Growth In Middle-income Countries Research Articles

How do R&D and remittances affect economic growth? Evidence from middle-income countries

Sustainable development through technical progress for middle-income countries (MICs) is overlooked in growth allied studies. Despite their crucial role in alleviating poverty and resource shortages, MICs encounter challenges in global economic competition, driving persistent efforts to find practical solutions. Therefore, this study explores the integrated impact of R&D expenditure and remittances on economic growth in MICs. Using data from 25 MICs between 1996 and 2021, this study employs the “2nd generation unit root” and “panel autoregressive distributed lag (ARDL)” methods. The “feasible generalized least square (FGLS)” techniques and the “Dumitrescu-Hurlin (D-H)” causality test are employed to verify the robustness of the panel ARDL estimation. The Westerlund cointegration tests confirm a long-term cointegration between variables. The findings of the panel ARDL approach show that R&D expenditure and remittances positively and significantly influence economic growth. The robustness of the panel ARDL results is confirmed by the FGLS estimation, which produces similar outcomes. The outcomes from the FGLS and the ARDL methods are additionally validated by the D-H causality check. Therefore, encouraging R&D and remittances is crucial to accelerate middle-income nations' economic growth. The study reveals a novel mechanism of R&D expenditures, remittances, and economic growth in MICs, shaping their mutual influence on this economic landscape. The study supports middle-income countries' policymakers in creating effective policies for their financial institutions regarding R&D expenditure and remittances.

Economic Growth in Middle-Income Countries: The Role of Political Stability and Foreign Direct Investment

Economic Growth in Middle-Income Countries: The Role of Political Stability and Foreign Direct Investment

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.

How does renewable energy consumption and trade openness affect economic growth and carbon emissions? International evidence of 122 countries

This paper aims to systematically explore the impact of renewable energy consumption, trade openness, industrialization, and urbanization on economic growth and carbon emissions while considering the different development levels of 122 countries over the period 1998–2018. Pesaran CD test, CIPS unit root test, Pedroni cointegration test, fully modified ordinary least square (FMOLS) estimation, Dumitreschu–Hurlin causality test and DOLS robustness test are adopted. The results show that trade openness has different effects on economic growth and carbon emissions across different income groups. Specifically, the impact of trade openness on economic growth in high- and low-income countries is positive, while trade openness has a negative impact on economic growth in middle-income countries. Meanwhile, the impact of trade openness on carbon emissions supports the pollution haven hypothesis. Urbanization promotes economic growth in all income countries, and increases carbon emissions in countries of all income groups except high-income countries. Renewable energy consumption promotes economic growth and curbs carbon emissions, while industrialization increases economic growth and carbon emissions. Further findings show a one-way causality from trade openness to renewable energy consumption. Finally, some targeted recommendations are provided for countries with different development stages.

THE EFFECTS OF RENT SEEKING ACTIVITIES ON ECONOMIC GROWTH IN MIDDLE-INCOME COUNTRIES

This study investigates the effects of rent seeking activities on economic growth in 53 middle-income countries. Our data spans the period 2011 to 2020. We use the generalized method of moments estimator to examine the effects of rent-seeking activities on economic growth. Our study also includes several control variables, namely democratic accountability, public debt, human capital, foreign direct investment, capital stock, population, research and development expenditure and trade openness. The empirical results suggest that rent-seeking activities impede economic growth in middle-income countries.

Temperature and environmental degradation: an international evidence

ABSTRACT Introduction The effects of temperature have largely been under-examined in climate change studies. This study examines both direct and indirect effects of temperature on environmental degradation using the sample of 103 middle-income countries from 1985 to 2019. Unlike previous studies in which a single equation approach is utilized, our study considers the simultaneous equations modelling to examine the energy-growth-environment nexus incorporating temperature and corruption. The difference and system generalized method of moments estimations for panel data are used. Outcomes Empirical results from this paper confirm both the direct and indirect effects (via energy consumption) of temperature on environmental degradation. We find corruption harms economic growth in middle-income countries. The continued use of fossil fuel energy in energy consumption deteriorates environmental quality. Our findings confirm the critical role of the services sector in supporting economic growth and reducing emerging consumption, leading to increased environmental quality. Conclusion Findings from our study reconfirm the vital role of renewable energy and its extended use in achieving dual objectives of supporting economic growth and improving the environmental quality in middle-income countries.

