Growth In Low-income Countries Research Articles

Age Dependency Ratios and GDP Growth in Developing Countries

What is the relationship, if any, between age dependency ratios (ADRs) and macroeconomic growth in low-income countries versus emerging economies? This paper probes the hypotheses that (1) ADRs and GDP growth are inversely correlated at both stages of development and (2) an equivalent rise in ADR is associated with a greater change in GDP growth in low-income countries than in emerging economies. The approach to testing the corresponding null hypotheses is to conduct linear fixed-effects regression analyses with AR(1) disturbances using annual World Bank and United Nations data on 38 low-income countries and 63 emerging economies over the 24-year period from 1994 to 2017. Model 1 is a simple bivariate regression of GDP growth against ADR by group; Model 2 adds population growth, unemployment, human capital (represented by Human Development Index scores), and technology (reflected in gross fixed capital formation) as control variables. The ADR coefficients have greater statistical significance in low-income countries than in emerging economies, but the differences themselves are more likely to be statistically significant in Model 2 than in Model 1, and tests of the null hypotheses produce mixed results. The paper closes with a comment on the implications for fiscal policy in low-income countries.

Assessing the effect of public capital on growth: An extension of the World Bank Long-Term Growth Model

To analyze the effect of an increase in the quantity or quality of public investment on growth, this paper extends the World Bank’s Long-Term Growth Model (LTGM), by separating the total capital stock into public and private portions, with the former adjusted for its quality. The paper presents the LTGM public capital extension and accompanying freely downloadable Excel-based tool. It also constructs a new infrastructure efficiency index, by combining quality indicators for power, roads, and water as a cardinal measure of the quality of public capital in each country. In the model, public investment generates a larger boost to growth if existing stocks of public capital are low, or if public capital is particularly important in the production function. Through the lens of the model and utilizing newly-collated cross-country data, the paper presents three stylized facts and some related policy implications. First, the measured public capital stock is roughly constant as a share of gross domestic product (GDP) across income groups, which implies that the returns to new public investment, and its effect on growth, are roughly constant across development levels. Second, developing countries are relatively short of private capital, which means that private investment provides the largest boost to growth in low-income countries. Third, low-income countries have the lowest quality of public capital and the lowest efficient public capital stock as a share of GDP. Although this does not affect the returns to public investment, it means that improving the efficiency of public investment has a sizable effect on growth in low-income countries. Quantitatively, a permanent 1 ppt GDP increase in public investment boosts growth by around 0.1–0.2 ppts over the following few years (depending on the parameters), with the effect declining over time.

The different effects of basic research in enterprises on economic growth: Income-level quantile analysis

Abstract In the open innovation era, enterprises should conduct more of their own basic research or not rely on contextual factors. We use quantile regression to determine that basic research in the business sector has different effects on economic performance by national income level using thirty-one Organization for Economic Co-operation and Development (OECD) and non-OECD countries including China during 1996–2014. We find that basic research expenditure has a negative relationship with economic growth in low-income countries, whereas in high-income countries, the relationship is positive. Furthermore, the greater the national income, the higher the importance of basic research for economic growth. However, increased absorptive capacity mediates the positive relationship between basic research investment and economic growth in high-income countries, and, in low-income countries, it mediates the negative relationship between the two. In this study, we provide a more detailed understanding of the relationships between basic research investment in the business sector and economic growth.

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.

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 their own 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 main sources of growth in health expenditures from 2000-2015. We also disaggregated how much growth in government expenditures on health from domestic sources was due to economic growth, growth in the tax base, reallocations in government expenditures towards health, and the interactions of these factors. 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 much 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 a strengthened tax base was most important in UMICs. For high-income countries, where economic growth was relatively slower and tax bases were already strong, the largest driver of growth in government expenditure on health from domestic sources was reallocation of the government budget towards health. Conclusions: Given these findings from 2000-2015, discussions about a government’s ability to reallocate to health from its overall budget need to be evidence based and pragmatic. Dialogue on domestic resource mobilization needs to emphasize overall economic growth and growth in the tax base as well as the share of health in the government budget.

