Economic Effects of Pension Reform based on Consumption Tax

This paper analyzes the micro and macroeconomic effects of pension reform by a consumption tax hike by using an overlapping-generations model that is primarily based on Groezen, Leers and Mejidam (2003). Although Groezen, Leers and Mejidam (2003) consider pay-as-you-go pension in a model of a small open economy, they do not analyze physical capital accumulation, assume that public pension is financed only by the intergenerational transfer of national pension premiums, and ignore consumption tax as a public pension resource. This study considers pay-as-you-go pension in a closed economy model and assumes that public pensions are financed by both consumption taxes and national pension premiums. In addition, although Groezen, Leers and Mejidam (2003) consider a model with endogenous fertility, this analysis uses a model with exogenous fertility based on Verbon (1988) and Breyer (1989). Subsequently, we consider the micro and macroeconomic effects of the policy that increases the consumption tax rate compared to the effects of increases under a national pension system. We find that even if the population growth rate is negative, both a consumption tax hike and increases in people’s national pension premiums surprisingly promote physical capital accumulation, and if promoting physical capital is enough, such policies enhance economic growth remarkably. Furthermore, we show that a consumption tax hike may promote physical capital accumulation compared to an increase in national pension premiums if the consumption tax rate is not too high.

Knowledge-based economy: wealth owners portfolio choices and financialisation. A wealth supply analysis

Based on a data and literature analysis as well as autonomous theoretical reasoning and argumentation by the author, the present article discusses the relevance of financialisation and portfolio choice changes under the present phase of development of modern economies. Relying upon the earlier studies by the author which stress that knowledge-based economy can be characterised as a low profitability of investment in physical capital, higher income inequalities, lower physical capital and economic growth rate phase of the development of economic systems, the present work provides variously conceived arguments to support the idea that significant portfolio choice changes by wealth owners are a relevant feature of knowledge-based economy. Some of the implications of the economic theory of the availability of assets other than physical capital and other assets more connected with production needs were thus discussed, pointing out that this leads mainly to the negation of the necessary arrival of mainstream counterbalance mechanisms which support the affirmation of higher physical capital accumulation when higher income inequalities are recorded.

Output Growth Decomposition in the Presence of Input Quality Effects: A Stochastic Frontier Approach

How do physical capital accumulation and total factor productivity (TFP) individually add to economic growth? We approach this question from the perspective of the quality of physical capital and labor, namely the age of physical capital and human capital. We build a unique dataset by explicitly calculating the age of physical capital for each country and each year of our time frame and estimate a stochastic frontier production function incorporating input quality in five regions of countries (Africa, East Asia, Latin America, South Asia and West). Physical capital accumulation generally proves much more important than either the improved quality of factors or TFP growth in explaining output growth. The age of capital decreases growth in all regions except in Africa, while human capital increases growth in all regions except in East Asia.

Optimal taxation with unobservable investment in human capital

In a Ramsey model of optimal taxation, if human capital investment can be observed separately from consumption, it is optimal not to distort human or physical capital accumulation in the long run, and only labour income taxes should be used. However, in reality the government can’t always distinguish between investment in human capital and pure consumption, so a tax on labour or consumption will necessarily tax human capital. We find that when investment in human capital is unobservable, the optimal policy is to tax human capital at a positive rate, even in the long run. Whether physical capital should be taxed or not depends on its degree of complementarity with human capital versus labour.

Financial Development and Economic Growth in ASEAN-5 Countries

This article explores the relationship between financial sector development and economic growth, using a sample of ASEAN-5 countries (Malaysia, Indonesia, Singapore, Thailand and Philippines) from 1980 to 2011. More specifically, this study investigates whether higher levels of financial development (FD) are significantly and robustly correlated with faster current and future rates of economic growth, physical capital accumulation and economic efficiency improvements. Findings of this study revealed that FD has a significant positive effect on economic growth. However, the estimated models show that the influence of FD, as a determinant for economic growth of ASEAN-5 countries, is less than that of domestic investment and export.

IS HUMAN CAPITAL ACCUMULATION A GROWTH DRIVER IN NIGERIA? AN EMPIRICAL INVESTIGATION

Accumulation of human capital is critical to sustained economic growth in the long run, since it facilitates the efficient absorption of new capital developments, improves the speed of adaptation of entrepreneurs and generates innovation necessary for sustained economic growth. It is against this premise this study investigate the human-capital accumulation growth-nexus in Nigeria. Employing a dynamic approach, involving test for unit roots, and cointegration, and finally, the Generalized Method of Moments (GMM) estimation techniques on annual time series data, covering the period 1981 to 2016, sourced from the World Bank Development Indicators (WDI) and Central Bank of Nigeria (CBN) Statistical Bulletin, the empirical findings reveal that human and physical capital accumulation significantly induce rapid and sustained economic growth in the long-run. The other variables- infrastructural development (measured by ICT infrastructure) and industrial output (a measure of industrialization) have positive but weak impacts on economic growth, on account of the weak infrastructural development, and low level of industrialization in Nigeria. Inflation rate (a measure of macroeconomic policy environment) on the other hand, is found to have a militating effect on economic growth. We recommend amongst others; sustained investments in human and physical capital accumulation, stable and coherent macroeconomic policies, particularly with respect to taming of domestic inflationary pressures, supportive institutional structures and aggressive industrialization-enhancing policies, in order to enhance sustained economic growth in Nigeria.

Intragenerational redistribution in a funded pension system

In a general equilibrium framework, this paper studies the properties, in terms of labour market distortions and capital accumulation, of three social security systems: a pay-as-you-go notional defined contribution (PAYG NDC), a fully funded (FF), and a novel modified FF (MFF) system, which includes an intragenerational redistributive component to guarantee minimum living standards to future low-income retirees. We show that while PAYG NDC depresses labour supply and physical capital accumulation, FF is neutral on both dimensions. Conversely, MFF slightly increases physical capital accumulation, without significantly reducing labour supply incentives. Moreover, it reduces the burden of future intergenerational redistribution, and increases social welfare.