, more developed than Greek institutions and on a level similar to that of Spanish institutions. We use data for a wide cross-section of countries since 1960 and correlate indicators of institutional development with the long-term average growth rate, identifying issues where reform is likely to significantly affect economic growth. We construct three new indices that measure the potential of institutional reform - the impact of reform on growth, the required reform effort and the efficiency of reform index - by taking into consideration the institutional distance between Portugal and the European Union. These indices measure, respectively, which reforms have the most payoff in terms of growth, which are less costly to undertake and which deliver the most growth per required effort. Our results strongly suggest that in a large number of issues, institutional reform may translate into substantially higher rates of economic growth. Of the ten most promising reforms, six are in the legal area, irrespective of which of the indices is considered. Whereas legal reform is promising at the aggregate and the microeconomic levels, in the financial sector aggregate indicators offer the wider scope for productive reform, while in the corporate governance area it is indices at the micro level that hold the most promise. These results support the view that a comprehensive reform effort is likely to deliver higher rates of growth in Portugal, allowing faster real convergence with the rest of the European Union.Received: January 2003, Accepted: February 2004, JEL Classification: O0, O5, K00, K4, G2, G3This paper is based on Firms, Financial Markets and the Law: Institutions and Economic Growth in Portugal, prepared for the conference Desenvolvimento Económico Português no Espaço Europeu: Determinantes e Políticas, organized by the Banco de Portugal. Financial support by the Banco de Portugal, NOVA FORUM and FUNDAÇÃO Para a Ciência e tecnologia and Polti through feder are gratefully acknowledged. Comments from Marcelo Rebelo de Sousa, two anonymous referees and the editor are sincerely appreciated. The usual disclaimer applies.     

Public capital, endogenous growth, and endogenous fluctuations

Cazzavillan [Cazzavillan, G., 1996. Public spending, endogenous growth, and endogenous fluctuations. Journal of Economic Theory 71, 394–415] studies a discrete-time, one-sector endogenous growth model with a flow of publicly enjoyable goods and productive services financed through income taxation. He demonstrates how equilibrium paths are indeterminate, for a large range of the consumption externality of public spending. This study extends [Cazzavillan, 1996] by considering an otherwise identical production function, except with public capital stock as an input. The results support the robustness of multiple growth paths even in a one-sector growth model with public capital stock, and modify the set of the consumption externality of public spending, in determining growth dynamics in a similar model with non-accumulated public spending.     

The effects of local government investment on economic growth and employment: evidence from transitional China

Based on the panel data of 28 provinces in the year of 1987-2001,this paper examines the effects of the local government investment on economic growth and employment.The empirical result shows that the local government investment plays a significant positive role in economic growth and emplovment.However,while the proportion of local government investment to GDP had a remarkable rise after 1998.the elasticity of local government investment on economic growth declined,which shows that there is a hig room for raising the efficiency of local government mvestment.Moreover,the empirical examination shows that although local government investment had positive effect on employment,the elasticity had a decrease after 1994 when the tax-sharing system reform was put into practice.This shows that the positive role of local government investment on emplovment is also limited.This paper argues that the role of local governments as investors must be weakened,and local governments of different levels should lessen direct economic intervention and concentrate on public regulation.     

政府公共消费的经济效应及其政策含义

关于公共消费与经济增长之间的关系,学术界颇多争论,分歧较大,虽然一些研究成果发现公共消费与经济增长负相关,但也有一些学者通过研究得出了截然相反的结论.本文运用经济增长理论分析公共消费支出的社会经济效应,并以中国相关数据为样本进行实证检验,并提出相关的政策建议.     

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.     

目前我国投资过热的原因剖析及应对措施

目前，我国经济面临着新一轮的投资过热，本文首先剖析了导致目前投资过热的原因，然后在分析投资过热影响的基础上，提出了缓解投资过热的一些应对措施。     

Public spending and growth: The role of government accountability

This paper examines the role of institutions in the nexus between public spending and economic growth. Empirical results based on a newly assembled dataset of 80 countries over the 1970–2010 period suggest that particularly when institutions prompt governments to be accountable to the general citizen does public capital spending promote growth. Taking account of the type of financing for this spending, we show that the growth-promoting effect under an accountable government appears to prevail for various financing sources, including a reallocation from current spending, an increase in revenue, and a rise in the budget deficit. However, government accountability does not seem to play a key role in the growth effects of current spending.     

