Working Papers by Topic

Long-Term Economic Growth and Income Gaps

"Long-Run Catching-Up And Falling-Behind And Human Capital (PWT 10.0)" March, 2024

 
Ithas been recognized for about three decades now that incomes rarely grow in a linear path over more than a decade. Some authors have analyzed changes in relative income. A rise in the poorer country income asa proportion of the richer country’s income has been called relative convergence. This paper elaborateson the concepts of relative convergence, absolute convergence (a decrease in thepoorer country’s income short fall from the richer country’s income), and full convergence (equality of the initially poorer country’s income to the richer country’s income that depends on the initial conditions). Neo-classical growth theory has not used either “relative convergence” or “full convergence” in describing convergence. Some seminal papers haveused the phrase “absolute convergence” but given it the meaning that all countries’ incomes eventually become equal irrespective of initial conditions.

Various authorson the neo-classical growth theory often conflate between at least two of the three concepts: relative convergence, absolute convergence, and full convergence (mostly without using these terms). We relate these convergence concepts to the meaning other authors havegiven to “convergence” in growth theory since 1956. We also prove the following proposition,

Proposition1. Relative convergence is a necessary but not asufficient condition for absolute convergence and relative divergence is a sufficient but not a necessary condition for absolute divergence.

We emphasize that growing fasteris not sufficient for income gap reduction - it may take even 800/900 years of faster growth before income gaps start decreasing.

The literature on incomevariations either suggests random shocks (rather than country characteristics) are more important in explaining income growth variations or is pessimisticthat econometric investigation of income growth determinants will provide
useful results. We take income relative to abenchmark country and collapse the varieties of growth experiences to two: where a country is growing faster than a benchmark country, and where it is growing slower. Combining therelative TFP data in the new generations of PWT, with the concept of relative convergence, this paper extends development accounting to examine the relative
importance of catching-up in inputs and catching-up in the efficiency with which inputs are used in explaining catching-up in (relative) income. It suggests that using truly long-rundata and ignoring income fluctuations that last then ten years may have value. Using data as long as 64 years from onegeographical region, Sub-Saharan Africa (to reduce parametric heterogeneity), itfinds growth miracles and failures since 1950 in a country that may each last 20 to 30 years. It separates long-termcatching-up growth periods from long-term falling-behind periods for the same countries and examines proximate factors for the two. The main difference of thedivergence panels from the r-convergence panels is on the role of human capital. When human capital iscontributing to income, countries are catching up (in relativeincome) - and TFP is about one-half as important as human capital. When it is not, they are falling behind both relativelyand absolutely.

 

"EU Accession, Institutional Change, Growth and Human Capital" June, 2023.

We use the experience ofex-socialist countries to examine the roles of initial institutions at transition, and change in institutions upon joining the EU, on growth. Proxying better institutions with accession tothe EU, we show ex-socialist countries thatjoined the EU boosted their growth after accession. We examine the proximate causes of thisboost in growth and find the importance of human capital increased post accession. Neither the amount of human capital change upon accession nor didother economic or political confounders change - these countries had fully opened-up and adopted neo-liberal economic policies, governance restructuring and democracy inearly 1990s. Accepting and implementing EU’s regulations and norms in all details upon joining it permits building oftransparent networks and improves institutions. These countries had higher than OECD level ofhuman capital at transition. Theirskilled labour needed the right institutions to create value it was capable of.

"Long-Term Growth Miracles and Failures and Human Capital (PWT 9.1)" January, 2022.

Therecent empirical growth literature has noted that most countries’ incomes do not grow uniformly over periods longer than a decade or so. We ignore the short-term, consider income variations over the long run (up to 65 years) and two growth regimes, and take growth relative to a numeraire country. The two regimes are: periods when a country’s income is catching-up (relative
convergence) and when it is falling-behind (both relative and absolute divergence). To minimize parameter heterogeneity, we consider one geographical region, Sub-Saharan Africa (SSA). The average catching-up duration for this region is 19.4 years, average falling-behind is 28.1 years and the number of periods for the two experiences is almost the same. Performing growth accounting by panel estimation separately for the two sets of periods, we find when human capital is contributing to growth in a positive and statistically significant way, countries are catching-up; when it is not, they are falling behind. For the catching-up panels, we find total factor productivity (TFP) to be less important than human capital for both growth and income levels, and the excess-effect of human capital over TFP is about 2.5 times for growth than for income levels.

