Creativity and Growth in: Edmund Phelps (2013),Mass Flourishing. How Grassroots Innovation Created Jobs, Challenge and Change

This article reviews the thesis presented by Edmund Phelps, Mass Flourishing. How Grassroots Innovation Created Jobs, Challenge and Change (Princeton University Press, 2013) that modern economic growth is an indirect outcome of human creativity, and that the object of enlightened policy ought to be to promote this creativity, or flourishing, rather than economic growth per se. The book is a remarkable contribution to the literature on economic growth, with its focus on how entrepreneurship and innovation generates endogenous growth and, more importantly to the author, improves human satisfaction.

Global networks, cities and economic performance: Observations from an analysis of cities in Europe and the USA

The network paradigm has been highly influential in spatial analysis in the globalisation era. As economies across the world have become increasingly integrated, so-called global cities have come to play a growing role as central nodes in the networked global economy. The idea that a city’s position in global networks benefits its economic performance has resulted in a competitive policy focus on promoting the economic growth of cities by improving their network connectivity. However, in spite of the attention being given to boosting city connectivity little is known about whether this directly translates to improved city economic performance and, if so, how well connected a city needs to be in order to benefit from this. In this paper we test the relationship between network connectivity and economic performance between 2000 and 2008 for cities with over 500,000 inhabitants in Europe and the USA to inform European policy.

Education and Earnings for Poverty Reduction : Short-Term Evidence of Pro-Poor Growth from the Mexican Oportunidades Program

Education, as an indispensable component of human capital, has been acknowledged to play a critical role in economic growth, which is theoretically elaborated by human capital theory and empirically confirmed by evidence from different parts of the world. The educational impact on growth is especially valuable and meaningful when it is for the sake of poverty reduction and pro-poorness of growth. The paper re-explores the precious link between human capital development and poverty reduction by investigating the causal effect of education accumulation on earnings enhancement for anti-poverty and pro-poor growth. The analysis takes the evidence from a well-known conditional cash transfer (CCT) program — Oportunidades in Mexico. Aiming at alleviating poverty and promoting a better future by investing in human capital for children and youth in poverty, this CCT program has been recognized producing significant outcomes. The study investigates a short-term impact of education on earnings of the economically disadvantaged youth, taking the data of both the program’s treated and untreated youth from urban areas in Mexico from 2002 to 2004. Two econometric techniques, i.e. difference-in-differences and difference-in-differences propensity score matching approach are applied for estimation. The empirical analysis first identifies that youth who under the program’s schooling intervention possess an advantage in educational attainment over their non-intervention peers; with this identification of education discrepancy as a prerequisite, further results then present that earnings of the education advantaged youth increase at a higher rate about 20 percent than earnings of their education disadvantaged peers over the two years. This result indicates a confirmation that education accumulation for the economically disadvantaged young has a positive impact on their earnings enhancement and thus inferring a contribution to poverty reduction and pro-poorness of growth.

Growth, migration and unemployment across Swedish municipalities

Fundamental questions in economics are why some regions are richer than others, why their economic growth rates vary, whether their growth tends to converge and the key factors that contribute to the variations. These questions have not yet been fully addressed, but changes in the local tax base are clearly influenced by the average income growth rate, net migration rate, and changes in unemployment rates. Thus, the main aim of this paper is to explore in depth the interactive effects of these factors (and local policy variables) in Swedish municipalities, by estimating a proposed three-equation system. Our main finding is that increases in local public expenditures and income taxes have negative effects on subsequent local income growth. In addition, our results support the conditional convergence hypothesis, i.e. that average income tends to grow more rapidly in relatively poor local jurisdictions than in initially “richer” jurisdictions, conditional on the other explanatory variables.

