Growth In Low-income Countries Research Articles

Understanding the challenge of decoupling transport-related CO2 emissions from economic growth in developing countries

The transition to net zero requires full decarbonization of the transport sector, currently one of the leading sources of emissions globally. Transport-related carbon emissions are growing fastest in the developing world. This makes it particularly critical to understand whether low- and middle-income countries are making progress towards decoupling transport sector emissions from economic growth, as well as the extent to which their current emissions trajectory is being shaped by structural factors versus more amenable policy choices. This paper assembles and analyzes a comprehensive dataset on transport-related emissions with a uniquely broad coverage of developing countries. The paper employs the Tapio decoupling model over the period 1990–2018 to demonstrate that high-income countries are almost twice as likely to have reached relative decoupling as low and middle-income countries (70 vs 36 percent, while the latter are almost twice as likely to be in a state of negative decoupling as the former (17 versus 41 percent). This paper conducts index-decomposition and econometric analysis to shed light on the factors driving transport-related carbon emissions. Index decomposition reveals that there have been only relatively modest reductions in the transport emissions intensity of GDP since 1990 and that these have not been large enough to offset economic growth in middle-income countries and demographic growth in low-income countries. Regression analysis further shows that urbanization and industrialization are important correlates of transport-related emissions, while the correlation of policy choices with reduced emissions is rather weak.

Advancing digital economy in Africa: The role of critical enablers

Given the slow pace of digital economy in Africa, this study investigated the role of critical digital economy enablers in stimulating the growth of a digital economy in Africa. The paper employed the panel-correlated standard error (PCSE) and feasible generalized least square (FGLS) estimators to analyse relevant data of 37 African countries between 2009 and 2022. For a robust analysis, the sampled countries were grouped into different income groups. The results indicate that digital infrastructure enhances digital economy growth while economic policy uncertainty dampens it across the income groups. Further results reveal that human capital development accelerates digital economy growth in low-income countries while the different measure of institutional quality have heterogeneous impact on the growth of the digital economy in Africa. The paper concludes that African policymakers should design and implement policies that will promote significant investment in digital infrastructures and human capital, and provide a stable and predictable policy framework. The novelty of this paper is its assessmemt of the role of critical digital economy enablers across different income groups in Africa.

Electronic Payment Technology and Business Finance: A Randomized, Controlled Trial with Mobile Money

We conducted a randomized, controlled trial with small- and medium-sized enterprises in Kenya to estimate the causal impact of an electronic payment (e-payment) technology on business finance. Using an encouragement design, we exogenously increased e-payment usage among a random subset of firms by relaxing adoption transaction costs and information barriers. Sixteen months after the intervention, we find that the e-payment technology increased access to mobile loans (in the number of loans as well as in the amount borrowed) by at least 50% (0.17 standard deviation), likely because of the reduction of information asymmetries brought by an increase in digital transactions. We find no effect of the e-payment technology on sales and profits, but we do find a reduction of sales volatility and precautionary investment, especially for smaller firms. This suggests that mobile loans help smaller firms cope with short-term negative shocks. We provide a stylized model of business finance that rationalizes these findings. This paper was accepted by Bruno Biais, finance. Funding: This paper was produced under the framework of the “Enabling Innovation and Productivity Growth in Low Income Countries (EIP-LIC/PO5639)” project, funded by the Department for International Development (DFID) of the United Kingdom and implemented by Tilburg University. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4821 .

Assessing the Global Drivers of Sustained Economic Development: The Role of Trade Openness, Financial Development, and FDI

Achieving economic development is one of the most important economic goals of every country. Identifying the determinants of economic growth, is a useful tool for adopting appropriate economic policies. This study, therefore, empirically examines the impact of trade openness, foreign direct investment, and financial development on economic growth, across 62 countries over the period 1995–2016. These countries are divided into two groups: low-income and high-income countries. We employ the pooled mean group (PMG), mean group (MG), and dynamic fixed effect (DFE) estimation techniques on the cross-country panel data. The findings show a positive long run association between trade openness, foreign direct investment (FDI), financial development, labor, government expenditure, and economic growth in low-income countries, with a positive and negative short run effect from capital and government expenditures, respectively. For high-income countries, a positive long run association between trade openness, FDI, capital, and economic growth exist. The short run estimates indicate a positive effect on trade openness and capital as well as a negative effect on government expenditure. Our study shows that the adoption of policies that improves access to skilled labor and international trade, affect the attainment of a sustainable economic development.

