scholarly journals Debt, Investment, and Growth in Developing Countries with Segmented Labor Markets

2020 ◽  
Vol 20 (102) ◽  
Author(s):  
Edward Buffie ◽  
Luis-Felipe Zanna ◽  
Christopher Adam ◽  
Lacina Balma ◽  
Dawit Tessema ◽  
...  
Keyword(s):  
Human Capital ◽  
Labor Markets ◽  
Agricultural Sector ◽  
Public Investment ◽  
National Income ◽  
Formal Sector ◽  
Real Wages ◽  
Market Outcomes ◽  
Long Run ◽  
The Social

We introduce a new suite of macroeconomic models that extend and complement the Debt, Investment, and Growth (DIG) model widely used at the IMF since 2012. The new DIG-Labor models feature segmented labor markets, efficiency wages and open unemployment, and an informal non-agricultural sector. These features allow for a deeper examination of macroeconomic and fiscal policy programs and their impact on labor market outcomes, inequality, and poverty. The paper illustrates the model's properties by analyzing the growth, debt, and distributional consequences of big-push public investment programs with different mixes of investment in human capital and infrastructure. We show that investment in human capital is much more effective than investment in infrastructure in promoting long-run economic development when investments earn their average estimated returns. The decision about how much to invest in human capital versus infrastructure involves, however, an acute intertemporal trade-off. Because investment in education affects labor productivity with a long lag, it takes 15+ years before net national income, the private capital stock, real wages for the poor, and formal sector employment surpass their counterparts in a program that invests mainly in infrastructure. The ranking of alternative investment programs depends on the policymakers' social discount rate and on the weight of distributional objectives in the social welfare function.

Conclusion

2021 ◽  
pp. 161-164
Author(s):  
Eric A. Posner
Keyword(s):  
Artificial Intelligence ◽  
Labor Market ◽  
Labor Markets ◽  
Human Beings ◽  
Independent Contractors ◽  
Gig Economy ◽  
Long Run ◽  
The Social ◽  
Market Fragmentation ◽  
Social Surplus

Many people are worried about the fragmentation of labor markets, as firms replace employees with independent contractors. Another common worry is that low-skill work, and ultimately nearly all forms of work, will be replaced by robots as artificial intelligence advances. Labor market fragmentation is not a new phenomenon and can be addressed with stronger classification laws supplemented by antitrust enforcement. In fact, the gig economy has many attractive elements, and there is no reason to fear it as long as existing laws are enforced. Over the long run, artificial intelligence may replace much of the work currently performed by human beings. If it does, the appropriate response is not antitrust or employment regulation but policy that ensures the social surplus is fairly divided.

Investment in Physical, Human Capital, Economic Growth and Life Expectancy in Bangladesh

2018 ◽  
Vol 19 (2) ◽  
pp. 251-269 ◽  
Author(s):  
Biswajit Maitra
Keyword(s):  
Health Care ◽  
Human Capital ◽  
Life Expectancy ◽  
Public Investment ◽  
Decisive Role ◽  
Physical Capital ◽  
Wald Test ◽  
Ardl Model ◽  
Long Run

This article studies the efficacy of the public investment in human capital and physical capital to raise income in Bangladesh over the period 1980–2016. This article also assesses whether the investment in human capital and income have raised life expectancy of the country. The Johansen cointegration test identifies a long-run relation of income with investment on education, health care and physical capital. The error correction mechanism (ECM) based on the cointegrating relation followed by the Wald test of Granger causality has found that these investments have caused income to rise with some lag periods. Robustness of these findings is confirmed by involving an autoregressive distributed lag (ARDL) model of cointegration followed by its ECM representation. On the other hand, the Johansen and ARDL methods of cointegration followed by their ECMs have also found a long-run relation of life expectancy with the investment in education, health care and income. A decisive role of the investment in health care and income on life expectancy is observed, while an unusual negative role of the investment in education is also found. However, positive value of the long-run coefficients of the education and health-care investments of the ECM-ARDL model indicate some long-run favourable impact of these investments on life expectancy in Bangladesh. JEL: I26, I15, C32

The composition of productive government expenditure

2008 ◽  
Vol 1 (1) ◽  
pp. 57-83 ◽  
Author(s):  
Goncalo Monteiro ◽  
Stephen J. Turnovsky
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Government Spending ◽  
Public Investment ◽  
Government Expenditure ◽  
Physical Capital ◽  
Content Type ◽  
Trade Offs ◽  
Long Run ◽  
Productive Government Spending