The economic policy uncertainty and firm investment in Australia

ABSTRACT

This paper examines the impact of economic policy uncertainty (EPU) on the Australian firm investment activity. We find a significant positive relationship between the EPU and the firm investment over 2002 to 2017 period. Our main results remain unchanged after several endogeneity tests. Further analysis reveals that this relationship becomes pronounced for firms if their headquarters located in small states, firms with more tangible assets, higher operating cash flows and cash holdings, higher profits and leverage, but firms with fewer dividend payouts. Our paper sheds lights on the unique attribute of the impact of the EPU on the Australian firm investment activity and offers important policy and managerial implications.     

Learning investment and industrial diversity in urban growth

This paper studies an urban growth model where learning through personal contacts could be more effective in a denser locale, whereas the effectiveness of learning through impersonal means of communications depends principally on the technology of communications rather than on the locale in which learning takes place. As a result of advances in communications technology, cities would be larger, and workers would spent more time on learning through personal contacts but may cut time on impersonal learning if the two kinds of learning investment are complements. Otherwise, cities could become smaller, while workers would spend more time on impersonal learning at the expense of time on learning through personal contacts. In a multi-sector economy, urban industrial diversity tends to increase or fall together with city size.     

The employment effect of changes in the composition of fiscal consolidations

This paper assesses the magnitude and nature of fiscal consolidation policies and their impact on employment. In particular, in an attempt to address fiscal imbalances in the near term, countries have been faced with the delicate challenge of doing so without damaging recovery prospects and thus, counter to their original aim, worsening further public finances. In this regard, the paper reviews recent austerity measures adopted by governments and discusses how prolonging fiscal consolidation measures in their current form could be counterproductive for guaranteeing debt sustainability. Moreover, the article shows how poorly designed fiscal cuts – directly or indirectly affecting labour – seem to have been dampening job prospects. The paper sheds light on how fiscal and employment goals can be achieved together. More specifically, it finds that a fiscally-neutral change in the expenditure and revenue composition of fiscal consolidation can boost job creation. In this sense, the paper shows that it is imperative to find the right policy mix and recommends countries to be mindful of the nature and pace of consolidation.     

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.     

International investment in a model of stochastic growth and development traps

This paper investigates the effects of financial integration in a stochastic endogenous growth model of two economies in which heterogeneous agents face fixed costs of productive investment. The removal of investment barriers may enable a poor country to escape from a state of low and unstable growth by leading to large capital inflows and by raising the number of agents who invest in productive capital. However, since the two economies are characterized by increasing returns to capital and since financial integration may lower the saving rate, it is also possible that both countries' growth prospects worsen.     

公共资本性支出、经常性支出与内生经济增长

本文基于一个含有两类不同产出能力的公共商品的内生增长模型,通过数理分析得出在市场经济条件下最优公共支出结构的依据是公共商品各自的产出弹性.进而采用面板数据模型对13个发达国家1972～2009年的公共支出实践进行了实证研究.实证结果表明,经常性(资本性)支出对经济增长有正(负)效应.该研究结论为平衡预算下的公共支出结构决策提供了参考依据.     

2010年葡萄牙发展清洁能源的成就

2010年,葡萄牙科技发展的亮点是葡萄牙在清洁能源应用上的进展。据报道,葡萄牙2010年上网的电流中,大约有45％的电流来自可再生能源。葡萄牙数年前就研究开发智能电网带来的结果,为进一步开发应用清洁能源,葡萄牙于2010年3月推出新能源计划（ENE2020）。其中,发展电动交通是其重点规划之一。葡萄牙发展电动交通的一个创新设想是利用电动车辆作为能源调节器。在其它科技发展领域,葡萄牙坚持科教兴国的理念,一如既往地实施吸引科技人才、打造国家重点实验室、加强和发达国家科技合作的既定方针,希望通过科技进步改变葡萄牙目前的处境。     