Essays on growth and environment

This thesis consists of a summary and four self-contained papers. Paper [I] Following the 1987 report by The World Commission on Environment and Development, the genuine saving has come to play a key role in the context of sustainable development, and the World Bank regularly publishes numbers for genuine saving on a national basis. However, these numbers are typically calculated as if the tax system is non-distortionary. This paper presents an analogue to genuine saving in a second best economy, where the government raises revenue by means of distortionary taxation. We show how the social cost of public debt, which depends on the marginal excess burden, ought to be reflected in the genuine saving. We also illustrate by presenting calculations for Greece, Japan, Portugal, U.K., U.S. and OECD average, showing that the numbers published by the World Bank are likely to be biased and may even give incorrect information as to whether the economy is locally sustainable. Paper [II] This paper examines the relationships among per capita CO2 emissions, per capita GDP and international trade based on panel data spanning the period 1960-2008 for 150 countries. A distinction is also made between OECD and Non-OECD countries to capture the differences of this relationship between developed and developing economies. We apply panel unit root and cointegration tests, and estimate a panel error correction model. The results from the error correction model suggest that there are long-term relationships between the variables for the whole sample and for Non-OECD countries. Finally, Granger causality tests show that there is bi-directional short-term causality between per capita GDP and international trade for the whole sample and between per capita GDP and CO2 emissions for OECD countries. Paper [III] Fundamental questions in economics are why some regions are richer than others, why their growth rates differ, whether their growth rates tend to converge, and what key factors contribute to explain economic growth. This paper deals with the average income growth, net migration, and changes in unemployment rates at the municipal level in Sweden. The aim is to explore in depth the effects of possible underlying determinants with a particular focus on local policy variables. The analysis is based on a three-equation model. Our results show, among other things, that increases in the local public expenditure and income taxe rate have negative effects on subsequent income income growth. In addition, the results show conditional convergence, i.e. that the average income among the municipal residents tends to grow more rapidly in relatively poor local jurisdictions than in initially “richer” jurisdictions, conditional on the other explanatory variables. Paper [IV] This paper explores the relationship between income growth and income inequality using data at the municipal level in Sweden for the period 1992-2007. We estimate a fixed effects panel data growth model, where the within-municipality income inequality is one of the explanatory variables. Different inequality measures (Gini coefficient, top income shares, and measures of inequality in the lower and upper part of the income distribution) are examined. We find a positive and significant relationship between income growth and income inequality measured as the Gini coefficient and top income shares, respectively. In addition, while inequality in the upper part of the income distribution is positively associated with the income growth rate, inequality in the lower part of the income distribution seems to be negatively related to the income growth. Our findings also suggest that increased income inequality enhances growth more in municipalities with a high level of average income than in municipalities with a low level of average income.

Sustained growth, government expenditure and inflation

We construct and simulate a theoretical model in order to explain particular historical experiences in which inflation acceleration apparently helped to spur a period of economic growth. Government financed expenditures affect positively the produtivity growth in this model so that the distortionary effect of inflation tax is compensated by the productive effect of public expenditures. We show that for some interval of money creation rates there is an equilibrium where money is valued and where steady state physica1 capital grows with inflation. It is a1so shown that zero inflation and growth maximization are never the optimal policies.

National development strategy: the key growth institution

O Crescimento Econômico é Quase que Invariavelmente o Resultado de uma Estratégia Nacional De Desenvolvimento. o Efetivo Desenvolvimento Econômico Ocorre Historicamente Quando a Nação é Uma Nação Forte, e as Diferentes Classes Sociais são Capazes de Cooperar e Formular uma Efetiva Estratégia Para Promover o Crescimento e Enfrentar a Competição Internacional. uma Estratégia Nacional De Desenvolvimento é Essencialmente uma Instituição ou um Conjunto de Instituições que Estimulam A Acumulação de Capital e o Progresso Técnico. Segue uma Discussão das Principais Características de Tais Estratégias. o Artigo Finaliza com uma Análise dos Conflitos ou Tensões Envolvidos nas Estratégias Nacionais de Desenvolvimento.