Do Monetary Policy Frameworks Matter in Low-Income Countries?

In recent years, most low-income countries (LICs) have been remarkably successful in reducing inflation to single-digit levels, and many LICS are engaged in reforms to make their monetary policy frameworks more systematic, transparent, and forward-looking, often with technical support from the International Monetary Fund (IMF). To inform those initiatives, our paper provides new empirical evidence about how the characteristics of the monetary policy framework affects the propagation of shocks in LICS. First, we analyze a cross-country panel dataset of 79 LICs over the period 1990 to 2015 to assess the impact of external shocks on real GDP growth, and we find highly significant differences between LICs where the central bank targets monetary aggregates or inflation compared to LICs that use the nominal exchange rates as the main nominal anchor. Second, we use difference-in-difference methods to assess the evolution of economic growth in sub-Saharan Africa (SSA) over the period from 1986 to 1994, and we find highly significant differences between 9 countries in the Central African Franc (CFA) zone compared to a control group of 12 other SSA countries. Our findings show that central banks in LICs can face policy tradeoffs similar to those which have been highlighted for more advanced economies, and our analysis underscores the key role of the monetary policy framework in fostering price stability and sustained economic growth in LICs.

Influence of intrauterine factors on birth weight and on child linear growth in rural Ethiopia: A prospectivecohortstudy.

Little is known about the influence of intrauterine fetal factors on childhood growth in low-income countries. The objective of this study was to examine the influence of intrauterine fetal growth on child linear growth in rural Ethiopia. We conducted a prospective community-based cohort study from July 2016 to October 2018. All pregnant women with gestational age of 24 weeks or below living in 13 kebeles, in central Ethiopia were enrolled. The fetuses were followed from pregnancy up to 11-24 months after birth. We measured biparietal diameter, head circumference, femoral length, and abdominal circumference at 26, 30 and 36 weeks of pregnancy. At birth, we measured infant weight. At 11-24 months of age, z-scores of length- for- age, and weight-for-length were calculated. A multilevel, mixed-effect, linear regression model was used to examine the influence of fetal, newborn, maternal, household factors and residence area on child linear growth. We included 554 children. The prevalence rate of stunting was 54.3% and that of wasting was 10.6%. Fetal biparietal diameter, head circumference, and abdominal circumference, were significantly associated with birth weight. Femoral length z-score in early pregnancy, gestational age at delivery and child age were significantly associated with length-for-age z-score. Family size was significantly associated with length-for-age z-score. Family size and maternal height were associated with weight-for-height z-score. There was a large variation in length-for-age z-score (Intra cluster correlation, or ρ (rho) = 0.30) and weight-for-length z-score (ρ = 0.22) than of birth weight of new-born (ρ = 0.11) in kebeles indicating heterogeneity in clusters for length-for-age z-score and weight-for-length z-score than birth weight. Child linear growth was influenced by fetal growth, duration of pregnancy, maternal height, and family size. Environmental factors that are associated with the area of residence play a bigger role for linear growth than for birth weight.

GMM Analyses of the Effects of Digital Services Trade on Economic Growth of Low, Middle and High Income Countries

