Financial development, shocks, and growth volatility

This paper uses spectral theory to develop the following two testable hypotheses in a unified framework for the predictions of business-cycle and endogenous growth models: (i) financial development affects only business-cycle volatility; and (ii) shocks affect both business-cycle volatility and long-run volatility of GDP growth. In other words, volatility caused by shocks is more persistent than that caused by financial underdevelopment. We decompose the business-cycle and long-run volatility by the spectral method and then test the hypotheses at the cross-country level. Empirical evidence provides support for both hypotheses. Higher private credit, a bank-based measure of financial development, dampens business-cycle volatility but not long-run volatility. Volatility of shocks, as measured by the volatility of changes in the terms of trade, magnifies both business-cycle and long-run volatility. The results are robust to accounting for endogeneity, a market-based measure of financial development, and an alternative method of volatility decomposition.

Foreign aid, leisure-effort choice, and economic growth

Using an endogenous growth model, this paper examines the growth and welfare effects of foreign aid in the recipient economy. The emphasis is on the incentive factor of the effort-leisure choice. Besides financing public services, part of the aid is transferred to the public. This increases individual wealth, thereby providing less incentives to individuals for human capital acquisition, but with more leisure. Thus, foreign aid may not always help the growth and welfare of the economy. Taking this incentive factor into account, we further study the issue on aid allocation in achieving the highest levels of growth and welfare. Along the balanced growth path, aid allocation for welfare maximization is different from that under growth maximization.

Pollution, health and economic growth

This paper examines the growth impacts of aid allocation on healthcare and pollution abatement in an endogenous growth model, and finds that the aid tied to them contributes positively to the equilibrium growth rate. Nonetheless, the growth rate can be reduced or even impaired if the ratio of aid on pollution abatement is lowered.

Parental nurturing and adverse effects of redistribution

This paper suggests that if parental nurturing is a dominating force in human capital formation then income redistribution may not promote economic growth. In particular, if, consistently with empirical evidence, parental human capital complements investment in a child’s education and yields increasing returns in the intergenerational production of human capital, income redistribution may have an adverse impact on the growth rate of average human capital. Redistribution shifts resources towards the less educationally-productive families and thus in the presence of credit markets imperfections and increasing returns, it reduces the aggregate level of investment in human capital. Moreover, if the degree of increasing returns is sufficiently large to produce sustained growth, this adverse effect on human capital formation may outweigh the conventional beneficial effects of redistribution that arises from the interaction between a production technology exhibiting diminishing returns and credit market imperfections.

Privatization and economic growth in Australia: the shorthand of a long process

The impact of privatization on economic growth has been little investigated relative to disaggregated approaches. A growth accounting framework is used here to investigate the impact of privatization on growth for the  Australian economy. The contribution of public capital to the private sector and whether the growth process is endogenous or Solow is evaluated. Separate measures of public and private capital are computed in order to estimate their impacts with labour on Australian gross domestic product (GDP) growth for the period 1960 to 2003. A simple growth rates version is found preferred by stationarity and other tests. Labour growth appears to strongly positively influence the growth of GDP. In contrast, public capital growth has no statistically significant effect on GDP growth, or on private capital productivity. The data are consistent with the hypothesis that the coefficients of the growth equation are the same before and during privatization.

Modelling the relationship between defense spending and economic growth for the Fiji Islands

The goal of this paper is to examine the nexus between GDP and military expenditure. We model this relationship within a multivariate framework by including exports in the model. We use the recently developed bounds testing approach to cointegration and find that there is a long run relationship among the variables when GDP is the endogenous variable. Normalizing on GDP and using four different estimators, we find that in the long run both military expenditure and exports have a positive impact on GDP. Finally, using the Granger causality test, we find that there is evidence for military expenditure Granger causing exports and exports Granger causing GDP, implying that military expenditure indirectly Granger causes GDP in the short run. In the long run, we find that both military expenditure and exports Granger cause GDP for Fiji. Our findings are consistent with the Keynesian school of thought, leading us to derive some policy implications.

Effects of survivin antagonists of growth of established tumors and B7-1 immunogene therapy

Background: Survivin, a member of the inhibitor of apoptosis (IAP) protein family, is detectable in most types of cancer, and its presence is associated with a poor prognosis. We determined the effects of gene-based therapies that inhibit survivin function in a mouse tumor model. Methods: Using five to six mice per treatment group, we injected tumors derived from mouse EL-4 thymic lymphoma cells with plasmids encoding antisense survivin, a dominant-negative mutant survivin, and the T-cell costimulator B7-1. Expression of endogenous survivin and the proteins encoded by the injected plasmids were examined by immunohistochemical staining of tumor sections and by western blot and flow cytometry analyses of isolated tumor cells. Tumor growth, the generation of antitumor cytotoxic T-lymphocyte (CTL) activity, apoptosis, and the contribution of leukocyte subsets to antitumor activity were measured. All statistical tests were two-sided. Results: Large (1.0-cm diameter) tumors had approximately 10-fold more survivin than small (0.2-cm diameter) tumors. At 28 days after injection, antisense and dominant-negative mutant survivin plasmids statistically significantly inhibited the growth of both small (P = .006 and P = .0018, respectively) and large (P<.001 for both plasmids) EL-4 tumors compared with tumors injected with empty plasmid. The growth of large tumors was further inhibited by intratumoral injection with antisense survivin and B7-1 (P = .004); thus, inhibition of survivin expression renders large tumors susceptible to B7-1-mediated immunotherapy. Mice whose tumors were completely eradicated by injection of B7-1 remained tumor free for 26 days after re-injection with EL-4 cells (when the experiment ended). Compared with tumors injected with empty plasmid, tumors injected with survivin-based plasmids had increased apoptosis, and animals bearing such tumors generated more antitumor CTLs. Conclusion: Intratumoral injection of plasmids that block survivin expression and stimulate the generation of tumor-specific CTLs may be beneficial for the treatment of large lymphomas.

Dynamics of endogenous food production in Cherax destructor Clark culture ponds

This study examined endogenous food production in crayfish culture ponds and the pond dynamics resulting from the interactions of pond bottom and water column parameters under a crop flooding strategy.