How does corruption hurt growth? Evidences about the effects of corruption on factors productivity and per capita income

Corruption is a phenomenon that plagues many countries and, mostly, walks hand in hand with inefficient institutional structures, which reduce the effectiveness of public and private investment. In countries with widespread corruption, for each monetary unit invested, a sizable share is wasted, implying less investment. Corruption can also be a burden on a nation’s wealth and economic growth, by driving away new investment and creating uncertainties regarding private and social rights. Thus, corruption can affect not only factors productivity, but also their accumulation, with detrimental consequences on a society’s social development. This article aims to analyze and measure the influence of corruption on a country’s wealth. It is implicitly admitted that the degree of institutional development has an adverse effect on the productivity of production factors, which implies in reduced per capita income. It is assumed that the level of wealth and economic growth depends on domestic savings, foster technological progress and a proper educational system. Corruption, within this framework, is not unlike an additional cost, which stifles the “effectiveness” of the investment. This article first discusses the key theories evaluating corruption’s economic consequences. Later, it analyzes the relation between institutional development, factor productivity and per capita income, based on the neoclassical approach to economic growth. Finally, it brings some empirical evidence regarding the effects of corruption on factor productivity, in a sample of 81 countries studied in 1998. The chief conclusion is that corruption negatively affects the wealth of a nation by reducing capital productivity, or its effectiveness.

A brief history of Brazil's growth

The paper studies Brazil’s economic growth and begins with a brief overview of events that marked the country’s development from her discovery to the 19th century. It then divides the years between 1900 and 2008 into four periods. The breaks in regime occur in 1918, 1967 and 1980, according to the methodology created by Bai and Perron (1998, 2003). The use of the accounting methodology serves the analysis of the behavior of productivity in the previously identified different phases of the post-World War II period. High inflation might have been a reason for the decline in productivity observed between 1980 and mid-1990s. The paper shows that terms of trade have a significant effect on economic growth and output fluctuations. Other factors (such as fiscal stimulus or easy access to foreign finance) also matter for output accelerations in the short run. From 2004 to 2008, terms of trade improvement and debt reduction brought economic progress. The emergence of a new era in this millennium will depend on wiser fiscal policies than those of the past.

Growth and exchange rate volatility: a panel data analysis

The aim of this article is to assess the role of real effective exchange rate volatility on long-run economic growth for a set of 82 advanced and emerging economies using a panel data set ranging from 1970 to 2009. With an accurate measure for exchange rate volatility, the results for the two-step system GMM panel growth models show that a more (less) volatile RER has significant negative (positive) impact on economic growth and the results are robust for different model specifications. In addition to that, exchange rate stability seems to be more important to foster long-run economic growth than exchange rate misalignment

Brazil and Turkey, a comparative analysis of both countries' economic development and institutional design from the Great Depression to the early 21st century

Apos uma década de rápido crescimento econômico na primeira década do século 21, Brasil e Turquia foram considerados duas das economias emergentes mais dinâmicas e promissoras. No entanto, vários sinais de dificuldades econômicas e tensões políticas reapareceram recentemente e simultaneamente nos dois países. Acreditamos que esses sinais e a sua simultaneidade podem ser entendidos melhor com um olhar retrospectivo sobre a história econômica dos dois países, que revela ser surpreendentemente paralela. Numa primeira parte, empreendemos uma comparação abrangente da história econômica brasileira e turca para mostrar as numerosas similaridades entre os desafios de política econômica que os dois países enfrentaram, assim como entre as respostas que eles lhes deram desde a virada da Grande Depressão até a primeira década do século 21. Essas escolhas de política econômica comuns dão forma a uma trajetória de desenvolvimento notavelmente análoga, caracterizada primeiro pela adoção do modelo de industrialização por substituição das importações (ISI) no contexto da recessão mundial dos anos 1930; depois pela intensificação e crise final desse modelo nos anos 1980; e finalmente por duas décadas de estabilização e transição para um modelo econômico mais liberal. Numa segunda parte, o desenvolvimento das instituições econômicas e políticas, assim como da economia política subjacente nos dois países, são analisados comparativamente a fim de prover alguns elementos de explicação do paralelo observado na primeira parte. Sustentamos que o marco institucional estabelecido nos dois países durante esse período também têm varias características fundamentais em comum e contribui a explicar as escolhas de política econômica e as performances econômicas comparáveis, detalhadas na primeira parte. Este estudo aborda elementos do contexto histórico úteis para compreender a situação econômica e política atual nos dois países. Potencialmente também constitui uma tentativa de considerar as economias emergentes numa perspectiva histórica e comparativa mais ampla para entender melhor as suas fraquezas institucionais e adotar um olhar mais equilibrado sobre seu potencial econômico.