Objectives: To analyze the effect or impact of Digital Services Trade on economic growth (GDP) of a panel of Low, Middle and High Income Countries.
 Study Design: Panel Quantitative Study.
 Methodology: Dynamic Difference GMM (Diff-GMM) and System GMM (Sys-GMM), Panel pooled OLS (POLS) and Fixed Effects (FE) models were employed in the analyses.
 Results: The System GMM estimator seems to predict that, ceteris paribus, a 1 unit increase in digital services exports significantly impacts GDP growth in Low and High Income countries panels in the short run by 5.7% and 52.4% respectively. The panel POLS models estimate that digital services exports cause a significant long run increase in GDP in High income countries by 39.67% relative to 6.68% in the panel of Middle Income countries and negative growth in Low income countries of 7.74%. The FE models predict that for every 1 unit increase in the number of people using the internet, GDP significantly increases by 42.7%, 27.8% and 0.03% in the Middle, High, and Low Income countries panels respectively.
 Conclusion: The findings of this study indicate that generally, digital services trade seems to have a significant positive effect on GDP of all country panels. However, Low and Middle Income countries are lagging behind. Therefore, this study recommends that, to promote digital trade driven economic growth, the panel of Low and Middle Income countries’ policy makers should increase investments in both institutional and physical digital infrastructure that enable more people, Small and Medium enterprises(SMEs) and rural populations have access to stable, high speed and affordable digital services.

Exploring renewable energy, financial development, environmental quality, and economic growth nexus: new evidence from composite indices for environmental quality and financial development.

The association between trade, financial development, consumption of renewable energy, environmental quality, foreign direct investment, and economic growth is important for sustainable growth and environmental strategies. Hence, this research unveils this association in selected low- and high-income economies from 1996 to 2020. Unlike most of the previous literature, this study uses a composite environmental quality index, a composite financial development index, and a composite trade share measure to better represent environmental quality, financial development, and trade openness, respectively. The Continuously Updated Fully Modified and Continuously Updated Bias Corrected estimators along with the Dumitrescu Hurlin causality method are utilized to scrutinize the nature of the linkage between the modeled variables. The long-run estimation provided that consumption of renewable energy and environmental quality augment economic growth in high-income nations, while both these variables do not contribute to the economic growth in low-income countries. Financial development upsurges economic growth in high- as well as low-income nations. Interestingly, trade openness boosts economic growth in high-income countries, while in low-income countries, it obstructs economic growth. In causal linkage, the conservation hypothesis for low-income countries and the feedback hypothesis for high-income countries are confirmed in the context of consumption of renewable energy and economic growth association. The supply-leading hypothesis for low-income countries and the feedback hypothesis for high-income countries are supported regarding the financial development-economic growth nexus. Moreover, one-way causality from growth to environmental quality and bidirectional causality between environmental quality and economic growth for low- and high-income countries are established, respectively. Lastly, exhaustive environmental and economic policies are directed.

GENDER EQUALITY, EMPLOYMENT TRENDS AND SUSTAINABLE ECONOMIC GROWTH NEXUS: AN EMPIRICAL EXAMINATION OF LOW-INCOME COUNTRIES

This research has been integrated to check the affiliation between gender equality, employment trends, and sustainable economic growth of low income countries. Furthermore, this research validates a classical theory that argued that factoring or adding more variables in a gender specified model will reduce the only portion of residuals but does not rule out the gap. It also considers the impact of gender inequality and employment trends on sustainable economic growth separately and combines. Panel data estimation by using secondary data sources from recognized international organizations such as the United Nations Development Program, World Economic Outlook, and World Economic Situation Perspectives over time. Gender inequality, unemployment, and some other macro-economic, social, demographic, and financial factors are incorporated over 2011 to 2020. This research considers three different statistical models. For statistical estimation of long run affiliation granger causality and Generalized Method of Moment (GMM) is utilized by the researcher. Gender inequality negatively influences sustainable economic growth. Employment trends also contribute to influencing economic growth. Moreover, there is a statistically significant association amid gender inequality, employment trends, and sustainable economic growth. Furthermore, factoring more variables in gender specified models does not rule out gender inequality. There is long term association between gender equality, employment trends, and sustainable economic growth of low income countries. Therefore, when governments or policymakers construct policies about reducing or eliminating gender inequality, they must consider employment trends prevailing in that economy.

A quantitative analysis of sources of changes in government expenditures on health, 2000 to 2015: what can we learn from experience to date?

