Economic development and growth

Previously economic growth was generally discussed in terms of foreign direct investment (FDI), educational growth, savings, investments, inflation as well as trade openness of a nation. Very recently it has been identified that population is one of the major determinants of economic growth of a nation. In the recent years, the study of urbanization has gained a matter of concern in developing countries as it has been recognized as part of a larger process of economic development which is affecting developing countries. South Asian countries are one of the emerging economics and growing at a faster rate over the past few years. At the same time, population of South Asia is growing at a significant rate. Therefore the study has attempted to identify the causal relationship between urban population and economic growth in South Asia using a panel data analysis. The study makes use of the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP), Pesaran as well as Fisher methods for panel unit root test. The panel Pedroni cointegration test suggests that there is long run relationship between the variables. The further panel Vector Error Correction Model (VECM) suggests that there is long run causality running from urban population growth to economic growth in South Asia. The study concludes that the growth of urban population can have significant impact on economic growth in South Asia in the long run.

The objective of this research is to elaborate an endogenous growth model which allows us to examine the mutual interaction between economic growth, labour market behaviour and population growth. We show how the introduction of disequilibrium and some nonlinearities give rise to more complex dynamics than the usually obtained. The unemployment rate, per capita income and population growth rate fluctuate along cycles of different periods, and they may even exhibit chaotic paths. In particular, as the level of knowledge sector development and the rigidity of the labour market increase, the possibility of complex dynamics increases as well. Moreover, in line with wage bargaining models, we get the result that the higher workers’ bargaining power, the lower both the employment rate and per capita production. When we assume endogenous population growth by means of optimal fertility choices, the model endogenously generates a logistic behaviour in the population growth rate describing its historical evolution. The demographic transition reverses the positive relationship between economic development and population growth, and fertility rates permanently decline. However, besides this structural change, we find that during the transition, the relevant variables evolve regularly; in particular, it seems that labour force fits the labour market needs. As some endogenous population research states, this dynamic result could be related with the population's age structure.

There has been growing interest in analysing the relationship between inequality and growth since the pioneering work of Kuznets (1955) that found that inequality first increases and later decreases during the process of economic development, sug- gesting a non-linear relationship between these two variables. However, theoretical papers and empirical applications have produced conflicting results. While a con- siderable part of the literature has shown that inequality is detrimental to growth, more recent studies have challenged this result and found inequality to have had a positive effect on growth. The first group of authors argue that there is less demand for redistribution in more egalitarian societies and therefore less tax pressure, which creates greater accumulation of capital and higher growth (Persson and Tabellini, 1994). A second argument in this line of reasoning is related to political instability (Alesina and Perotti, 1996) and posits that greater levels of inequality imply a dis- tortion in the functioning of markets, reducing labour productivity. By contrast, the authors who defend a positive relationship between inequality and growth base their arguments on the effects of inequality in the accumulation of factors of production. If the savings rate of the rich is higher than that of the poor, the reduction of inequal- ity implies a reduction in aggregate savings and therefore of capital accumulation and growth (Fields, 1989; Campanale, 2007). Moreover, agglomeration economies produce higher returns to high-skilled workers and consequently produce simulta- neously higher inequality and higher economic growth (Borjas et al., 1992; Wheaton and Lewis, 2002; Glaeser and Maré, 2001). If both variables are influenced by identi- cal factors, it is likely that they are produced by the same causes.

Authors included in classic economic thought, started to worry about the distribution of wealth and income among society. Since Adam Smith (1776), in the same line of classical economic thought David Ricardo (1891) argued that inequality was necessary for economic development, because people with high income use to save more money, which stimulated the capital accumulation and the economic progress. If inequalities are seen from the perspective of neo-classical represented by Stuart Mill (1984) and others, inequality is not so important to understand the process of economic growth because “distribution of the wealth depends on the laws and the manners of the society not by the economy”. From a more orthodox perspective developed by Simon Kuznet (1955), it is important to remember the huge development that meant for inequalities measurement, the discovery of the graph and the curve that bears his name. He established that inequality fluctuates in a predictable way depending on the development of a society, extremely poor societies used to have less inequality because almost everybody lived below the subsistence level. He supported that “societies which are involved in an industrialization process are more unequal, because manufactured sector income`s are higher than agriculture`s”. The other reason is that the difference between workers and entrepreneur create salary differences. Post- industrial societies are less unequal, due to redistributive politics and better access to education.