PurposeRecent research supports the role of productive government spending as an important determinant of economic growth. Previous analyses have focused on the separate effects of public investment in infrastructure and on investment in education. This paper aims to introduce both types of public investment simultaneously, enabling the authors to address the trade‐offs that resource constraints may impose on their choice.Design/methodology/approachThe authors employ a two‐sector endogenous growth model, with physical and human capital. Physical capital is produced in the final output sector, using human capital, physical capital, and government spending on infrastructure. Human capital is produced in the education sector using human capital, physical capital, and government spending on public education. The introduction of productive government spending in both sectors yields an important structural difference from the traditional two‐sector growth models in that the relative price of human to physical capital dynamics does not evolve independently of the quantity dynamics.FindingsThe model yields both a long‐run growth‐maximizing and welfare‐maximizing expenditure rate and allocation of expenditure on productive capital. The welfare‐maximizing rate of expenditure is less than the growth‐maximizing rate, with the opposite being the case with regard to their allocation. Moreover, the growth‐maximizing value of the expenditure rate is independent of the composition of government spending, and vice versa. Because of the complexity of the model, the analysis of its dynamics requires the use of numerical simulations the specific shocks analyzed being productivity increases. During the transition, the growth rates of the two forms of capital approach their common equilibrium from opposite directions, this depending upon both the sector in which the shock occurs and the relative sectoral capital intensities.Research limitations/implicationsThese findings confirm that the form in which the government carries out its productive expenditures is important. The authors have retained the simpler, but widely employed, assumption that government expenditure influences private productivity as a flow. But given the importance of public investment suggests that extending this analysis to focus on public capital would be useful.Originality/valueTwo‐sector models of economic growth have proven to be a powerful tool for analyzing a wide range of issues in economic growth. The originality of this paper is to consider the relative impact of government spending on infrastructure and government spending on human capital and the trade‐offs that they entail, both in the long run and over time.

The Inequality of Pay in Pre-modern Germany, Late 15th Century to 1889

2019 ◽  
Vol 60 (1) ◽  
pp. 209-243 ◽  
Author(s):  
Ulrich Pfister
Keyword(s):  
Human Capital ◽  
Supply And Demand ◽  
Real Wages ◽  
Additional Information ◽  
Modern Germany ◽  
15Th Century ◽  
Long Run ◽  
Two Phases ◽  
The Individual ◽  
Modern Era

Abstract The study explores relative labour scarcity in a broad range of activities and relates it to the long-run dynamics of structural change, supply and demand of human capital, and the inequality between men and women. It builds on two recent compilations of wage data and complements these with additional information, particularly on wages in agriculture. From the second quarter of the seventeenth century the skill premium was stable; the first phase of industrialization did not lead to a differentiation of the individual return to human capital. Labour demand from the modern sector stabilized real wages of males from the second quarter of the eighteenth century at least and increased them from the mid-1850s onwards. This opened a wedge between the agricultural and the non-agricultural sectors already for considerable time before the beginnings of industrialization. Finally, the modern era saw two phases of labour market segmentation along gender lines, one in the later sixteenth and the early seventeenth centuries, the other from the 1840s to the 1870s.

On the determinants of economic growth: Empirical evidence from the Eurozone countries

2020 ◽  
Vol 23 (2) ◽  
pp. 210-229 ◽  
Author(s):  
Panagiotis Pegkas ◽  
Christos Staikouras ◽  
Constantinos Tsamadias
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Public Debt ◽  
Public Investment ◽  
Trade Openness ◽  
Growth Strategies ◽  
Fiscal Consolidation ◽  
Long Run ◽  
Determinants Of Economic Growth

This study empirically investigates the causal relationship between economic growth and several factors (investment, human capital, trade openness and public debt) in the Eurozone countries, where imbalances persist several years after the financial crisis. The results reveal a long-run relationship between variables and public debt, as investment, human capital and trade openness positively affect growth. On the other hand, there is a negative long-run effect of public debt on growth. Furthermore, the results indicate that there is long-run unidirectional causality running from investment, trade openness and human capital to growth and bidirectional causality between public debt and growth. The overall results reveal that Eurozone countries should base their growth strategies on fiscal consolidation, increasing exports, correcting the use of public investment and improving the quality of human capital, especially in higher education.

A NOTE ON FOREIGN AID, HUMAN CAPITAL, AND WELFARE

2016 ◽  
Vol 21 (6) ◽  
pp. 1484-1507 ◽  
Author(s):  
Hafedh Bouakez ◽  
Fabienne E. Gouba
Keyword(s):  
Human Capital ◽  
Foreign Aid ◽  
Optimal Allocation ◽  
Public Investment ◽  
Public Spending ◽  
Long Run ◽  
Welfare Losses ◽  
Short Run ◽  
Alternative Scenarios ◽  
Aid Programs

Should foreign aid be tied or untied? We study this question in the context of a dynamic growth model in which agents can accumulate human capital through education. We compare the growth and welfare implications of three polar scenarios in which foreign aid is either (i) completely untied, (ii) tied to public investment in infrastructure, or (iii) tied to public spending on education. Our results indicate that tying aid to education is more beneficial from a long-run welfare perspective than the two alternative scenarios. We also compute the optimal allocation of foreign aid and find that the largest fraction of aid flows ought to be tied to public spending on education. Finally, we study the transitional dynamics of the recipient economy following an aid inflow and find that aid programs that are tied (entirely or partially) to public spending on education generally entail some welfare losses in the short run.