"State of the Developing World: PPP Income, Catching-Up/Falling Behind, and No Growth," June 2021

See abstract at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2909338

"South Asia/Frontier Long-Term Income Dynamics and Income-Health Relationships," July 2019.

See abstract at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3277198

Globalization and Institutions

"Multinational Corporations and Institutions" July 2019.

See abstract at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2909320

“Foreign Aid and Long-Term Prospects of Recipients,” September 2019.

See abstract at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3277203

Published Papers by Topic

Total citations to my papers: 689 on 05/30/23 (including some to working papers)

For list of citations, see, my Google Scholar profile here.

Long-Term Economic Growth and Income Gaps, Total Citations: 39.

“Income Convergence and The Catch-Up Index,” The North American Journal of Economics and Finance, Vol. 48 (2019), pp. 613-627. Published online August 16, 2018, Cited by: 39

Stillbirths and Life Expectancy, Total Citations: Five

"Stillbirths: How should its rate be reported, its disability-adjusted-life-years (DALY), and stillbirths adjusted life expectancy, "BMC Medical Informatics and Decision Making, Vol. 19 (2019), pp. 133-140, Cited by: Five

Globalization and Institutions, Total Citations: 32.

“Financial Openness & Institutions In Developing Countries,” Research in International Business and Finance, Vol. 46, December 2018, pp 240-250, Cited by: 10

“Are Institutions In Developing Countries Malleable,” Journal of Policy Modeling, Vol. 38 (2016), Issue 2, pp. 272-289. Cited by: 22.

Capital Flight and Capital Flows, Total Citations: 309.

“Relationship Between Different Types of Private Flows To Developing Countries,” Quantitative and Qualitative Analysis in Social Sciences, Vol. 4 (2010), Issue 1, pp. 58-82, Cited by: Six.

“Capital Flight,” Commissioned Entry in the Encyclopedia of Globalization, Vol. I (2007), R. Robertson and J.A. Scholte (eds.), published by Routledge. ISBN # 0-415-97314-7

“Capital Mobility among Advanced Countries.” Journal of Policy Modeling, Vol. 27, December 2005, pp. 1067-1081, Cited by nine.

"The Asian Crisis and Financial and Capital Account Liberalization,” pp. 98-108 in Chatterji, M. and P. Gangopadhyay (eds.) “Economic Globalization and Asia.” (2005) Ashgate Publishing Ltd., U.K., ISBN # 0-75-46414-7,

“What is Capital Flight?” The World Economy, Vol. 25, No. 3, March 2002, pp. 341-358, Cited by 66.

“Capital Inflows and Capital Flight – Individual Countries Experience,“ Journal of Economic Integration, December 1998, pp. 644-61, Cited by 36.

“Foreign Direct Investment and Capital Flight” Princeton Studies in International Finance, No. 80 (1996), International Finance Section, Department of Economics, Princeton University, Princeton, NJ, Cited by 192.

Transfer Pricing, Total Citations: 319

“Minority Ownership, Deferral, Perverse Intra-firm Trade and Tariffs,” International Economic Journal, Spring 1995, pp. 19-39. Cited by 26.

“Multinational Firms and Government Revenues,” Journal of Public Economics, Vol. 42 (1990), Issue 2, pp. 135-47/ Cited by 93.

“Perverse Intra-firm Trade,” Southern Economic Journal, Vol. 56 (1989), No. 1; Cited by 11.

“Foreign Subsidiary, Transfer-pricing and Tariffs.” Southern Economic Journal 55 (1988), 162–170; Cited by 42.

“Endogenous Transfer Pricing and the Effects of Uncertain Regulation,” Journal of International Economics, 24 (1988), 147-157; Cited by 147.