Our contribution hopes to shed light on the intricate relationship between the media business (and its specific sub-segments) and general economic development (and pos- sible intervening variables). Based on media data provided by an international consul- tancy, economic indicators from the World Bank, and several sources mapping national “media systems” we will outline the diversity of the world’s 30 leading countries (in me- dia terms) and expose the correlations between them. Additionally, annual data from the 2001-2010 period will allow for analyses of time series and possible causal relationships. Analyses show a strong correlation between media industries’ yearly revenue and GDP. Correlations shifted by time intervals also point beyond annual effects. Media’s long-term growth and their share of overall economic value creation, along with compound economic growth rates and the general state of development, are all strongly linked to each other as well as to media systems’ variables, like freedom of the press. Nevertheless, despite the over- all dependency of media industries’ growth on the growth of GDP, less developed coun- tries show stronger rates of media growth than might be expected based on GDP growth. Furthermore, outperformance in media markets’ growth appears to stimulate general eco- nomic development, which suggests a process of co-evolution.

facts of global economic growth and development since the Industrial Revolution, namely: the central roles of productivity, trade and foreign direct investment (FDI), the concentration of innovation, the deindustrialization of the periphery, the Great Divergence, persistence of middle per-capita income levels, miracle growth, the demographic transition, the role of institutions and conditional convergence. I then present, in diagrammatic form, a model of endogenous technological change explaining how trade and FDI raise the world growth rate but focus innovation in advanced and larger countries, thus generating multiple steady states in economic growth. The theory explains the simultaneous historical emergence of development and underdevelopment. So long as underdevelopment persists this generates a polarized, rather than an equal, form of globalization. Nevertheless, an adequate orchestration of the forces of globalization ensuring that technological change accrues equally across countries can break the cycle of inequality and generate economic development everywhere. Such policies, based on export promotion, technological adoption, human capital formation and infrastructure investment, not only are economically favorable to all, tending to raise the world growth rate, but also tend to strengthen democratic institutions everywhere, to accelerate the demographic transition in the Third World, and promote a more harmonious global economic integration.

network of institutions which made up the London capital markets were of paramount importance to the efficient workings of this international monetary system. However, then, as today, the links between finance and economic development were complex. According to conventional wisdom, a fully globalized capital market should sever the links between national savings and investment, and reallocate global savings from the capital-rich to the capital-scarce countries, strengthening the development prospects of poorer countries. It was certainly the case that between 1870 and 1914 the share of British foreign investments going to Europe and the United States halved, from 52 per cent to 26 per cent of the total, while the share of Latin America and the British Dominions rose from 23 per cent to 55 per cent of the total (Kenwood and Lougheed, 1994, p. 30). However, taking the world as a whole, while half of all lending went to Asia, Latin America and Oceania-Africa, half went to other advanced countries, and one-quarter was to North America alone, by then the wealthiest region of the world economy (table 4). Moreover, the large capital flows to Latin America were very unevenly distributed, the majority directed to the wealthiest parts of the continent; during the 1880s just two nations - Argentina and Uruguay - were responsible for over 60 per cent (in value terms) of all loans negotiated in the region (Marichal, 1989, p. 127).

Kuznets’ and UGT’s definitions have several points in common. The most fun- damental is that they embrace the “incremental” conception of growth, typical of the postwar economic development thought (see Rostow, 1992; Easterly, 2006). This conception, well identified in Rostow’s idea of “stages of growth”, argues that societies go through a sequence of stages, each one of more economic sophistication and higher living standards (Rostow, 1990, 1960, 1956). Within such conception, both Kuznets’ and UFT’s definitions of modern economic growth refer to similar historical episodes. For instance, both Europe and Latin America experienced an industrial take-off, Europe in the 19th century and Latin America in in the early 20th century. However, their con- cepts differ in the particular social changes they emphasize. For instance, demographic transition is a minor concern in Kuznets’ view, but it is the essence of UFT’s definition. Meanwhile, structural change might be considered a secondary element in UFT, but an indispensable one in Kuznets’ idea.

A third school of thought is the feedback hypothesis (FBH), which argues that ICT can complement and can deepen the impact on economic growth and vice versa. Here, the proponents suggest that ICT improves economic productivity and economic growth opportunities. As the wealth of economic agents and countries increases, these countries tend to increase investments in ICT to continu- ously develop and upgrade not only the number of people using ICT, but also the quality of the ICT so as to enable firms to pursue economies of scale and scope and to move up the innovation value chain. The feedback between ICT development and economic growth has a reinforcing impact on each other, enabling the economy to gravitate to a higher stage of economic development. Empirical studies that sup- ports the FBH include the following: Chakraborty and Nandi (2009, 2011), Wolde-Rufael (2007), and Zahra et al. (2008). The final school of thought maintains that there is no causal link between ICT and economic growth, known as no linkage hypothesis (NLH). This hypothesis seems to be a minority in the literature. A study that has shown this result is Veeramacheneni et al. (2007).