Mitigation of Long-Term Human Capital Losses from Natural Disasters: Evidence from the Philippines

2020 ◽  
Author(s):  
Catalina Herrera-Almanza ◽  
Ava Cas
Keyword(s):  
Human Capital ◽  
Natural Disasters ◽  
Agricultural Sector ◽  
The Philippines ◽  
Market Outcomes ◽  
Age Cohort ◽  
Triple Difference ◽  
Negative Effect ◽  
Infrastructure Program

Abstract The detrimental effects of natural disasters on human capital during childhood are well-documented. However, little is known about whether, and to what extent, these impacts can be mitigated in the long term. This study analyzes whether a school infrastructure program can mitigate the adverse effects of extreme weather shocks on long-term children's education and labor market outcomes. This article uses a triple difference model that exploits the geographic variation of super-typhoons combined with the age-cohort exposure to, and spatial variation of, a secondary school infrastructure program in the Philippines. This study finds that the school infrastructure program almost entirely mitigated the negative effect of typhoons on educational attainment. These differential effects of the program on education among typhoon-affected children are also associated with their higher likelihood of working in a high-skilled occupation, in the non-agricultural sector, and of migrating overseas.

scholarly journals Assessing the effect of climate change and financial development on agricultural production in ASEAN-4: The role of renewable energy, institutional quality and human capital as moderators

2021 ◽  
Author(s):  
Abbas Ali Chandio ◽  
Muhammad Ibrahim Shah ◽  
Narayan Sethi ◽  
Zulqarnain Mushtaq
Keyword(s):  
Climate Change ◽  
Human Capital ◽  
Renewable Energy ◽  
Financial Development ◽  
Agricultural Production ◽  
Energy Use ◽  
Agricultural Sector ◽  
Institutional Quality ◽  
Distributed Lag ◽  
Long Run

Abstract This study utilizes the data of ASEAN-4 nations, namely Indonesia, Malaysia, Philippines, and Thailand, to examine how climate change, renewable energy, human capital, institutional quality as well as financial development affect the agricultural production. Since shocks in one country can easily affect another country of this region, the second generation modelling techniques are utilized to prove the relationship among the variables of interest. Findings from the Westerlund (2007) cointegration test confirms long run relationship among the variables. The result from Cross-sectionally augmented autoregressive distributed lag (CS-ARDL) model reveals that climate change negatively affects the agricultural production, renewable energy, human capital, institutional quality positively affects the agricultural production. Moreover, renewable energy use, human capital and intuitional quality moderates the effect of carbon emission on agricultural production. In addition, a U shaped relationship between financial development and agricultural production is discovered, suggesting that financial development can promote production in the agricultural sector only after reaching a certain threshold. Finally, some policy recommendations are provided for the ASEAN-4 countries.

scholarly journals Identifying and Estimating Neighborhood Effects

2018 ◽  
Vol 56 (2) ◽  
pp. 450-500 ◽  
Author(s):  
Bryan S. Graham
Keyword(s):  
Social Sciences ◽  
Residential Segregation ◽  
Neighborhood Effects ◽  
Labor Market Outcomes ◽  
Criminal Activity ◽  
Life Outcomes ◽  
Market Outcomes ◽  
Urban America ◽  
Long Run ◽  
The Social

Residential segregation by race and income are enduring features of urban America. Understanding the effects of residential segregation on educational attainment, labor market outcomes, criminal activity, and other outcomes has been a leading project of the social sciences for over half a century. This paper describes techniques for measuring the effects of neighborhood of residence on long-run life outcomes. ( JEL C51, I24, J15, K42, R23)

Mismatch Between Education and Occupation: A Case Study of Pakistani Graduates.

2011 ◽  
Vol 50 (4II) ◽  
pp. 531-553 ◽  
Author(s):  
Shujaat Farooq
Keyword(s):  
Higher Education ◽  
Human Capital ◽  
Labour Market ◽  
Jel Classification ◽  
Formal Sector ◽  
Field Of Study ◽  
Keywords Education ◽  
Job Mismatch

In this study, an attempt has been made to estimate the incidences of job mismatch in Pakistan. The study has divided the job mismatch into three categories; education-job mismatch, qualification mismatch and field of study and job mismatch. Both the primary and secondary datasets have been used in which the formal sector employed graduates have been targeted. This study has measured the education-job mismatch by three approaches and found that about one-third of the graduates are facing education-job mismatch. In similar, more than one-fourth of the graduates are mismatched in qualification, about half of them are over-qualified and the half are under-qualified. The analysis also shows that 11.3 percent of the graduates have irrelevant and 13.8 percent have slightly relevant jobs to their studied field of disciplines. Our analysis shows that women are more likely than men to be mismatched in field of study. JEL classification: I23, I24, J21, J24 Keywords: Education and Inequality, Higher Education, Human Capital, Labour Market

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