Background: Achieving universal health coverage (UHC) requires increased domestic financing of health by low-income countries (LICs) and middle-income countries (MICs). It is critical to understand how much governments have devoted to health from domestic sources and how much growth might be realistic over time. Methods: Using data from WHO's Global Health Expenditure Database, we examined how the composition of current health expenditure changed by financing source and the sources of growth in health expenditures from 2000-2015 across different income groups. We disaggregated how much growth in government expenditures on health from domestic sources was due to economic growth, growth in government spending as a share of GDP, and reallocations in government expenditures towards health. Results: Lower MICs (LMICs) and upper MICs (UMICs), as a group, saw a significant reduction in out-of-pocket expenditures and a significant growth in government expenditures on health from domestic sources as a share of current health expenditures over the period. This trend indicates likely progress in the pathway to UHC. For LICs, these trends were more muted. Growth in government expenditure on health from domestic sources was driven primarily by economic growth in LICs, LMICs, and UMICs. Growth in government expenditure on health due to increased government spending as a share of GDP was high in UMICs. For the high-income country group, where economic growth was relatively slower and government spending was already high with strong tax bases, the largest driver of growth in government expenditure on health from domestic sources was reallocation of the government budget towards health. Conclusions: Dialogue on domestic resource mobilization needs to emphasize overall economic growth and growth in the government spending as a share of GDP as well as the share of health in the government budget.

Poverty Reduction through Industrialisation, Economic Diversification and Growth in Low-income Countries: A Review of Literature and Evidence

Poverty has consistently been a pervasive phenomenon tackled by public policies as it comes with its batch of intolerable levels of economic, social and political hardship deemed distressing for humankind. Thus, the strategy against this scourge gained increased attention within countries and across the globe. The poverty reduction strategy aims to pull people out of degrading living conditions. The debate on poverty reduction is of paramount significance because various approaches are suggested to address this issue, but with mixed results. That is because often, these approaches apply regardless of the circumstances of place and time. On this note, many keep attributing the success and failure of poverty reduction strategies in Low-Income Countries to the income distribution issue. Hence, this success and failure are thought to be linked to the adjustment between unlimited needs and the allocation of scarce resources required to address socio-economic issues formalised by poverty indicators. Engaged in another perspective, a great deal of literature and evidence suggests that the explanation of this success and failure could well be found upstream, namely, from the industrialisation, economic diversification and growth established as prominent tools to improve social welfare. Indeed, this literature and evidence contend that Low-Income countries are still struggling to manage poverty reduction as their economic circumstances exhibit weak industrialisation as well as inconsequential economic diversification and growth. This literature and evidence could be subject to scrutiny for a better understanding of poverty. Hence, this paper contributes to this debate by assessing selected literature and evidence. It establishes to what extent industrialisation, as well as economic diversification and growth, predispose Low-Income countries’ ability and inability to encounter effectively the issue of poverty. Keywords: Poverty, industrialisation, growth, economic diversification, low-income countries. DOI: 10.7176/JPID/60-04 Publication date: July 31 st 2021

EFFECTS OF RENT-SEEKING ON ECONOMIC GROWTH IN LOW-INCOME ECONOMIES

Sluggish growth in low-income countries, despite the high performance in other economic indicators, motivates the literature to switch attention to institutions. Despite its crucial economic implications, there is limited attention on rent-seeking as a driver of economic growth in low-income countries. This paper investigates the effect of rent-seeking on growth in low-income countries from 2004 to 2017using the system generalized method of moments estimator. The empirical results reveal that rent-seeking negatively affects growth, implying that it obstructs the pace of economic development in low-income countries. Hence, it is necessary for policymakers in these countries to adopt anti-rent-seeking policies to promote a rapid and sustainable growth.

Indian agricultural trade in WTO regime

Agriculture sector is the fundamental constituent of the Indian economy and this sector provides employment to more than (50%) population and contributes (17.32%) of gross domestic product. India is a net exporter of agricultural commodities with net exports earnings of US$ 28.66 billion in the year 2015. Nonetheless, liberalization, globalization, world Trade organization can greatly enhance the role of agriculture as an engine of growth in low-income countries like India by making it possible for the agricultural sector to grow considerably faster than the domestic consumption. It also increases the potential for enhance agricultural export from India to World. The present study was based on secondary data collected from the various published sources, viz. various issues of hand book of RBI, FAO Trade year Book, Statistical Abstract in India, indiastat.com, FAOSTAT etc. This study was carried out during 2018 at department of Agricultural Economics, CCSHAU, Hisar. The data were grouped into two periods (Pre-WTO and Post-WTO) depending upon the formation of world trade organization and its effect on export and import of agricultural sector, Period-I related to agricultural trade before formation of world trade organization and ranged from 1975-1994 and Period-II ranged from 1995-2015 which is the Post-WTO period. The data was analysed by using major analytical techniques like least square technique, tabular analysis, per centage share, growth rates and Coefficient of Variation. In this context, the present study analyses the trends, growth and instability in agricultural trade of India before and after WTO.