There are of course problems with the GEDI and REDI as well as other attempts to measure ecosystems. These include scalability to different geographic units of analysis, level of correlation of variables used to measure the conceptual dimensions, weighting of variables when combined to measure ecosystem dimensions, replicabil- ity of measures for various time periods that would enable a dynamic comparison of performance and policy evaluation, supporting evidence for the hypothesized posi- tive relationship between ecosystem scores and entrepreneurship performance, i.e., job creation, other forms of economic growth such as income and wealth creation, and innovative outcomes. Further, as with all ecological systems there are potential problems of logic called the ecological fallacy (Robinson 1950) defined as inferring attributes of the whole to individual members. This potential problem is mitigated in part given the GEDI can and has been applied to sub-regions not just countries of which they are a part. Conceptual thinking and experience suggests that the eco- system approach can be followed in an effort to measure entrepreneurship and its relation to development. However, more research is needed to better understand the nature of entrepreneurship ecosystems as complex systems and their relationship to entrepreneurship and economic growth at the regional level.

The accumulation of capital and the creation of employment were important factors, yet the improvements in productivity were scarce in nearly all sectors. The specialisation of production has not strengthened the presence of innovative activities and those with a high technological content as would be expected from an advanced economy, but instead in traditional and highly cyclical sectors such as construction. Low productivity levels have affected nearly all of the country’s activities, despite an increase in capital assets per worker during this period. However, these were much more serious in the construction sector, as during the housing boom a large number of investment projects based their short-term profitability on expectations for the revaluing of the assets and not on productivity. The pattern of growth of the Spanish economy in the 2000s was fragile and unsustainable in the long term. On the one hand, “the competitiveness of Spain at a global level has placed too much trust in the short-term benefits derived from the arrival of the Euro” (Pérez et al, 2011), while on the other, the risks and imbalances accumulated during the period of expansion and housing boom (a high current account deficit and heavy debt burden) led the Spanish economy to be highly

Naturally a proper analysis of future growth prospects in China requires a much deeper examination than just focusing on investment rates. China faces many difficul- ties if it is to continue growing at this rate—in particular the need to shift an enormous part of the economy from state-controlled means of production and distribution to more market-oriented systems. Moreover, tensions over the weakness of China’s finan- cial system, in particular its banks, and the conflict between economic reform and the political status quo are growing. Pollution is also a major problem. All this means that Chinese economic growth is not guaranteed and that future economic growth may be volatile. However, China is pursuing a development path similar to that of the Asian Tigers of 30 years ago—large capital accumulation and increases in employment. Our analysis suggests that China can produce decades of fast growth based solely on high capital accumulation rather than reliance on technological progress. China will not need to focus on improving TFP to improve its standard of living for many years.

A great deal of empirical work has convincingly shown that there is a positive association between financial development and economic growth, and some recent work has even provided evidence that the former causes the latter 1 . What is less clear is the identification of the actual transmission channel. This paper is an attempt in this direction, with particular emphasis placed on the role of the financial system in alleviating informational asymmetries. While research in this field has highlighted the benefits of well developed financial systems, the observation that internal funds (retained earnings plus depreciation) constitute by far the main source of funds of the corporate sector has not gained any attention. 2 We believe that the informational frictions that lie behind this phenomenon may be part of the missing empirical link between financial system and growth. In particular, we will show that such frictions create a financing constraint that reduces investment and growth.

From reading the extant literature on regional development and regional inequal- ity, the variety in conceptualisations and definitions of regional entities as spear- heads of accelerated regional growth is striking. We will provide in our paper a brief overview of this panorama of concepts. In the present study we will next introduce the notion of a «resourceful region» as an umbrella concept to cover and encapsu- late various regional development notions and strategies. A resourceful region is a functionally and spatially demarcated geographical area which combines its assets (skills, physical resources, technology, social capital, institutional support systems, geographical connectivity etc.) in order to maximize its capabilities to achieve ac- celerated economic progress and a more sustainable socio-economic performance. This concept will be highlighted and advocated against the background of our con- cise historical literature review, followed by an exposition on smart spatial speciali- sation, opportunity-seeking innovative regional strategies, spatial-industrial cluster initiatives, social and spatial proximity analysis, and the importance of cognitive and creative abilities. A reference will also be made to an empirical case study —the avia- tion cluster in Poland— to illustrate the meaning and relevance of the «resourceful region» idea.