Premature deindustrialisation and growth slowdowns in middle-income countries

In this study, we examine how the premature deindustrialisation trend hinders the channels of economic growth in middle-income countries. To identify the ‘premature deindustrialisation’ phases, we arrive at a set of five conditions. The first and second conditions detect the deindustrialisation phase in terms of employment and value-added share of the manufacturing sector. In the last three conditions, we define the upper threshold levels in terms of income per capita, employment, and value-added share of the manufacturing sector to capture the ‘premature’ element in deindustrialisation. The empirical results indicate that premature deindustrialisation raises the likelihood of growth slowdowns in an economy. Further, the increase in informal and low-productive service employment raises the incidence of growth slowdowns in middle-income countries. The evidence emphasises that it is critical to reverse the early deindustrialisation trend to break out of the middle-income status.

The role of agricultural productivity in economic growth in middle-income countries: An empirical investigation

Purpose - This study investigates the role of agricultural productivity in economic growth in middle-income countries.Methods - This study utilizes the data of 53 middle-income countries over the period 1991-2017 and provides robust estimations using second-generation panel data methods considering cross-sectional dependency.Findings - The estimation results of the Common Correlated Effects Mean Group (CCEMG), Dynamic-CCEMG, and biased-corrected form of Dynamic-CCEMG, suggest that agricultural productivity is the main engine of economic growth. Additional findings show that economic growth is positively associated with both physical capital and human capital. This paper does not find any significant relationship between trade openness and economic growth.Implications - This study reveals that the industrialization process in middle-income countries to boost economic growth can be accelerated by implementing policies to increase productivity in the agricultural sector.Originality - This study focuses on analyzing the effect of agricultural productivity neglected mainly in recent studies on economic growth. This paper develops a second-generation estimator that considers cross-sectional dependence.

The potential role of aid in escaping the middle-income trap

AbstractRecently, the middle-income trap (MIT) has gained considerable attention – besides European countries, several African, Asian, and Latin-American developing countries are also affected. Many countries have remained in the middle-income bracket for decades, whilst only a few have advanced to high-income status. Felipe et al. in 2012 showed that an annual growth rate of at least 3.5 and 4.7% sustained for a period of 14 and 28 years is required respectively for upper-middle-income and lower-middle-income countries to escape the MIT. Economic growth is influenced by several factors including foreign aid received. Thus, in this study, we aim to answer the question of how aid affects economic growth in middle-income countries and whether aid may contribute to escaping the MIT. Focusing on the countries that have remained in the middle-income group between 1990 and 2017, our analysis confirms that aid contributes to economic growth; however, the impact is positive in the upper-middle-income countries and negative in the lower-middle-income countries. Aid is therefore, likely to be more effective in helping the upper-middle income countries to escape the MIT but not the lower-middle income countries.

Editorial for Applied Econometrics

This Editorial evaluates 14 invaluable and interesting articles in the Special Issue “Applied Econometrics” for the Journal of Risk and Financial Management (JRFM). The topics covered include recovering historical inflation data from postage stamps prices, FHA loans in foreclosure proceedings through distinguishing sources of interdependence in competing risks, information in earnings forecasts, nonlinear time series modeling, a systemic approach to management control through determining factors, economic freedom and FDI versus economic growth, efficient cash use of the Taiwan dollar, financial health prediction in companies from post-Communist countries, influence of misery index on U.S. Presidential political elections, multivariate student versus Gaussian regression models in finance, financial derivatives markets and economic development, income inequality and economic growth in middle-income countries, abnormal returns, mis-measured risk, network effects, and risk spillovers in stock returns.