Comparisons of inverse modelling approaches for predicting energy consumption, economic growth and CO<SUB align="right">2 emissions: a case study for low-income countries

This study examines the causal relationships between CO2 emissions, energy consumption and economic growth in low-income countries for the period 1995-2013. The artificial neural network (ANN) model is applied to predict three variables during 2014-2025. Our empirical results show that there is bidirectional causality between economic growth and CO2 emissions, as well as energy consumption and economic growth, and there is unidirectional causal relationship running from energy consumption to CO2 emissions. In order to reduce emissions and to avoid a negative effect on the economic growth, low-income countries should adopt the dual strategy of increasing investment in energy infrastructure and stepping up energy conservation policies to increase energy efficiency and reduce wastage of energy. Comparison with dynamic simultaneous-equation model shows that the ANN model performs better for predictions.

Do Business Regulations Promote Growth in Low-income Countries?

The present article addresses the complex web of interactions between the architecture and quality of the business regulatory setting and economic growth. Thus, we aim to advance a two-fold contribution to the literature: we methodologically account for the uncertainty related to possible alternative explanations for growth processes, by means of ‘Bayesian Model Averaging’; and we assess the impact of business environment on growth, involving the descriptors reflected by Country Policy and Institutional Assessment. These indicators benefit from a pronounced ‘in-field’ nature and reflect a large variety of possible public policies. The results suggest a statistically significant positive relationship between the overall quality of business regulatory environment and growth. This outcome is found to be robust to various choices of priors’ structures. Moreover, the outcome’s estimated amplitude largely declines once the endogeneity is considered.

Resource Allocation to Upgrade the Economic Structure: Experience from South Korea's Industrial Policy

“Climb up” the global division of labour ladder or upgrading the economic structure is a very hard job, requiring a smart industrial policy with the capability of choosing key sectors suitably and having appropriate and effective policy to allocate resources to these sectors. When climbing up, some countries may skip several levels with the support of appropriate industrial policy, but they can slip if they try to jump too many steps at once with the rush of industrialization. Based on an analysis of the academic perspectives related to industrial policy and evidences from the sector selection process as well as the mechanism for allocating resources for the development of key South Korean industries, the paper will draw some important lessons for developing countries, including Vietnam, in order to bridge the gap with leading nations.
 Keywords
 Resource allocation, industrial policy, South Korea
 References
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Foreign Direct Investment, Financial Development and Their Impact on the GDP Growth in Low-income Countries

ABSTRACTThis essay empirically studies the effects and causal links between foreign direct investment (FDI), financial development (FD) and economic growth. The sample consists of the main economies of low-income countries and the study covers the period 1990–2015. The results of the estimate show that, under certain specific economic conditions, FDI affects positively the level of long-term economic growth; it thus makes it possible to improve the economic situation of these countries. Using Johansen’s cointegration technique, the results find that FD; FDI and GDP growth are cointegrated, that shows the pursuit of the long-term equilibrium relationship between them. The error correction model confirms the existence of a double causal relationship between FDI and GDP growth, and between FD and FDI and between GDP growth and FD.

Developing Integrated Crop-Livestock Farming System as a Strategy for Green Growth in Low Income Countries: A Brief Review

Today, low income countries around the world are promoting sustainable development through sustainable agricultural practices which will help them in addressing socio economic as well as environmental issues simultaneously. Integrated farming systems hold special position as in this system nothing is wasted, the byproduct of one system becomes the input for other. A green growth approach is the chance for emerging and developing countries to leapfrog unsustainable and inefficient production and consumption patterns. This paper explores crop-livestock farming system pattern drawn from developing countries as the green growth approach in order to push agriculture more sustainable in the future.

PUBLIC EXPENDITURES AND GROWTH IN A MONETARY UNION: THE CASE OF WAEMU

The focus of the paper is on how public spending volume, composition (current versus capital) and quality are linked to economic growth in lower-income countries that are members of a monetary union. We specifically investigate the case of the West Africa Economic and Monetary Union (WAEMU) countries, which have fluctuating growth rates and relatively low-income levels compared to other parts of the world. The empirical analysis covers the period 2000-2013. The results indicate that total public spending has a significant impact on growth. While the impact of the capital component is positive and statistically significant, the effect of the current component tends to be negative, but not significant. When the capital component is further split into two: public fixed capital investment and public other capital expenditures, defined as total public capital expenditure minus public fixed capital investment, the results show that not only physical capital formation but also human capital spending is important for growth. While the volatility measure for public investment has a clear negative and statistically significant impact on growth, the quality of public fixed investment has a positive impact. The findings also indicate that fiscal deficits have not been an important constraint to the effectiveness of government spending on growth, reflecting the fiscal discipline achieved in the union. On the other hand, the debt-to-GDP ratio clearly shows a significant negative impact on growth, indicating the risk associated with debt distress. Total fiscal revenue has a significant and positive effect on growth, most likely indicating relatively low levels of fiscal revenues to GDP ratios, partially boosted by natural resources, coupled with grants. In each regression specification, it is observed that the contributions of both trade openness and private investment on growth are positive and significant. The results also indicate that the quality of institutions, measured by an index of bureaucracy quality, is critical to enhancing the positive effect of public spending on growth. The findings are robust to different regression methodologies, as well as the inclusion of short- and medium-term data.