thesis 1: Our first prediction is that countries with more democratic structures are better developed, as measured by higher GDP and higher GDP per capita, however it may take a long time for a culture of democracy to influence economic growth and also because politi- cal institutions change only slowly. Given this, we need to look at longer time spans, but: What the right horizon should be? (Acemoglu et al., 2008, explore a similar hypothesis trying to explain the impact of income on democracy). Therefore, we need to investigate the longer-run relationship between income and democracy. Hypothesis 2: Historical factors are influencing the economic and political development of societies. We then argue that there are some democracy-related determinants of income in short periods of time like post-war period with the abandoning of some dictatorship regimes. In particular, contrary to the implications of moderni- zation theory, it seems also reasonable to assume that democracy drives economic growth mostly after economic crises. This is justified by the fact that dictatorships are more likely to collapse in the face of economic crises, than the reversion of democracies to dictatorship (this hypothesis was also formulated by Acemoglu et al. (2008) but results may change through the use of a different dependent va- riable). These are hypothesis that are being taken into account in a current work.

In regression (6), we include a vector of variables related to political and economic institutions: Socialism, which is a dummy variable for socialist economic institutions; New State, which measures the proportion of time under colonial rule; Public, which measures the quality of governmental institutions; and Open, which measures the proportion of time between 1965 and 1990 that the country is open to international trade. We find, in line with many recent studies, that openness and quality of public institutions are highly correlated with the level of income. The socialist variable is not significant, probably because of the strong collinearity with Open and because of the smaller data set once we include the Public variable (since that variable is not available for most of the socialist economies). Newly independent countries also do not have signficantly lower income levels. If the malaria index is not included, the new state variable is highly significant, which suggests the possibility that the heavy burden of disease in tropical Africa and Asia made these regions more susceptible to colonization. We find, importantly, that both policy and geography variables are strongly correlated with the level of 1995 per capita GDP. Remember that geography may be even more important than suggested by this equation, since there are reasons to believe that favorable geography plays a role in inducing growth-promoting

The relationship between domestic trade and service production, on one hand, and productivity per worker and world economic growth, on the other, is studied in this paper through a panel data econometric analysis. Two mechanisms are described where services, by incorporating technology in the productive structure of domestic economies, increase average productivity per worker and promote economic growth. Data corresponding to 124 countries, between 1970 and 2007 was analyzed. Significant evidence was found about the role of both imported services and domestic service production in consolidating the nations’ average productivity. Likewise, services with a high content of human capital, as opposed to economic activities in the primary and secondary sectors, were found to underpin the largest share of productivity growth per worker in high and middle income countries.

Naredo, para solucionar esta contradicción insoluble, propone esclarecer, primero, el significado real del desarrollo, entendido como crecimiento, para, una vez super[r]

There is no much evidence supporting the existence of scale effects (the main exception is Kremer, 1993). In addition, the existence of scale effects is not supported by a number of stylized facts and empirical studies. First, even if rich cities are densely populated, some poor countries are also densely populated and this fact seems to be an obstacle for development. Second, in a large scale study on the determinant of economic growth, Sala-i-Martin (1997) finds that scale effects are not significantly different from zero. Moreover, Brander and Dowrick (1994), using a 107-country panel data (1960- 1985) find that reductions in the birthrate have a strong positive medium-term impact on per capita income growth, that is, for their sample there is a reverse-scale effect. Finally, regarding the effect of human capital on growth, the evidence presented by O’Neill (1995) suggest that the contribution of human capital to growth is higher in richer economies and is not significantly different from zero for very poor countries.

Our focus was on land-rich economies where income growth is such that a large demand for industrial goods appears at a time when the supply by early comers is already well developed. Straightforward comparative advantage implies that those economies will import manufactures. If the demand for sophisticated services starts for incomes above a certain threshold, increases in the value of the output of primary goods can imply that, at some point, a demand for skilled labor may appear in order to satisfy that consumption by high-income groups. These groups, then, would not oppose the emergence of public education to increase the skills of a set of workers, the number of which would depend on the number of landlords who demand services. Hence, the di usion of education would depend on the size of the elite and, indirectly, on the degree of concentration of land ownership. The growth of an educated class can change the political balance, and the incentives to provide public education, by incorporating into the picture a new in uential group, and also by giving rise to a population who in some cases may self- nance the acquisition of skills of descendants. A large manufacturing activity may or may not arise spontaneously. Over time, a new political economy of industrial protection is likely to result from the interplay of the interests of landlord, capitalists, skilled workers (at rst, mainly occupied in services). Quite di erent paths seem possible according to how the implicit con icts are processed.