The effects of grants and loans on economic growth in Sub-Saharan Africa: Considering different types of income level

This paper investigates the question of aid’s effects on economic growth in Sub-Saharan Africa (SSA) by disaggregating aid into grants and loans during 1994–2015. The estimation results indicate that grants have a positive and statistically significant effect on economic growth, while loans have a negative but insignificant effect on it. When we break down the panel data into Low Income Countries (LICs) and Middle Income Countries (MICs) in order to gain further insight, grants have been effective in spurring growth in both LICs and MICs, while loans have had positive and significant impact on economic growth in neither LICs nor MICs. Accordingly, the main findings of this study provide a consistent evidence in support of the grants-effectiveness on growth in both MICs and LICs, contrary to the ineffectiveness of loans. The other supplementary results show that the domestic investment (GCF) and education (SEC) which are basically public policy variables have significantly positive impacts on economic growth in MICs, while they are not statistically significant in LICs.

The paradox of progressing sideways: food poverty and livelihood change in the rice lands of outer island Indonesia

ABSTRACT Despite economic growth in middle-income countries across the global south, pockets of food poverty persist in the countryside. An accepted account suggests that many of the poor are stuck in a 'truncated agrarian transition' where neither agriculture nor labour markets provide sufficient opportunities. Yet, statistics indicate that many have moved out of poverty, even as undernourishment continues. Exploring an Indonesian periphery, this paper interrogates this conundrum. It describes a ‘sideways scenario’ where change fails to map onto both expectations of forward development and stagnation described by established theory. While many progress in quotidian terms, persistent food poverty and stunting remain. Here, ‘advancing sideways’ amounts to a paradoxical form of progress.

Inflation Targeting Monetary Policy and Macroeconomic Performance: The Case of Middle Income Countries

The number of studies investigating the effects of inflation targeting (IT) on inflation and macroeconomic variables has increased with the rising number of countries adopting IT. The empirical evidence has, however, failed to converge. In line with the need for more such studies, this paper uses a difference-in-differences (DID) model with dynamic panel fixed effect and instrumental variable (IV) techniques to estimate the effect of IT on inflation and economic growth for a sample of 40 middle-income countries. Generally, we find that the effects of IT on inflation is quantitatively large but statistically insignificant. We, however, find strong evidence that IT leads to higher growth in middle-income countries.

What Factors Affect Income Inequality and Economic Growth in Middle-Income Countries?

Income inequality in many middle-income countries has increased at an alarming level. While the time series relationship between income inequality and economic growth has been extensively investigated, the causal and dynamic link between them, particularly for the middle-income countries, has been largely ignored in the current literature. This study was conducted to fill in this gap on two different samples for the period from 1960 to 2014: (i) a full sample of 158 countries; and (ii) a sample of 86 middle-income countries. The Granger causality test and a system generalized method of moments (GMM) are utilized in this study. The findings from this study indicate that causality is found from economic growth to income inequality and vice versa in both samples of countries. In addition, this study also finds that income inequality contributes negatively to the economic growth in the middle-income countries in the research period.

The impact of financial development on economic growth in middle-income countries

Whether an economy can be categorized as middle-income or not is an empirical issue. We apply the World Bank’s standard to divide middle-income economies into trapped middle-income economies and graduated middle-income economies, and compare them with high-income economies. This paper tests how financial system development positively impacts a nation’s economic development among the above-mentioned three groups of economies. We combine models and methodology from previous studies (King and Levine, 1993a; Levine and Zervos, 1998; Rousseau and Wachtel, 2000, 2002; Xu, 2000). Augmenting these models with new measures and relations of financial development, we find that (1) consistent with previous studies, financial development contributes significantly to economic growth through channels of physical capital stock and total factor productivity; (2) there is Granger causality between equity market development and economic growth for all three groups of economies, although some stronger and some weaker; (3) there is a reverse causality between economic growth and equity market development in high-income economies, which is not detected in other economies; (4) strong evidence of Granger causality and feedback between banking system development and inflation is found only in the trapped middle-income economies.

