Microfinance, entrepreneurship and institutional quality

2020 ◽  
Vol 9 (1) ◽  
pp. 137-148
Author(s):  
Malavika Nair ◽  
Martha Njolomole
Keyword(s):  
Economic Growth ◽  
Private Property ◽  
Institutional Quality ◽  
Empirical Literature ◽  
Small Scale ◽  
Microfinance Institutions ◽  
Content Type ◽  
Private Property Rights ◽  
Access To Credit ◽  
Institutional Failure

Purpose The purpose of this paper is to consider the success and failure of microfinance institutions in generating economic growth over the past 30 years and propose a dual criterion of evaluation. Design/methodology/approach It surveys the empirical literature on microfinance and finds that while there has been small and localized success in various countries in improving access to credit, at the same time there has been a broader failure to generate economic growth. The authors argue that this broader failure should be viewed from the viewpoint of institutional failure or the lack of supporting institutions such as private property rights and stable rule of law within developing countries. Findings Using Baumol’s (1968) theory of entrepreneurship, the authors argue that the broader failure of microfinance is a case of poor institutional quality leading to unproductive or even destructive entrepreneurship rather than productive entrepreneurship. The paper also suggests a link between the literature criticizing foreign aid and this view on microfinance. Originality/value The paper provides a survey of the empirical literature on micro finance as well as a novel framework that aids in understanding both the localized small-scale success as well as broader failure to generate economic growth.

Impact of remittances on economic performance in consideration of institutional quality

2020 ◽  
Vol 47 (3) ◽  
pp. 479-507
Author(s):  
Surya Nepal ◽  
Sae Woon Park ◽  
Sunhae Lee
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
South Asia ◽  
Central Asia ◽  
Financial Development ◽  
Economic Performance ◽  
Institutional Quality ◽  
Content Type ◽  
The Impact ◽  
Asian Developing Countries

PurposeThe purpose of this paper is to empirically assess the impact of remittances on the economic performance of the 16 Asian developing countries, taking account of their institutional qualities.Design/methodology/approachA panel of 16 Asian developing countries (Central Asia, South Asia, and ASEAN) over the period of 2002–2016 is employed in the analysis. To assess the impact of remittances on economic performance in consideration of institutional quality, OLS estimates as well as GMM are used.FindingsThe effect of remittances on economic growth is statistically significant. In addition, they also impact economic growth when they interact with institutional or financial development variables. For the long-run growth process of Central Asian, South Asian, and ASEAN countries, a sound and smooth institutional framework appears to be indispensable. Also, it was found that more fragile economies tend to achieve bigger growth than less fragile economies, as this kind of growth is triggered by more remittances flowing into fragile economies. However, the impact of remittances on growth does not depend on the level of ICT. FDI and financial development have positive impact on growth.Research limitations/implicationsThere are limitations to this research as well. Due to the unavailability of data, several countries had to be removed from this study. The cost of sending money might be an important variable for this study. However, the data on this variable from reliable sources are almost impossible to gather. Therefore, this variable is also not included in this research. The savings from remittances when intermediated through formal financial channels will, in fact, produce a positive allocation and distribution of resources that may eventually become an important source of growth. However, one precondition for larger and greater growth is that remittances need to be well and properly utilized by the financial sector. Therefore, quality institutions should be formed first, which can facilitate investment activities and make the flow of remittances more convenient.Originality/valueThis paper exclusively considers the case of Asian developing countries (Central Asia, South Asia, and ASEAN) to assess the impact of remittances on the economic performance of these countries, with special consideration of the interaction effects of remittances and institutional quality in these emerging Asian economies. The previous studies on the effect of remittances on growth do not conform to one concrete conclusion. This study is undertaken in a bid to get the best possible result on the impact of remittances on the growth of the selected countries, majority of which attract substantial chunk of remittances into their economies.

