Social conflict, growth and factor shares

Standard growth theory is based on atomistic agents with no strategic interactions among them. In contrast, we model growth as resulting from a one-off, strategic game between workers and owners of capital (capitalists) on factor shares, in an otherwise standard AK growth model. The resulting distribution of income between factors further determines the marginal revenue product of capital and the rate of growth. We analyse the properties of four equilibria: competitive, Stackelberg equilibrium, a hybrid non-cooperative regime, and cooperative (Nash) solution. We show that our model provides a potentially richer view of the growth process than comparable models, and endogenises a key aspect of the social contract.social conflict; factor shares; growth; catching up with the Joneses

Status, fertility, growth and the great transition

We develop an overlapping generation model to examine how the relationship between status concerns, fertility and education affect growth performances. Results are threefold. First, we show that stronger status motives heighten the desire of parents to have fewer but better educated children, which may foster economic development. Second, government should sometimes postpone the introduction of an economic policy in order to maintain the process of economic development, although such a policy aims to implement the social optimum. Third, status can alter the dynamic path of the economy and help to explain the facts about fertility during the "great transition".social status, fertility, education, economic policy

Gain versus pain from status and ambition: Effects on growth and inequality

To shed lights on growth, distribution and the relationships between the two, we develop a growth model with heterogeneous individuals who care about social status. Individuals' heterogeneity stems from two sources: their innate skills and their degree of ambition. While the willingness of individuals to accumulate wealth depends whether they experience gain or pain from loss of status, we show that ambition of individuals plays an important role regarding growth and distribution: ambition can inhibit or foster accumulation of wealth, then in turn growth. In such a context, we show that growth can be positively or negatively correlated with inequalities.social aspirations, ambition, inequality, growth

Towards a way out of the Greek crisis

INTRODUCTION: CONFLICTING ARGUMENTS AND FRACTURING SOCIAL COHESION For the past 18 months, Greece has been under the intense, and ever intensifying, media spotlight for all the wrong reasons. After the bailout of 110m euros of May last year, a new assistance package may be decided in July, designed to keep Greece afloat until 2014 or 2015, when, the hope is, it will return to the markets on its own. The price for this (or these) bailout package(s) is drastic austerity – a new instalment of measures has recently (29/6/11) been voted by Parliament. At the same time, there is growing scepticism, indeed hostility, in large portions of society to the bailouts and the concomitant austerity. The popular anger towards the Papandreou government may be construed as an implicit dialogue between Greece and its European partners. Many in Europe will be dismayed at the feelings and overall stance of the Greek ‘indignados’ – anger and refusal to accept responsibility for the country’s debts. I happen to think that the latter is rather dishonourable and in fact demeaning for Greek people themselves – the debts have been amassed by a sovereign, free and democratic state and therefore owned by the people, just like the decisions that led to them. But I have some sympathy for people’s anger, and share some of their instinctive scepticism about the overall strategy of bailout-driven austerity

The great transition: implications from environmental policy on the quality-quantity trade-off on children

We develop an overlapping-generations model with human capital accumulation and endogenous fertility containing a pollution externality. We study the effects of an environmental policy on individuals' quality-quantity trade-off on children. In a Malthusian poverty trap, we show that a more stringent policy induces a reduction of fertility. In a state of perpetual development, we find a similar result and show that higher environmental quality, growth and welfare are compatible goals. Moreover, we show that the policy can be used as an instrument for initiating a country's great transition from a state of poverty to a state of development

Does public investment crowd out private investment? Evidence on investment and growth in Asia, 1971-2000

The paper looks at the growth and investment performance of six Asian countries - Bangladesh, India, Indonesia, Malaysia, Pakistan and Thailand. Having discussed the time series properties of the public and private investment series and the GDP growth rate, the paper goes on to use the concept of Granger-block causality in a three-variable VAR in the presence of possible unit roots. The analysis is based on the lag-augmented VAR concept developed by Toda and Yamamoto (1995). We find that no single relationship holds in all countries and that the relationship between public and private investment varies from country to country.peer-reviewe

Testing for causality between FDI and economic growth using heterogeneous panel data

The causal relationship between FDI inflows and growth is of great policy interest, yet the state of concrete knowledge on the issue is rather poor. Our contribution is to investigate the causal relationship between the ratio of FDI to GDP (FDIG) and economic growth (GDPG) using a battery of cutting-edge methods and an extensive data set. We employ the heterogeneous-panel tests of the Granger non-causality hypothesis based on the works of Hurlin, C. 2004a. Testing Granger Causality in Heterogeneous Panel Data Models with Fixed Coefficients. Mimeo: University of Orléans, (Fisher, R. A. 1932. Statistical Methods for Research Workers. Edinburgh: Oliver & Boyd., Fisher, R. A. 1948. ‘Combining Independent Tests of Significance.’ American Statistician 2 (5): 30–31) and Hanck, C. 2013. ‘An intersection test for panel unit roots.’ Econometric Reviews 32 (2): 183–203. Our panel data set is compiled from 136 developed and developing countries over the 1970-2006 period. According to the Hurlin and Fisher tests, FDIG unambiguously Granger-causes GDPG for at least one country. However, the results from these tests are ambiguous regarding whether GDPG Granger-causes FDIG for at least one country. Using a test based upon Hanck, C. 2013. ‘An intersection test for panel unit roots.’ Econometric Reviews 32 (2): 183–203, both with and without one structural break in the vector autoregression, we are able to determine whether and for which countries there is Granger-causality. This test suggests that at most there are six countries (Estonia, Guyana, Poland, Switzerland, Tajikistan and Yemen) where FDIG Granger-causes GDPG and at most four countries (Dominican Republic, Gabon, Madagascar and Poland) where GDPG Granger-causes FDIG

The growth–distribution nexus in a mixed regime of education with a status motive: On the macroeconomics of the welfare state

We develop a growth model with human capital accumulation to study the effects of status-driven motivation on individuals' choice between public or private education. This choice interacts with and exacerbates the effects of status, with implications for growth and distribution. More motivated individuals work harder and choose private education. In a majority voting/median voter setup, individuals choose a public education size for which there is no trade-off between long-term growth and inequality. We also highlight the conflict of interest between individuals with respect to the size of the public education sector and the tax rate that supports it. We thus highlight important interactions between the macroeconomy, social attitudes and educational institutions and derive results of interest in a variety contexts. We end by drawing policy conclusions among which, the idea that in democracies, higher growth and lower inequality are mutually compatible when the government promotes public education

Gain versus pain from status and ambition: Effects on growth and inequality

To shed lights on growth, distribution and the relationships between the two, we develop a growth model with heterogeneous individuals who care about social status. Individuals' heterogeneity stems from two sources: their innate skills and their degree of ambition. While the willingness of individuals to accumulate wealth depends whether they experience gain or pain from loss of status, we show that ambition of individuals plays an important role regarding growth and distribution: ambition can inhibit or foster accumulation of wealth, then in turn growth. In such a context, we show that growth can be positively or negatively correlated with inequalities