Research Topics

Publications on Economic growth

There are 5 publications for Economic growth.
  • Income Distribution Macroeconomics


    Working Paper No. 807 | June 2014

    Recent research stresses the macroeconomic dimension of income distribution, but no theory has yet emerged. In this note, we introduce factor shares into popular growth models to gain insights into the macroeconomic effects of income distribution. The cost of modifying existing models is low compared to the benefits. We find, analytically, that (1) the multiplier is equal to the inverse of the labor share and is about 1.4; (2) income distribution matters mostly in the medium run; (3) output is wage led in the short run, i.e., as long as unemployment persists; (4) capacity expansion is profit led in the full-employment long run, but this is temporary and unstable.

  • The Economics of Inclusion


    Working Paper No. 755 | February 2013
    Building an Argument for a Shared Society

    This paper presents a review of the literature on the economics of shared societies. As defined by the Club de Madrid, shared societies are societies in which people hold an equal capacity to participate in and benefit from economic, political, and social opportunities regardless of race, ethnicity, religion, language, gender, or other attributes, and where, as a consequence, relationships between the groups are peaceful. Our review centers on four themes around which economic research addresses concepts outlined by the Club de Madrid: the effects of trust and social cohesion on growth and output, the effect of institutions on development, the costs of fractionalization, and research on the policies of social inclusion around the world.

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    Author(s):
    Michael A. Valenti Olivier Giovannoni

  • Growth Trends and Cycles in the American Postwar Period, with Implications for Policy


    Working Paper No. 754 | February 2013

    Do all types of demand have the same effect on output? To answer this question, I estimate a cointegrated vector autoregressive (VAR) model of consumption, investment, and government spending on US data, 1955–2007. I find that: (1) economic growth can be decomposed into a short-run (transitory) cycle gravitating around a long-run (permanent) trend made of consumption shocks and government spending; (2) the estimated fluctuations are investment dominated, they coincide remarkably with the business cycle, and they are highly correlated with capacity utilization in both labor and capital; and (3) the long-run multipliers point to a large induced-investment phenomenon and to a smaller, but still significantly positive, government spending multiplier, around 1.5. The results cover a lot of theoretical ground: Paul Samuelson’s accelerator principle, John Kenneth Galbraith’s stress on consumption and government spending, Jan Tinbergen's investment-driven business cycle, and Robert Eisner’s inquiries on the investment function. The results are particularly useful to distinguish between economic policies for the short and long runs, albeit no attempt is made at this point to inquire into the effectiveness of specific economic policies.

  • Disaggregating the Resource Curse


    Working Paper No. 641 | December 2010
    Is the Curse More Difficult to Dispel in Oil States than in Mineral States?

    The hypothesis of the natural resource curse has captivated the economics profession, and since the mid-1990s has generated a large body of policymaking initiatives aimed at dispelling the curse. In this paper, we evaluate how the effect of resource abundance on economic growth has changed since these policies were first introduced by comparing the periods 1970–89 and 1996–2008. We disaggregate resources into oil, gas, coal, and nonfuel mineral resources, and find that disaggregation unmasks diverse effects of resources on concurrent economic and institutional outcomes, as well as on the ability of countries to transform their economic and institutional infrastructure. We consider resource dependence and institutional quality as two channels linking resource abundance to economic growth in the context of an instrumental variables (IV) model. In addition to exploring these channels, the IV framework enables us to test for the endogeneity of the measures of resource dependence and institutional quality in the growth regressions, paying particular attention to the weakness of the instruments.

     

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    Author(s):
    Timothy Azarchs Tamar Khitarishvili

  • Does Excessive Sovereign Debt Really Hurt Growth?


    Working Paper No. 603 | June 2010
    A Critique of This Time Is Different, by Reinhart and Rogoff

    The worst global downturn since the Great Depression has caused ballooning budget deficits in most nations, as tax revenues collapse and governments bail out financial institutions and attempt countercyclical fiscal policy. With notable exceptions, most economists accept the desirability of expansion of deficits over the short term but fear possible long-term effects. There are a number of theoretical arguments that lead to the conclusion that higher government debt ratios might depress growth. There are other arguments related to more immediate effects of debt on inflation and national solvency. Research conducted by Carmen Reinhart and Kenneth Rogoff is frequently cited to demonstrate the negative impacts of public debt on economic growth and financial stability. In this paper we critically examine their work. We distinguish between a nation that operates with its own floating exchange rate and nonconvertible (sovereign) currency, and a nation that does not. We argue that Reinhart and Rogoff’s results are not relevant to the case of the United States.

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    Author(s):
    Yeva Nersisyan L. Randall Wray

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