The effectiveness of government expenditure on economic growth in Botswana

2019 ◽  
Vol 10 (3) ◽  
pp. 368-384 ◽  
Author(s):  
Kafayat Amusa ◽  
Mutiu Abimbola Oyinlola
Keyword(s):  
Economic Growth ◽  
Government Spending ◽  
Negative Impact ◽  
Positive Impact ◽  
Government Expenditure ◽  
Public Spending ◽  
Empirical Literature ◽  
Content Type ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to examine the relationship between government expenditure and economic growth in Botswana over the period 1985‒2016. The study employed the auto-regressive distributed lag (ARDL) bounds testing approach in investigating the nexus. The study makes the argument that the effectiveness of public spending should be assessed not only against the amount of the expenditure but also by the type of the expenditure. The empirical findings showed that aggregate expenditure has a negative short-run and positive long-run effect on economic growth. When expenditure is disaggregated, both forms of expenditures have a positive short-run effect on economic growth, whereas only a long-run positive impact of recurrent expenditure is observed. The study suggests the need to prioritize scarce resources in productive recurrent and development spending that enables increased productivity. Design/methodology/approach This study examined the effectiveness of government spending in Botswana, within an ARDL framework from 1985 to 2016. To achieve this, the analysis is carried out on both an aggregate and disaggregated level. Government spending is divided into recurrent and development expenditures. Findings This study examined the effectiveness of government spending in Botswana, within an ARDL framework from 1985 to 2016. To achieve this, the analysis hinged on both the aggregate and disaggregated levels. The results of the aggregate analysis suggest that total public expenditure has a negative impact on economic growth in the short run; however, its impact becomes positive over the long run. On disaggregating government spending, the results show that both recurrent and development expenditures have a significant positive short-run impact on growth; however, in the long run, the significant positive impact is only observed for recurrent expenditure. Practical implications The results provide evidence of the diverse effects of government expenditure in the country. In the period under investigation, 73 percent of total government expenditure in Botswana was recurrent in nature, whereas 23 percent was related to development. From the results, it can be observed that although the recurrent expenditure has contributed to increased growth and must be encouraged, it is also pertinent for the Botswana Government to endeavor to place more emphasis on productive development expenditure in order to enhance short- and long-term growth. Further, there is a need to strengthen the growth-enhancing structures and to prioritize the scarce economic resources toward productive spending and ensuring continued proper governance over such expenditures. Originality/value The study provides empirical evidence on the effectiveness of government spending in a small open, resource-reliant middle-income SSA economy and argues that the effectiveness of public spending must be assessed not only against the amount of the expenditure but also on the type or composition of the expenditure. The study contributes to the scant empirical literature on Botswana by employing the ARDL approach to cointegration technique in estimating the long- and short-run impact of government expenditure on economic growth between 1985 and 2016.

Economic Calculation and the Productivity of Investment

2017 ◽  
Vol 12 (s1) ◽  
Author(s):  
Benjamin Powell ◽  
Gonzalo Macera
Keyword(s):  
Economic Growth ◽  
Institutional Quality ◽  
Theoretical Explanation ◽  
Austrian Economics ◽  
Empirical Literature ◽  
Economic Calculation ◽  
Investment Opportunities ◽  
Associated Knowledge

AbstractThis paper explains why institutional quality impacts the productivity of investment. The existing empirical literature finds that a given level of investment creates more economic growth in more economically free countries. We draw on insights from Austrian economics, particularly the economic calculation debate and associated knowledge problems, to provide a theoretical explanation for why entrepreneurs are able to better value investment opportunities in more economically free countries which, in turn, leads to higher economic growth.

The effect of infrastructure and taxation on economic growth: new empirical assessment

2019 ◽  
Vol 46 (5) ◽  
pp. 1065-1082 ◽  
Author(s):  
José Laurindo de Almeida ◽  
Helder Ferreira de Mendonça
Keyword(s):  
Economic Growth ◽  
Design Methodology ◽  
Panel Data Analysis ◽  
Empirical Literature ◽  
Mobile Telephony ◽  
Indirect Taxation ◽  
Content Type ◽  
The Core ◽  
Long Period ◽  
New Infrastructure

Purpose The purpose of this paper is to contribute to the empirical literature that analyzes the effect of the core infrastructure (telecommunication, electricity and transportation) and indirect taxation on economic growth. Design/methodology/approach The authors present empirical evidence through panel data analysis based on a comprehensive sample of countries (96) over a long period of time (1976 to 2014). Findings The findings confirm the assumption that the core of infrastructure is essential to promote economic growth. Furthermore, indirect taxation is not a tool capable of stimulating growth. In particular, new sectors of the core of infrastructure, such as the internet and mobile telephony, are capable of expanding the effect of infrastructure on growth. Originality/value Based on a sample of 74 countries, we include new infrastructure sectors into the analysis (transportation, fixed telephony, mobile telephony and internet), and verify changes from the 1990s.