Are there links between institutional quality, government expenditure, tax revenue and economic growth? Evidence from low-income and lower middle-income countries

We study the interactions between institutional quality, government expenditure, tax revenue, and economic growth in low-income countries (LICs) and lower middle-income countries (LMICs) over 2005–2019. The primary distinguishing factor of the paper is the simultaneous inclusion of all these four variables in a single temporal causal model. A second distinguishing feature of the paper is its focus on LICs and LMICs and a clear distinction between short-run and long-run results. Tax revenue is considered as general revenue as well as revenue from taxes on international trade, and customs and other import duties. Our results show that institutional quality, government expenditure, tax revenue, and economic growth often have endogenous links among each other in the short run. These results are not always uniform across our samples. On the other hand, a robust and uniform result across all samples is that the three covariates are important drivers of long-term economic growth. Thus, the co-development of stronger institutions and more effective fiscal policies (relating to taxes and government expenditure) appear to be key in procuring sustained long-term economic growth of countries.

The effect of financial development on income inequality in Africa

ABSTRACT Extant studies on the relationship between financial development and inequality have largely adopted single financial indicators especially the private credit/GDP. Unlike these works, the present study adopts a robust total financial development indicator based on four mainstays of financial development of financial deepening, efficiency, stability and access following the World Bank recommendation on the measurement of financial development. Using this measure, the paper examines the relationship in 40 African countries. The empirical results confirm the findings of extant studies that the ratio of private credit to GDP increases inequality in high, middle-low and low-income countries. The total financial development, however, reports mixed evidence. While this measure reduces inequality in high and middle-low income countries, it does not affect inequality in low-income countries. Also, the study finds evidence of a nonlinear relationship only among the low-income countries. The paper recommends that policymakers should formulate wholesome policies that cut across all mainstays of financial development to reduce inequality, particularly, in high and middle-low African countries. Also, policymakers are advised to increase growth in low-income countries so that financial development could reduce inequality. At most, these countries should pay less attention to financial development for inequality-reduction policies among low-income countries.

Growth Strategies to Avoid the Middle-Income Trap

Since we coined the term in 2006, “the middle income trap” has been the subject of scores of investigations. The investigators have generally tried to answer one of two questions: Is there evidence to support the existence of the trap, and what can middle-income countries do to spring free of it? The evidence in support of its existence has been mixed, and the policy discussions have—to put it bluntly—been largely unhelpful. But our original proposition was that of the possibility of a trap, not its inevitability. We were more convinced of the absence of a functional theory of economic growth for middle-income economies. Solow-Swan models that stressed capital accumulation and exogenous technological change did well to explain growth in low-income countries, and Lucas-Romer models emphasizing learning and endogenous technical change identified the main drivers of growth in advanced economies and explained why capital and knowhow did not easily flow to poorer economies. Neither class of models has, to our knowledge, satisfactorily explained successful transitions from one type of growth to the other. In this paper, we propose that Schumpeterian models proposed by Aghion, Howitt and others that stress creative destruction and institutional change could provide the analytical foundations for understanding middle-income economies better. We present evidence that is consistent with the main predictions of this approach, and discuss its key policy implications, especially effective competition regimes, mechanisms to maintain social mobility, and adept management of economic crises.

