Economic growth and inequality patterns in the presence of costly technology adoption and uncertainty

We develop a stochastic endogenous growth model to explain the diversity in growth and inequality patterns and the non-convergence of incomes in transitional economies where an underdeveloped financial sector imposes an implicit, fixed cost on the diversification of idiosyncratic risk. In the model endogenous growth occurs through physical and human capital deepening, with the latter being the more dominant element. We interpret the fixed cost as a ‘learning by doing’ cost for entrepreneurs who undertake risk in the absence of well developed financial markets and institutions that help diversify such risk. As such, this cost may be interpreted as the implicit returns foregone due to the lack of diversification opportunities that would otherwise have been available, had such institutions been present. The analytical and numerical results of the model suggest three growth outcomes depending on the productivity differences between the projects and the fixed cost associated with the more productive project. We label these outcomes as poverty trap, dual economy and balanced growth. Further analysis of these three outcomes highlights the existence of a diversity within diversity. Specifically, within the ‘poverty trap’ and ‘dual economy’ scenarios growth and inequality patterns differ, depending on the initial conditions. This additional diversity allows the model to capture a richer range of outcomes that are consistent with the empirical experience of several transitional economies.

The role of human capital in economic growth revisited

Benhabib and Spiegel (1994) examine the role of human capital in the development process empirically using a theory-driven specification rather than the standard production function approach. While they find evidence of a positive impact of human capital on income growth, their result is not robust to the inclusion of inequality as an additional covariate. Using an alternate dataset and different measures of inequality, we find robust support for the hypothesis that human capital matters even when we account for the adverse effect of income inequality on growth.

Essays on technology adoption under uncertainty, globalization and economic growth

This thesis examines how the initial institutional and technological aspects of the economy and the reforms that alter these aspects influence long run growth and development. These issues are addressed in the framework of stochastic endogenous growth models and an empirical framework. The thesis is able to explain why developing nations exhibit diverse growth and inequality patterns. Consequently, the thesis raises a number of policy implications regarding how these nations can improve their economic outcomes.

Cents and Sustainability : Securing Our Common Future by Decoupling Economic Growth from Environmental Pressures

The focus of Cents and Sustainability is to respond to the call by Dr Gro Brundtland in the seminal book Our Common Future to achieve, 'a new era of economic growth - growth that is forceful and at the same time socially and environmentally sustainable'. With the 20th anniversary of Our Common Future in 2007, it is clearly time to re-examine this important work in a modern global context. Using the framework of ‘Decoupling Economic Growth from Environmental Pressures’, Cents and Sustainability investigates a range of new evidence and research in order to develop a deeper understanding of how, and under what conditions, this 'forceful sustainable growth' is possible. With an introduction by Dr Jim MacNeill (former Secretary General to the Brundtland Commission, and former Director, OECD Environment Directorate 1978 -1984), the book will carry forewords from Dr Gro Brundtland (former Chair of the World Commission on Environment and Development), Dr Rajendra Pachauri (Chief, Intergovernmental Panel on Climate Change (IPCC), and joint recipient of the 2007 Nobel Peace Prize on behalf of the IPCC), and Dr Kenneth Ruffing (former Deputy Director and Chief Economist of the OECD Environment Directorate 2000 - 2005). Beginning with a detailed explanation of decoupling theory, along with investigation into a range of issues and barriers to its achievement, the book then focuses on informing national strategies for decoupling. Then putting this into action the book focuses on five key areas of decoupling, namely greenhouse gas emissions, biodiversity, freshwater extraction, waste production, and air pollution, and in each case showing compelling evidence for significant cost effective reductions in environmental pressures. The book concludes with a detailed case study of the groundbreaking application of public interest litigation to combat air pollution in Delhi, India.

Productivity differences, technology adoption and economic growth : the case of India

When the acronym of ëBRICí was coined in 2001 by Jim OíNeill of Goldman Sachs, it was expected that economic growth rates in India, Brazil and Russia would eventually catch up with that of China. However, China has continued to outperform the other economies in the group, even after it was renamed ëBRICSí to reflect the inclusion of South Africa in 2010. The focus of this chapter is on one of the BRICS economies, namely India. Its aim is to examine from an economic perspective, why Indiaís performance has not lived up to expectations, and comment on the key challenges it faces in meeting them. We begin with some descriptive statistics regarding the progress of the Indian economy since 1990. While it has been growing at a rapid rate since the reforms it introduced in the1990s, there has been a slowdown in its overall GDP growth rates since 2008. The rate of growth experienced in the period 2003ñ07 was an average of 10.5 per cent. However, since the recession following the Global Financial Crisis (GFC) of 2008, the growth rate has fallen. From the period 2008ñ12 it has only registered an average growth rate of 6.5 per cent (World Bank, 2013). This chapter suggests that one of the major factors underpinning this slowdown is the performance of Indiaís agricultural sector. The importance of the agricultural sector is highlighted by the following stylized facts.

India's vocational education capacity to support the anticipated economic growth

The buoyancy that the Indian economy experienced between 2000 and 2010, in spite of the global downturn of 2008, is no longer a reality. Growth projections for 2012-13 have been reassessed to 6.5 per cent. This is still higher than most other developed economies of the world (see Figure 1.1), however the growth rate is slowing. The World Bank in its recent forecasts1 expects India’s growth rates not to extend beyond 7.2 % and 7.4 % in the years 2013-14 and 2014-15, respectively. Similarly, the Planning Commission has scaled down the growth target for the 12th Five Year Plan (2012-17) from 9% to 8%. Different reports note different rates, but the consistent message is that the projection of India’s economy is on a downward trend...