How effective is government spending on environmental protection in a developing country?

2020 ◽  
Vol 47 (4) ◽  
pp. 789-803
Author(s):  
Saeed Moshiri ◽  
Arian Daneshmand
Keyword(s):  
Environmental Protection ◽  
Government Spending ◽  
Ecological Footprint ◽  
Time Series Data ◽  
Public Awareness ◽  
Institutional Quality ◽  
Empirical Literature ◽  
Series Data ◽  
Environmental Damage ◽  
Content Type

PurposeThe objective of this paper is twofold as follows: first, it explores the relationship between economic growth and the environment in the context of the environmental Kuznets curve (EKC) in Iran, as a semi-industrialized and largest developing economy in the Middle East. Second, it investigates the effectiveness of government spending on environmental protection.Design/methodology/approachThe paper uses the ecological footprint data and an ARDL model to gauge the income and government spending effects on environmental improvement. This method avoids the problems associated with using the regression including a squared income.FindingsThe results find no evidence for a turning point in the income–pollution relationship and no significant impact of government spending on reducing footprint. We conjecture that the structure of the economy and the weak institutional quality may explain the results.Research limitations/implicationsThis includes limited time series data on institutional quality indices and their small variations over time.Practical implicationsCreating an environmental fund using the oil windfall and applying environmental tax/subsidies policies will help address increasing environmental challenges in energy-rich developing countries. Education and public awareness about environmental problems and their impacts on the standard of living are also nonexpensive but effective ways to increase citizen's engagement towards improving environment.Social implicationsThe EKC may take different forms in various countries depending on their economic structure and institution qualities.Originality/valueThe paper uses the ARDL method rather than a commonly used regression with a squared income to estimate the EKC. It also uses ecological footprint as a measure of environmental damage. Exploring government effectiveness in managing public good is also novel in the empirical literature.

scholarly journals Economic growth and quality of institutions in 27 postsocialist economies

2020 ◽  
Vol 47 (4) ◽  
pp. 769-787
Author(s):  
Constantinos Alexiou ◽  
Sofoklis Vogiazas ◽  
Nikita Solovev
Keyword(s):  
Economic Growth ◽  
Panel Cointegration ◽  
Institutional Quality ◽  
Supporting Evidence ◽  
Causality Analysis ◽  
Content Type ◽  
Long Run ◽  
Quality Of Institutions ◽  
The Relationship

PurposeThe relationship between institutional quality and economic growth is revisited.Design/methodology/approachA panel cointegration methodology and causality analysis are applied to 27 postsocialist economies over the period from 1996 to 2016.FindingsUtilizing the Worldwide Governance Indicators as a means of assessing the quality of institutions, it is found that in the long run, economic growth is positively associated with the rule of law and voice and accountability. In the short run, regulatory quality retains a positive effect, but voice and accountability demonstrate a puzzling negative effect on economic growth that merits further analysis. In exploring the causal dimension of our variables, supporting evidence of the strong links between the quality of institutions and economic growth is provided, hence rendering robust results.Originality/valueTo the best of the authors’ knowledge, it is the first time that an ARDL methodological framework, which addresses potential endogeneity issues, is used to investigate the relationship between institutional quality and growth in the context of postsocialist economies.

