Growth, Structural Change, and Poverty Reduction: Evidence from India
by Rana Hasan, Sneha Lamba, and Abhijit Sen Gupta
MPRA Paper No. 55247
We examine the relationship between growth in labor productivity and poverty reduction through the lens of changes in the structure of output and employment. Combining state-level data from India on poverty with state-level data on output and employment for 11 production sectors over 1987–2009, we find that the movement of workers from lower to higher productivity sector is an important channel through which increases in aggregate productivity translate into poverty reduction. We also find that the importance of this channel of productivity growth, termed structural change by recent literature, varies across states. Exploratory analysis reveals that indicators of financial development, business regulations that promote competition and flexible labor regulations are associated with larger reallocations of labor from lower to higher productivity sectors. Overall, our findings are consistent with the view that a better investment climate is not only good for business, it is also an important means for making growth more pro-poor in a labor abundant country.
url – http://mpra.ub.uni-muenchen.de/55247/1/MPRA_paper_55247.pdf
courtesy – MPRA
ACCOUNTING FOR THE GREAT DIVERGENCE
by Stephen Broadberry
University of Warwick WP No. 160
This paper “accounts” for the Great Divergence between Europe and Asia in two ways. In the sense of measurement: (1) the traditional view, in which the Great Divergence had late medieval origins and was already well under way during the early modern period, is confirmed (2) However, revisionists are correct to point to regional variation within both continents (3) There was a Little Divergence within Europe, with a reversal of fortunes between the North Sea Area and Mediterranean Europe. (4) There was a Little Divergence within Asia, with Japan overtaking China and India. However, Japan started at a lower level of per capita income than the North Sea Area and grew at a slower rate, so continued to fall behind until after the Meiji Restoration of 1868. Any explanation needs to be able to account for the Little Divergences within Europe and Asia as well as the Great Divergence between the two continents. The divergences arose from the differential impact of shocks hitting economies with different structural features. The structural factors include: (1) The large share of pastoral farming in agriculture which helped to put the North Sea Area on the path to
high-value-added, capital-intensive, non-human-energy intensive production. (2) Late marriage in the North Sea Area, which lowered fertility and encouraged human capital formation (3) Labour supply, with an industrious revolution helping to explain the Little Divergences within both Asia and Europe (4) Institutions, with the role of the state helping to
explain the success of the North Sea Area. The two key shocks were (1) The Black Death, which led to a permanent per capita income gain in the North Sea Area, but not in the rest of Eurasia (2) The new trade routes which opened up from Europe to Asia and the Americas around 1500.
url – http://www2.warwick.ac.uk/fac/soc/economics/research/centres/cage/research/wpfeed/160-2013_broadberry.pdf
courtesy – University of Warwick
Offshoring, migrants and native workers: The optimal choice under asymmetric information
by Gianluca Orefice
The Journal of International Trade &Economic Development: An International and Comparative Review, Vol-23:2, p.179-201 (2014)
This paper presents a theoretical model of the optimal choice for firms between offshoring and hiring immigrant workers, in conditions of asymmetric information about their ability and effort in production (symmetric information is assumed for home born workers). When a domestic firm hires an immigrant it has no knowledge of the worker’s ability; when the firm goes abroad it uses local agents to obtain additional information about workers, allowing enforceable contracts. I show that it is optimal for firms to produce low quality products by offshoring production abroad and that high quality products will be produced using native workers, while intermediate quality level products are more likely to be produced at home using foreign born workers.
url –
courtesy – T&F
A permanent effect of temporary immigration on economic growth
by J. Muysken and T. H. W. Ziesemer
Applied Economics, Vol. 45:28, p. 4050-4059 (2013)
Immigration can help to lessen the burden of ageing for the welfare states of most Western economies. To show this, we develop a decomposition framework for Gross Domestic Product (GDP) per capita which deals with the impact of both ageing and immigration on economic growth. Using a Vector Error Correction Model (VECM) for the Netherlands during 1973 to 2009, we demonstrate the empirical relevance of some crucial interactions between elements of that decomposition. The conclusion is that even temporary immigration may help to alleviate the ageing problem through a positive long-term contribution to employment, wages and GDP per capita, as long as the immigrants are able to participate in the labour force in tandem with the native population. Unfavourable short-term effects should be avoided through a gradual phasing in of immigration policies.
url – http://www.tandfonline.com/doi/full/10.1080/00036846.2012.748178#.U2Mjk6IgT7M
courtesy – T&F
The Great Shift: Macroeconomic projections For the World Economy at the 2050 Horizon
by Jean Fouré, Agnès Bénassy-Quéré, and Lionel Fontagné
Paris School of Economics WP No 23
We present growth scenarios for 147 countries to 2050, based on MaGE (Macroeconometrics of the Global Economy), a three-factor production function that includes capital, labour and energy. We improve on the literature by accounting for the energy constraint through dynamic
modelling of energy productivity, and departing from the assumptions of either a closed economy or full capital mobility by applying a Feldstein-Horioka-type relationship between savings and investment rates.
Our results suggest that, accounting for relative price variations, China could account for 33% of the world economy in 2050, which would be much more than the United States (9%), India (8%), the European Union (12%) and Japan (5%). They suggest also that China would overtake the United States around 2020 (2040 at constant relative prices). However, in terms of standards of living, measured through GDP per capita in purchasing power parity, China would still lag 10 percent behind the United States at the 2050 horizon.
courtesy – Paris School of Economics
A Refi nement of the Relationship between Economic Growth and Income Inequality in Developing Countries
by Fadi Fawaz and Masha Rahnamamoghadam and Victor Valcarcel
MPRA Paper 55268 (April 2014)
There is mixed evidence in the literature of a clear relationship between income inequality and economic growth. Most of that work has focused almost exclusively on developed economies. In what we believe to be a first effort, our emphasis is solely on developing economics, which we classify as high-income and low-income developing countries (HIDC and LIDC). We make such distinction on theoretical and empirical grounds. Empirically, the World Bank has classified developing economies in this manner since 1978. The data in our sample is also supportive of such classifications. We provide a theoretical scaffolding that uses asymmetric credit constraints as a premise for separating developing economies in such a way. We find strong evidence of a negative relationship between income inequality and economic growth in LIDC to be in stark contrast with a positive inequality-growth relationship for HIDC. Both correlations are statistically significant across multiple econometric specifications. These results are robust to degree of persistence in the variables of interest as well as a measure threshold of income that is estimated endogenously for our sample.
url – http://mpra.ub.uni-muenchen.de/55268/1/MPRA_paper_55268.pdf
courtesy – MPRA
Income InequalIty and health: evIdence from developed and developIng countrIes
by DIerk Herzer amd Peter Nunnenkamp
Helmut Schmidt Universität Hamburg WP No. 141
We assess the effect of income inequality on life expectancy by performing separate estimations for developed and developing countries. Our empirical analysis challenges the widely held view that inequality matters more for health in richer countries than for health in poorer countries. Employing panel cointegration and conventional panel regressions, we find
that income inequality increases life expectancy in developed countries. By contrast, the effect on life expectancy is significantly negative in developing countries. While the quantitative effects are small, the striking contrast between the two country groups proves to be robust to modifications in measurement, specification and methodological choices.
url – http://www.hsu-hh.de/fgvwl/index_6fIxmi5fW6N1jPOE.html
courtesy – Helmut Schmidt Universität Hamburg
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