The Role of Population in Economic Growth

The relationship between population growth and economic growth is controversial. This article draws on historical data to chart the links between population growth, growth in per capita output, and overall economic growth over the past 200 years. Low population growth in high-income countries is likely to create social and economic problems while high population growth in low-income countries may slow their development. International migration could help to adjust these imbalances but is opposed by many. Drawing on economic analyses of inequality, it appears that lower population growth and limited migration may contribute to increased national and global economic inequality.

The Effect of IMF Programmes on Economic Growth in Low Income Countries: An Empirical Analysis

Using an LIC-specific participation model, we adopt a propensity score matching (PSM) methodology to compare economic growth performance in countries with and without IMF programmes over the period 1989–2008. Concessional programmes are found to have had a generally positive effect on economic growth for up to two years after agreements were signed. The effects are contingent on other factors including overall initial economic conditions, recent prior growth performance, aid dependency, debt, IMF resources, recent history of IMF engagement and time period. We examine the implications of the results as the IMF considers how best to support the Sustainable Development Goals.

Understanding Irrigation System Diversity in Nigeria: A Modified Cluster Analysis Approach

Irrigation is considered an important factor for agricultural growth in low-income countries. However, information is scarce in sub-Saharan African countries such as Nigeria regarding the types of farm household using irrigation and irrigation systems used. Such information may provide insights into why irrigation is still rare in Nigeria despite its potential. This paper briefly presents the historical irrigation investment patterns and policies in Nigeria. It then presents the typology of farm households and irrigators, using nationally representative household data in Nigeria. Historical investment patterns indicate that public irrigation investment in Nigeria has been low and inefficient in expanding irrigated areas. Currently, irrigation is used for a number of crops in Nigeria, ranging from rice and vegetables to maize, coarse grains and legumes. Irrigation is generally used only where labour or mechanized land preparation is cheap, indicating its labour-intensive nature. Choice of irrigated crops, water sources, irrigation methods and irrigation seasons all seem highly correlated, suggesting that irrigation in Nigeria only makes economic sense for each crop within specific production systems. The paper discusses the measures needed for improving irrigation use for different types of farm households and irrigators in Nigeria. Copyright © 2016 John Wiley & Sons, Ltd.

The laffer curve and the debt-growth link in low-income Sub-Saharan African economies

Purpose – The study of the link between debt and growth has been full of debates, both in theory and empirics. However, there is a growing consensus that the relationship is sensitive to the level of debt. The purpose of this paper is to address the question of non-linearity in the long-term relationship between public debt and economic growth. Specifically, the author set out to test if there exists an established “laffer curve” type relationship, where debt contributes to economic growth up to a certain point (maximal threshold) and then starts to have a negative effect on growth afterwards. Design/methodology/approach – To carry out the tests, the author has used a methodology that delivers a superior test of inverse U-shapes (Lind and Mehlum, 2010), in addition to the traditional test based on a regression with a quadratic specification. Findings – The results in the paper present evidence of a bell-shaped relationship between economic growth and total public debt in a panel of low-income Sub-Saharan African economies. This supports the hypothesis that debt has some positive contribution to economic growth in low-income countries, albeit up to a point. Practical implications – The overall result supports the claim that public debt may start to be a drag on economic growth if it goes on increasing beyond the level where it would be sustainable. Originality/value – This paper leads the way by implementing a robust test of non-linearity (“inverse-U” test) to the analyses the debt-growth nexus and the laffer curve in Sub-Saharan Africa.

Financial Accessibility and Economic Growth

This paper investigates the empirical evidence on the relationship between financial accessibility and economic growth to test the conventional hypothesis that improved financial accessibility leads to financial development and economic growth. First, we built a dynamic panel model on the relationship between financial accessibility and economic growth with a set of controlled variables. We then used several financial access indicators from 165 countries, collected from 2004 to 2011, applying the generalized method of moments (GMM) estimators to estimate their relationship. From these estimations, we found that high financial accessibility leads to high income in general. In addition, we found that an increase in financial access indicators had a greater impact on economic growth in low-income countries than it did on economic growth in high-income countries.