多边贷款是否促进了公共投资

自中国恢复世行成员国合法席位以来,多边贷款一直是我国公共投资的重要来源,它占公共投资的比例最高达到27%,平均8.6%,累计金额已达数百亿美元.这些贷款是促进了中国的公共投资水平,还是提高了政府消费,又或者降低了税收,这方面的评价研究很少.本文在宏观经济学的相关理论和模型基础上建立起一套Cowles Commission结构方程组,分别利用1978～2001年的国家和省级两层数据,对上述问题进行了评价.我们的计量分析结果表明,多边贷款并没有促进公共投资的增长,反而降低了税收,提高了政府消费水平.这种影响不同地区是有差异的.总的来看,这种传统意义上的消极影响没有波及私人投资和经济增长.     

Optimal Public Debts, Sustainable Deficits, and Budgetary Consolidation

It is hardly surprising that government budgets have always been widely debated inboth the political and academic arenas as public finances in general, and the budgetin particular, reflect the political and ideological colour of the government whichruns the state. No less inevitable are academic debates on budgetary issues giventhat economics is a multi-paradigmatic science. This background makes all the moremysterious the current complete consensus on the need for budgetary consolidationand the overwhelming acceptance of the `balanced budget' principle in politics as wellas in academic economics. In the paper, this position is questioned by producing a simple model of optimal public debt, sustainable deficits and optimal budgetary consolidation. Different possible trajectories of fiscal restriction and expansion – based on a Post-Keynesian and Rational Expectations paradigm alternatively – are then being empirically tested by comparing the German and British historical accounts of public finances over the past three decades.     

On the impact of a tax shock in Portugal

In 1999, Cavaco Silva, the Portuguese Prime Minister from 1985 to 1995, proposed a comprehensive tax reform package, which is to this day the basic reference in the tax policy debate in Portugal. A tax shock would consist of 4pp cuts in the corporate income tax and in the firms social security contribution rates, and a 5pp reduction in the highest personal income tax rate. These cuts would be financed by combating tax evasion, curbing wasteful public expenditure and, if necessary, by increasing the VAT rate by up to 2pp. Using a dynamic general equilibrium model to evaluate the effects of this tax shock, we find that the long-term GDP gains would be between 0.72% and 2.91% while the effects on lifetime private welfare would range between -0.99% and 0.9%. The efficiency of this tax reform package depends critically on the way the tax cuts are financed to ensure deficit neutrality. Because investment is subject to adjustment costs, to alleviate the long-run trade-off between GDP and welfare, tax policy changes must induce a significant increase in net labor income.Received: July 2001, Accepted: March 2002, JEL Classification: C68, D58, E62, H21, H30Correspondence to: Alfredo M. PereiraA previous version of this paper was presented at the Society of Computational Economics and SPiE conferences. Thanks are due to Fernando Chau, Emanuel Santos, and two anonymous referees for very insightful comments and suggestions. The views in this article are of the authors alone and do not reflect the position of the Portuguese Ministry of Finance.     

Energy taxation in Southern Europe: The case of Portugal

We investigate whether or not the imposition of a common EC energy-tax will penalize more the poorer Southern European economies and if this will harm convergence at the EC level. We start by surveying briefly the existing studies and empirical evidence. Then we exploit the results obtained when using the macroeconometric HERMES models to simulate the introduction of an energy-tax. Unfortunately, as we only have HERMES results for one Southern European economy, Portugal, our conclusions are limited. Finally, we investigate convergence in Europe and the effects of energy taxation on convergence. We conclude that energy taxation will harm growth all over the EC, penalizing more one of the less developed countries, Portugal, and having most probably adverse effects on convergence.This paper was prepared for presentation at the Conference Energy Tax in Europe organized jointly by the SEO-University of Amsterdam and the DG XII of the CEC and held in Amsterdam on 13th December 1991. I would like to thank the participants in the Conference and two anonymous referees for helpful comments. Of course, the usual disclaimer applies.