Corruption, public debt and economic growth – evidence from developing countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Carole Ibrahim
Keyword(s):  
Economic Growth ◽  
Developing Countries ◽  
Public Debt ◽  
Economic Effects ◽  
Empirical Literature ◽  
Long Term Effects ◽  
Empirical Examination ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to empirically examine the effect of corruption on public debt and economic growth in 20 developing countries over the period 1996-2018. Design/methodology/approach This study makes use of the autoregressive distributed lag (ARDL) model to detect the long-term relationships, on the one hand, between corruption and public debt and, on the other hand, between corruption and economic growth. Findings The empirical results reveal that corruption increases the debt-to-GDP ratio and that the interactions between corruption and public revenues and between corruption and public spending have a positive influence on public debt in the long run. The estimations also show that high corruption hampers long-term economic growth and increases the negative effect of public debt on economic growth in developing countries. Originality/value While corruption is a prevalent phenomenon in most developing countries, the literature still lacks empirical examination of its economic effects. This study fills this gap with the aim of highlighting that high corruption hinders development in developing nations. This study also examines the impact of the interactions between corruption and components of the fiscal balance on public debt. Moreover, while the existing empirical literature uses regression techniques, this paper uses a panel ARDL approach to detect the long-term effects of corruption.

John Locke and the Hobbesian Hypothesis: How a Similar Colonial Prejudice Became an Essential Premise in the Most Popular Justification of Private Property Rights

2017 ◽  
Author(s):  
Karl Widerquist ◽  
Grant S. McCall
Keyword(s):  
Property Rights ◽  
John Locke ◽  
Private Property ◽  
Natural Rights ◽  
Small Scale ◽  
Property Theory ◽  
Private Property Rights ◽  
Property System ◽  
Lockean Proviso ◽  
Ownership Of Land

This chapter introduces the role of “the Hobbesian hypothesis” (the claim that “the Lockean proviso” is fulfilled) in the natural rights justification of private property by discussing John Locke’s use of it in his “appropriation” theory. The chapter defines the property-theory version of “the Lockean proviso” as the claim that everyone is better off in a society with private ownership of land and natural resources than they could reasonably expect to be in any society in which land remains a commons as it was for many small-scale stateless peoples in history and prehistory. The chapter defines the property-theory version of “the Hobbesian hypothesis” as the empirical claim that the Lockean proviso is fulfilled by the property rights system: even the least advantage people under the private property system are better off than they could reasonably expect to be in a small-scale society with common land. It argues that any plausible natural rights justification of the private property system relies on this hypothesis as an empirical premise comparing the welfare of disadvantaged people in societies with a well-develop private property system and people in small-scale, stateless societies that treat land as a commons.

scholarly journals What factors influence firm perceptions of labour market constraints to growth in the MENA region?

2015 ◽  
Vol 36 (8) ◽  
pp. 1181-1206 ◽  
Author(s):  
Ali Fakih ◽  
Pascal L. Ghazalian
Keyword(s):  
Economic Growth ◽  
Labour Market ◽  
Empirical Literature ◽  
Firm Characteristics ◽  
Mena Region ◽  
Data Set ◽  
Content Type ◽  
Cross Country ◽  
Skill Shortages ◽  
Firm Development

Purpose – Labour market constraints constitute prominent obstacles to firm development and economic growth of countries located in the Middle East and North Africa (MENA) region. The purpose of this paper is to examine the implications of firm characteristics, national locations, and sectoral associations for the perceptions of firms concerning two basic labour market constraints: labour regulations and labour skill shortages. Design/methodology/approach – The empirical analysis is carried out using firm-level data set sourced from the World Bank’s Enterprise Surveys database. A bivariate probit estimator is used to account for potential correlations between the errors in the two labour market constraints’ equations. The authors implement overall estimations and comparative cross-country and cross-sector analyses, and use alternative estimation models. Findings – The empirical results reveal some important implications of firm characteristics (e.g. firm size, labour compositions) for firm perceptions of labour regulations and labour skill shortages. They also delineate important cross-country and cross-sector variations. The authors also find significant heterogeneity in the factors’ implications for the perceptions of firms belonging to different sectors and located in different MENA countries. Originality/value – Reforms in labour regulations and investment in human capital are important governmental policy interventions for promoting firm development and economic growth in the MENA region. This paper contributes to the empirical literature by analysing the factors influencing the perceptions of firms located in the MENA region concerning labour regulations and labour skill shortages. It provides policy-makers with information needed in the design of labour policies that attenuate the impacts of labour market constraints and enhance the performance of firms and the long-run economic growth.

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