Does “Good” Governance Promote Economic Growth According to Countries' Conditional Income Distribution

This study identifies the relative impact of “good” governance on comparative economic growth performance for a large sample of countries classified based on their relative income distributions, namely; low income countries, middle income countries, and high income countries. The data set covers 100 countries throughout the period for 1996 to 2018. The empirical model is estimated with econometric pooled Ordinary Least Squares (OLS), random effects, fixed effects techniques and using the Hausman Test. According to the appropriate fixed effects estimated model, findings suggest that “good” governance generally has a positive and statistically significant effect on economic growth across all countries in the sample. However, results confirm that the impact of “good” governance differs according to conditional income distributions among countries. Indicators of “good” governance for low income countries are more likely to affect economic growth than those for middle and high income countries. Specifically, findings show that the dominant governance indicators for economic growth in low income countries include government effectiveness, political stability, regulatory quality, rule of law, and voice and accountability. Findings also show that control of corruption seems not to influence economic growth for high and low income countries. There are some policy implications that can be drawn for countries to develop a variety of policies toward the role of governance in the economy according to their income distributions.

External Debt, Investment, and Economic Growth: A Seemingly Unrelated Regression Model for Low-Income Countries

This study analyzes whether external debt is a driving factor for investment and economic growth in low-income countries. Using data over the period 2000~2017, we performed an analysis using the 23 countries in the sample and a split-sample analysis wherein we separated less indebted countries (12) from more indebted countries (11). Empirical results of the seemingly unrelated regressions model indicate that external debt significantly decreases investment and economic growth for both the total sample and the sub-samples. In addition, we found that trade openness is positively and significantly related to the level of growth per capita. This positive association is confirmed for both the total sample and the split sample. Findings also indicate that the level of growth exerts a positive and significant effect on investment for the total sample and for less indebted countries.

Prediction of hookworm prevalence in southern India using environmental parameters derived from Landsat 8 remotely sensed data

Soil-transmitted helminth infections propagate poverty and slow economic growth in low-income countries. As with many other neglected tropical diseases, environmental conditions are important determinants of soil-transmitted helminth transmission. Hence, remotely sensed data are commonly utilised in spatial risk models intended to inform control strategies. In the present study, we build upon the existing modelling approaches by utilising fine spatial resolution Landsat 8 remotely sensed data in combination with topographic variables to predict hookworm prevalence in a hilly tribal area in southern India. Hookworm prevalence data collected from two field surveys were used in a random forest model to investigate the predictive capacity of 15 environmental variables derived from two remotely sensed images acquired during dry and rainy seasons. A variable buffer radius (100–1000 m) was applied to the point-prevalence locations in order to integrate environmental conditions around the village centroids into the modelling approach and understand where transmission is more likely. Elevation and slope were the most important variables in the models, with lower elevation and higher slope correlating with higher transmission risk. A modified normalised difference water index was among other recurring important variables, likely responsible for some seasonal differences in model performance. The 300 m buffer distance produced the best model performance in this setting, with another spike at 700 m, and a marked drop-off in R2 values at 1000 m. In addition to assessing a large number of environmental correlates with hookworm transmission, the study contributes to the development of standardised methods of spatial linkage of continuous environmental data with point-based disease prevalence measures for the purpose of spatially explicit risk profiling.

Trends of Income Distribution in Bangladesh and Relationship with Growth – Theories and Evidences

Income distribution is very substantial for economic and social advancement. It affects the structure of the society, limits the level of poverty for any specified average per capita income and poverty puts pressure on growth. Different Household Expenditure Survey data of 2000, 2005 and 2010 are used to review the trends of income distribution in Bangladesh. The Decile techniques and Gini coefficient measures are used to explain the recent trends. In addition, the shares of income of the uppermost and lowermost deciles are also used to show the income dispersal in Bangladesh. It is revealed that Bangladesh has exposed visible economic growth but income disparity has increased rapidly over time. The study is also measured the affiliation between economic growth and income disparities, using a new practical form that fits the data well. Most of the upshots suggest that inequality has a substantial positive influence on economic growth. It reapproves the Kuznets’ hypothesis that at an initial stage of progress, disparity of income rises and it decreases again. Although, it provides empirical evidence that the distribution could have a positive effect on economic growth in low-income countries rather than the growth effects on distribution. The positive relationship is a contrary result to the recent empirical findings but indicates that more research is indispensable to fully understand the composite affiliation between income distribution and economic growth.