Transport infrastructure and technical efficiency in a panel of countries: Accounting for endogeneity in a stochastic frontier model

In this paper, a global production frontier is estimated using stochastic frontier models to assess the contribution of transport infrastructure to countries’ performance. We find that the role of infrastructure is underestimated under the exogeneity assumption indicating that handling endogeneity is crucial in the estimation. Results suggest that a better endowment of infrastructure contributes to economic growth, highlighting its importance in explaining differences in the economic performance of countries. Efficiency measures indicate that high-income countries are more efficient than low- and middle-income countries, suggesting that there is room for improving economic performance in countries with a lower income level. Better institutions also are essential to foster countries’ economic output.

Impact of agricultural sector investment development on national economic output

This study aims to capture the investment performance of the agricultural sector in capital formation and the incremental capital output ratio (ICOR) and its relative contribution to the national economy in the 2011-2020 period. ICOR research method is the ratio of changes in output due to changes in capital as an indicator to measure investment performance. The research data used is secondary data obtained from the Central Statistics Agency (BPS). The results of the study show that the investment performance of the food crop agricultural sector has fluctuated throughout 2011-2020. The impact of the policy on the agricultural sector was generally positive, but in that vulnerable year, investment leakage was found that led to efficiency. The cause of the leakage is the behaviour of rent-seeking which is reflected in the time leading up to the elections, namely in 2014 and 2018 with the leakage rate of the investment budget in that year being very high, namely 74.09% and 84.50%, respectively. The year 2012 was marked by an ICOR value close to 0 (zero) accompanied by the growth and performance of the agri-food sector of 12.80%. In 2013 and 2015 the performance of the food crop sector contributed to the economic growth of the food crop sector by 8.65% and 15.78%. Unfortunately, the potential for loss of income in that year was very high, namely Rp. 8.16 trillion and Rp. 17.45 trillion, respectively. The best period for the performance of the food crop agricultural sector occurred in the rent-seeking behaviour that occurred in 2 motives, namely political and economic motives. Political motives occur through the mechanism of the backing system and lobbying. The economic motive is caused by the emergence of transaction costs for the distribution of subsidized fertilizers so that it leads to an increase in the HET for subsidized fertilizers.

The political economy of inflation

For the last 40 years, macroeconomics has been dominated by Milton Friedman’s view that inflation occurs when the supply of money rises more quickly than economic output – ‘too much money chasing too few goods’, as the saying goes. If inflation is always due to an imbalance of money supply and output, central banks alone determine the path of inflation, and fiscal policy merely has a redistributive function. This paper draws on historical and empirical evidence as well as recent theoretical literature to show that this view is mistaken. Monetary policy has redistributive effects, and fiscal policy affects the money supply. It is therefore impossible to separate them in practice. Both fiscal and monetary policy have inflationary consequences, and because their distributional effects are different, monetary policy cannot fully offset fiscal decisions. Fiscal and monetary policy are influenced by political decisions and are themselves political in nature. Since inflation reflects spending and saving patterns which are affected by political choices, it is fundamentally a political phenomenon.

Financial stability in response to climate change in a northern temperate economy

Climate change will have considerable impact on the global economy. Estimates of the economic damages due to climate change have focused on the effect of average temperature, but not the effect of other important climate variables. Related research has not explored the sub-annual economic cycles which may be impacted by climate volatility. To address these deficits, we propose a flexible, non-linear framework which includes a wide range of climate variables to estimate changes in GDP and project sub-annual economic cycle adjustments (period, amplitude, trough depth). We find that the inclusion of a more robust set of climate variables improves model performance by over 20%. Importantly, the improved model predicts an increase in GDP rather than a decrease when only temperature is considered. We also find that climate influences the sub-annual economics of all but one province in Canada. Highest stressed were the Prairie and Atlantic regions. Least stressed was the Southeastern region. Our study advances understanding of the nuances in the relationship between climate change and economic output in Canada. It also provides a method that can be applied to related economies globally to target adaptation and resilience management.

Specificity of Socio-Economic Processes in the Hungarian Microregion

The Kunhegyesi District is the most disadvantaged district in the Northern Great Plain Region of Hungary. The aim of this study, which serves as a basis for a social comparative analysis of the District’s settlements in the future, is to understand the demographic processes. Population in the District has been steadily decreasing since 2011 besides lower income levels, poorer health indicators and a higher proportion of premature mortality. Two out of three children are disadvantaged, while the vast majority of young people drops out of secondary school without any qualification. The higherthan-average proportion of Roma population alone does not explain worsening economic output, economic performance has nothing to do with ethnic origin. Reasons are rather to be found in the deterioration of social mobility of the past two decades. Similarly to areas with a higher proportion of Roma population, the District also undergoes an exodus of nonRoma, resulting in ghettoization, thereby further diminishing chances of social mobility. Thanks to social inclusion and recovery programs, as well as the commitment of local Roma stakeholders, promising changes are coming true with an increase in qualification and employment levels and a decrease in the number of disadvantaged children, question is whether development is sustainable in the long run, and also, whether the District has a potential to independently selfsustain social development.