The Role of Agriculture and Globalization

Globalization can greatly enhance the role of agriculture as an engine of growth in low-income countries by making it possible for agriculture to grow considerably faster than domestic consumption. It also increases the potential for agriculture to increase food security through enlarged multipliers to the massive, employment-intensive, non-tradable rural nonfarm sector. With such potential benefits, it is important to understand what is required for participation and to ensure that the poor and hungry are lifted out of poverty and hunger by these processes.

Public Investment as an Engine of Growth

This paper looks at the empirical record whether big infrastructure and public capital drives have succeeded in accelerating economic growth in low-income countries. It looks at big long-lasting drives in public capital spending, as these were arguably clear and exogenous policy decisions. On average the evidence shows only a weak positive association between investment spending and growth and only in the same year, as lagged impacts are not significant. Furthermore, there is little evidence of long term positive impacts. Some individual countries may be exceptions to this general result, as for example Ethiopia in recent years, as high public investment has coincided with high GDP growth, but it is probably too early to draw definitive conclusions. The fact that the positive association is largely instantaneous argues for the importance of either reverse causality, as capital spending tends to be cut in slumps and increased in booms, or Keynesian demand effects, as spending boosts output in the short run. It argues against the importance of long term productivity effects, as these are triggered by the completed investments (which take several years) and not by the mere spending on the investments. In fact a slump in growth rather than a boom has followed many public capital drives of the past. Case studies indicate that public investment drives tend eventually to be financed by borrowing and have been plagued by poor analytics at the time investment projects were chosen, incentive problems and interest-group-infested investment choices. These observations suggest that the current public investment drives will be more likely to succeed if governments do not behave as in the past, and instead take analytical issues seriously and safeguard their decision process against interests that distort public investment decisions.

Effect of a food supplementation and psychosocial stimulation trial for severely malnourished children on the level of maternal depressive symptoms in Bangladesh.

Maternal depression is associated with poor child development and growth in low-income countries. This paper evaluates the effect of a community-based trial providing psychosocial stimulation and food supplements to severely malnourished children on maternal depressive symptoms in Bangladesh. Severely underweight (weight-for-age Z-score < -3) hospitalized children aged 6-24 months (n = 507), were randomly assigned to: psychosocial stimulation (PS), food supplementation (FS), PS+FS, clinic control (CC) and hospital control (CH) at discharge. PS included play sessions with children and parental counselling to mothers during fortnightly follow-up visit at community clinics, conducted by trained play leaders for 6 months. FS involved cereal-based supplements (150-300 kcal/day) for 3 months. All groups received medical care, micronutrient supplements and growth monitoring. We used Bayley scales, Home Observation for Measurement of Environment (HOME) inventory and a parenting questionnaire to assess child development, home stimulation and mothers' child-rearing practices, respectively. We assessed mothers' depressive symptoms using a modified version of Centre for Epidemiologic Studies Depression Scale at baseline and at 6 months post intervention. Maternal depressive symptoms were significantly lower in the CH group at baseline (P = 0.014). After 6 months of intervention there was no significant effect of intervention after adjusting for baseline scores and all possible confounders. Maternal depressive symptoms were higher among poorer (P = 0.06), older (P = 0.057) and less educated (P = 0.019) mothers, who were housewives (P = 0.053), and whose husbands had more unstable jobs (P = 0.058). At 6 months post intervention, children's cognitive (P = 0.045) and motor (P = 0.075) development, HOME (P = 0.012) and mother's parenting score (P = 0.057) were higher among mothers with lower depressive symptoms. The study did not show a significant effect of the intervention on the level of maternal depressive symptoms. Interventions with higher intensity and/or of longer duration focusing directly on maternal psychosocial functioning are probably needed to reduce maternal depressive symptoms.

Business start-up regulations and the complementarity between foreign and domestic investment

This paper shows that the complementarity between foreign direct investment (FDI) and domestic investment significantly depends on regulations required to start a new domestically owned business in host economies. It finds evidence that FDI crowds out domestic investment in countries with entry regulation cost above a certain level, and many of these countries are in the bottom quartile of GDP per capita. Reforms in business start-up regulations can therefore play a critical role in enhancing the complementarity between foreign and domestic investment and thereby increase entrepreneurship and economic growth in low-income countries. The analysis takes into account other significant factors which affect domestic investment such as the cost of capital, government’s economic growth track record, institutional quality, and market size.