Growth,distribution and school policy

This paper investigates the relationship between growth, income inequality, and educational policies. An endogenous growth model is built in which there are two types of labor, skilled and unskilled, and the quality of the labor force (measured by the fraction of skilled workers) will ultimately determine the economic growth rate. We show that multi pIe inequality and growth paths may arise. Countries will not necessarily converge to the same economic growth and income distribution. When the proportion of skilled workers is low, the economy grows slow, and the Gini coeflicient is high. Low expected growth rate inhibits investments in human capital and the quality of the labor force tomorrow turns out to be low again, keeping the economy in the bad equilibrium. We then analyze the effects on growth and inequality of two types of government intervention: introduction of public schools and vouchers. Both types can induce the economic agents to invest more in education. The consequence will be an increase in the quality of the labor force, leading to higher growth rates and less inequality. Finally, we examine the welfare consequences of these interventions and conclude that they may be Pareto improving.

Uncertainty of aid inflows and the growth relationship

This paper contributes to the literature on aid and economic growth. We posit that it is not the levei of aid flows per se but the stability of such flows that determines the impact of aid on economic growth. Three measures of aid instability are employed. One is a simple deviation from trend, and measures overall instability. The other measures are based on auto-regressive estimates to capture deviations from an expected trend. These measures are intended to proxy for uncertainty in aid receipts. We posit that such uncertainty will influence the relationship between aid and investment and how recipient governments respond to aid, and will therefore affect how aid impacts on growth. We estimate a standard cross-country growth regression including the leveI of aid, and find aid to be insignificant (in line with other results in the literature). We then introduce measures of instability. Aid remains insignificant when we account for overall instability. However, when we account for uncertainty (which is negative and significant), we find that aid has a significant positive effect on growth. We conduct stability tests that show that the significance of aid is largely due to its effect on the volume of investment. The finding that uncertainty of aid receipts reduces the effectiveness of aid is robust. When we control for this, aid appears to have a significant positive influence on growth. When the regression is estimated for the sub-sample of African countries these findings hold, although the effectiveness of aid appears weaker than for the full sample.

Judicial system performance and economic development

The role of judicial systems in determining economic perfonnance has gained increasingly attention in recent years. Nonetheless, the literature lacks a clearly articulated framework to examine how judicial systems influence the investment and production decisions of economic agents. This paper tries to till in this gap. It examines what constitutes a well-functioning judiciary, analyzes how dysfunctional judicial systems compromise economic growth, and reviews the relevant empirical literature. It concludes with some remarks about why, despite the widespread perception that well-functioning legal and judicial systems are key to the success of market-oriented reforms in developing and transition countries, judicial refonn has lagged so much behind other reforms.

Wasted: understanding the economic and social impact of food waste

Over one-third of global food production goes to waste while over 850million people are fighting chronic hunger. The United States is the world’s largest food waster. One third of America’s food with an economic value of US$161 billion is wasted and less than 7% is recycled. American food waste ends up in landfills creating powerful methane gas emissions. South Korea, on the other hand, has implemented the world’s strictest food waste laws, and today diverts 93% of wasted food away from landfills turning such waste into powerful economic opportunities. This Master Thesis investigates the reasons behind global food waste by comparing South Korea and the US. It explores what these two nations are doing to address their respective food waste problems, South Korea successfully, the US not. The paper looks at the two countries’ respective policies and national characteristics, which impact decision-making and recycling processes. The effort concludes that South Korea has embarked on a necessary paradigm shift turning food waste into powerful economic drivers leading to a sharp decline in food waste. In the US, food waste continues to be a major problem without a national strategy to remedy waste. Any effort in the US, while laudable, is sporadic and local, and hence the US misses out on possibly important economic growth opportunities.