Pandemic Threat, Ostrom Threshold and Pre-Emptive Public Goods: why East Asia performed better in the COVID-19 crisis

The COVID-19 pandemic is an eminent threat posed by nature to the survival of the whole community. The cost X it imposes upon the community can be mitigated by the community’s pre-emptive public goods: an early warning system, capacity for monitoring, contact tracing and isolating infected persons, the strength of its public health system and the cultivated readiness to cooperate with anti-COVID protocols. The community provides these public goods in a nonstrategic game N (Nature) where the probability of a “bad outcome” (being symptomatically infected) falls with the total spending on pre-emptive public goods. Aside from N, members of the community play an Economic Dilemma Game (EDG), a symmetric Prisoner’s Dilemma Game (PDG) with strategy set (C, D), where the community earns its economic income which in turn provides the financing of the pre-emptive public goods. Games EDG and N are fused into a composite game N+EDG by defining the probability of a good outcome as increasing with the level of public goods financing. N+EDG has the same strategy set (C, D) as EDG but the payoffs of players are composite: the payoff from EDG less the expected share of the pandemic cost to the members. We show that there is a threshold pandemic cost X0 (Ostrom threshold) so that if X ≥ X0, the N+EDG has dominant strategy in C. At the cooperative equilibrium, the community is at its peak strength: economic output from EDG is largest and the contribution to pre-emptive public good is highest. A severe-enough cost of the pandemic threat as perceived by the group (i) causes players to exhibit an altruistic phenotype (choosing C every time) and (ii) leads to the lowest probability of a bad outcome. We argue that previous experience with pandemics in the last two decades on top of a higher tendency to follow authority in East Asia supported both the provision of better pre-emptive public goods and the higher abidance with anti-COVID protocols. These explain better performance.

Green urbanization

Large cities are more productive and generate more output per person. Using data from the UK on energy demand and waste generation, we show that they are also more energy-efficient. Large cities are therefore greener than small towns. The amount of energy demanded and waste generated per person is decreasing in total output produced, that is, energy demand and waste generation scale sublinearly with output. Our research provides the first direct evidence of green urbanization by calculating the rate at which per capita electricity use and waste decrease with city population. The energy demand elasticity with respect to city output is 83%: as the total output of a city increases by one percent, energy demand increases less than one percent, and the Urban Energy Premium is therefore 17%. The energy premium by source of energy demand is from households (13%), transport (20%), and industry (16%). Similarly, we find that the elasticity of waste generation with respect to city output is 90%. For one percent increase in total city output, there is a less than one percent increase in waste, with an Urban Waste Premium of 10%. Because large cities are energy-efficient ways of generating output, energy efficiency can be improved by encouraging urbanization and thus green living. We perform a counterfactual analysis in a spatial equilibrium model that makes income taxes contingent on city population, which attracts more people to big cities. We find that this pro-urbanization counterfactual not only increases economic output but also lowers energy consumption and waste production in the aggregate.

Water and the Circular Economy: Learning from Nature

This paper examines the hydrological cycle and its implications for the production capacity of two countries, China and the United States. While it takes a macro-level view, it illustrates the relevance of understanding the circularity of nature as exemplified by the hydrological cycle, for urban and regional circular economy considerations. Taking the circularity of nature as a starting point is a departure from common circular economy conceptions, which take an anthropocentric perspective rather than a nature based one. We calculate the amount of solar energy available for freshwater evaporation and the allocation of freshwater to its key uses in the domestic, industrial, and agricultural sectors. Our calculations indicate that the capacity to generate economic output can be accurately described by the embodied solar energy distribution that determines the availability of freshwater for allocation to different uses. This illustrates the need to take environmental/physical conditions more fully into account in economic development decisions at every level, from local to regional, national, and global. We begin our analysis with a review of circular economy concepts and argue that they reveal a limited understanding of the circularity of nature evident in energy and material cycles and their economic capacity implications. Achieving further expansions of economic capacity may increasingly depend on an improved understanding of nature’s circularity, especially when competing resource pressures and land-use constraint exacerbate economic capacity limits. Our findings suggest three particularly important lessons for decision makers: first, the efficiency increases needed to realize growing economic output will require circular economy models that consider the efficient processing capacity of nature rather than relying solely on technological solutions; second, the non-use of resources may be as valuable or more than their use; and third, price policies can be effective in steering resource use and non-use in the right direction.

Assessing the Environmental Pertinence of Cobalt Exploitation from Slag in KGHM Mines

As ore quality declines in KGHM mines after continuous exploitation, it becomes increasingly relevant to extract as much economic value as possible from the mined ore while limiting the environmental impact. The recovery of cobalt from converter slag is a possible extraction route that can increase economic output at a limited environmental and logistic cost. Life cycle assessment (LCA) is used to assess the environmental impact of copper exploitation and to compare that impact with the estimated impact of cobalt extraction in the Lubin mine. In most impact categories, Co extraction would be responsible for less than 0.2% of the impact, while increasing economic output by 3.38%. Economic allocation shows that cobalt recovery is environmentally pertinent.