Technology, Natural Resources and Economic Growth: Improving the Environment for a Greener Future

Description Through a combination of global data analysis and focused country level analysis, this timely book provides answers to the most pertinent country and industry specific questions defining the current relationship between technology, natural resources and economic growth. Contents Contents: Preface Part I: Global Analysis 1. Economic Growth and the Environment 2. Energy Substitution and Carbon Dioxide Emissions 3. Pollution, Natural Resources, and Economic Growth 4. Trade Openness and Environmental Quality 5. Environmental Productivity 6. Energy Price-induced Technological Change 7. Trade-induced Technological Change 8. Regional Economic Integration Part II: Country-Level Analysis 9. Emissions Trading in the United States 10. Increasing Returns to Pollution Abatement in the United States 11. Policy-induced Competitiveness in the United States 12. Trade Liberalization, Technology, and the Environment 13. Policy Implementation and its Effectiveness in China 14. Clean Technological Inventions in Japan 15. Intervention of Economic Policy and its Nonlinear Effects in Japan 16. The Next Emerging Giants: India and Africa 17. Conclusion Index Further information Through a combination of global data analysis and focused country level analysis, this timely book provides answers to the most pertinent country and industry specific questions defining the current relationship between technology, natural resources and economic growth. Shunsuke Managi takes a distinctive approach by focusing on the design and implementation of environmental regulations that encourage technological progress and, in doing so, looks at ways to ensure productivity improvements in the face of increasingly stringent environmental regulations and natural resource depletion. The findings in this important book demonstrate how successful environmental policies can contribute to efficiency by encouraging, rather than inhibiting, technological innovation. Technology, Natural Resources and Economic Growth will provide a valuable resource for a wide readership including postgraduate students, researchers, academics and policy makers working in the fields of environmental and ecological economics.

World emissions and economic growth: Application of non-parametric methods

The Environmental Kuznets Curve (EKC) hypothesises an inverse U-shaped relationship between a measure of environmental pollution and per capita income levels. In this study, we apply non-parametric estimation of local polynomial regression (local quadratic fitting) to allow more flexibility in local estimation. This study uses a larger and globally representative sample of many local and global pollutants and natural resources including Biological Oxygen Demand (BOD) emission, CO2 emission, CO2 damage, energy use, energy depletion, mineral depletion, improved water source, PM10, particulate emission damage, forest area and net forest depletion. Copyright © 2009 Inderscience Enterprises Ltd.

Regional aviation and economic growth : cointegration and causality analysis in Australia

Air transport is a critical link to regional, rural and remote communities in Australia. Air services provide important economic and social benefits but very little research has been done on assessing the value of regional aviation. This research provides the first empirical evidence that there is short and long run causality between regional aviation and economic growth. The authors analysed 88 regional airports in Australia over a period of 1985–86 to 2010–11 to determine the catalytic impacts of regional air transport on regional economic growth. The analysis was conducted using annual data related to total airport passenger movements – for the level of airport activity, and real aggregate taxable income – to represent economic growth. A significant bi-directional relationship was established: airports have an impact on regional economic growth and the economy directly impacts regional air transport. The economic significance of regional air transport confirms the importance of the airport as infrastructure for regional councils and the need for them to maintain and develop local airports. Funding should be targeted at airports directly to support regional development.

Global business services: Increasing specialization and integration of the world economy as drivers of economic growth

Purpose The purpose of this paper is to explore the contribution of global business services to improved productivity and economic growth of the world economy, which has gone largely unnoticed in service research. Design/methodology/approach The authors draw on macroeconomic data and industry reports, and link them to the non-ownership-concept in service research and theories of the firm. Findings Business services explain a large share of the growth of the global service economy. The fast growth of business services coincides with shifts from domestic production towards global outsourcing of services. A new wave of global business services are traded across borders and have emerged as important drivers of growth in the world’s service sector. Research limitations/implications This paper advances the understanding of non-ownership services in an increasingly global and specialized post-industrial economy. The paper makes a conceptual contribution supported by descriptive data, but without empirical testing. Originality/value The authors integrate the non-ownership concept and three related economic theories of the firm to explain the role of global business services in driving business performance and the international transformation of service economies.

Exploring the role of energy, trade and financial development in explaining economic growth in South Africa: A revisit

South Africa is an emerging and industrializing economy which is experiencing remarkable progress. We contend that amidst the developments in the economy, the role of energy, trade openness and financial development are critical. In this article, we revisit the pivotal role of these factors. We use the ARDL bounds [72], the Bayer and Hanck [11] cointegration techniques, and an extended Cobb–Douglas framework, to examine the long-run association with output per worker over the sample period 1971–2011. The results support long-run association between output per worker, capital per worker and the shift parameters. The short-run elasticity coefficients are as follows: energy (0.24), trade (0.07), financial development (−0.03). In the long-run, the elasticity coefficients are: trade openness (0.05), energy (0.29), and financial development (−0.04). In both the short-run and the long-run, we note the post-2000 period has a marginal positive effect on the economy. The Toda and Yamamoto [91] Granger causality results show that a unidirectional causality from capital stock and energy consumption to output; and from capital stock to trade openness; a bidirectional causality between trade openness and output; and absence (neutrality) of any causality between financial development and output thus indicating that these two variables evolve independent of each other.