RETURNS TO INNOVATION AND GROWTH: A PANEL DATA APPROACH FOR MIDDLE INCOME COUNTRIES

This paper attempts to investigate the relationship between the growth of gross domestic product and innovation related activities. A panel data analysis is conducted on a sample of eight middle-income countries covering 5-year time period from 2012-2016. The major findings of the study show a significant positive impact of expenditure on education, graduates in science and engineering, knowledge intensive employment, scientific and technical articles, population and foreign direct investments on the growth of gross domestic product. Hence, we conclude that there is a strong relation between innovation-related activities and economic growth in middle-income countries. Therefore, we suggest that middle-income countries should focus more on R&D and innovation related activities to grow and change their income status to higher income levels.

Spending on health and HIV/AIDS: domestic health spending and development assistance in 188 countries, 1995–2015

SummaryBackgroundComparable estimates of health spending are crucial for the assessment of health systems and to optimally deploy health resources. The methods used to track health spending continue to evolve, but little is known about the distribution of spending across diseases. We developed improved estimates of health spending by source, including development assistance for health, and, for the first time, estimated HIV/AIDS spending on prevention and treatment and by source of funding, for 188 countries.MethodsWe collected published data on domestic health spending, from 1995 to 2015, from a diverse set of international agencies. We tracked development assistance for health from 1990 to 2017. We also extracted 5385 datapoints about HIV/AIDS spending, between 2000 and 2015, from online databases, country reports, and proposals submitted to multilateral organisations. We used spatiotemporal Gaussian process regression to generate complete and comparable estimates for health and HIV/AIDS spending. We report most estimates in 2017 purchasing-power parity-adjusted dollars and adjust all estimates for the effect of inflation.FindingsBetween 1995 and 2015, global health spending per capita grew at an annualised rate of 3·1% (95% uncertainty interval [UI] 3·1 to 3·2), with growth being largest in upper-middle-income countries (5·4% per capita [UI 5·3–5·5]) and lower-middle-income countries (4·2% per capita [4·2–4·3]). In 2015, $9·7 trillion (9·7 trillion to 9·8 trillion) was spent on health worldwide. High-income countries spent $6·5 trillion (6·4 trillion to 6·5 trillion) or 66·3% (66·0 to 66·5) of the total in 2015, whereas low-income countries spent $70·3 billion (69·3 billion to 71·3 billion) or 0·7% (0·7 to 0·7). Between 1990 and 2017, development assistance for health increased by 394·7% ($29·9 billion), with an estimated $37·4 billion of development assistance being disbursed for health in 2017, of which $9·1 billion (24·2%) targeted HIV/AIDS. Between 2000 and 2015, $562·6 billion (531·1 billion to 621·9 billion) was spent on HIV/AIDS worldwide. Governments financed 57·6% (52·0 to 60·8) of that total. Global HIV/AIDS spending peaked at 49·7 billion (46·2–54·7) in 2013, decreasing to $48·9 billion (45·2 billion to 54·2 billion) in 2015. That year, low-income and lower-middle-income countries represented 74·6% of all HIV/AIDS disability-adjusted life-years, but just 36·6% (34·4 to 38·7) of total HIV/AIDS spending. In 2015, $9·3 billion (8·5 billion to 10·4 billion) or 19·0% (17·6 to 20·6) of HIV/AIDS financing was spent on prevention, and $27·3 billion (24·5 billion to 31·1 billion) or 55·8% (53·3 to 57·9) was dedicated to care and treatment.InterpretationFrom 1995 to 2015, total health spending increased worldwide, with the fastest per capita growth in middle-income countries. While these national disparities are relatively well known, low-income countries spent less per person on health and HIV/AIDS than did high-income and middle-income countries. Furthermore, declines in development assistance for health continue, including for HIV/AIDS. Additional cuts to development assistance could hasten this decline, and risk slowing progress towards global and national goals.FundingThe Bill & Melinda Gates Foundation.

The Role of Total Factor Productivity Growth in Middle-Income Countries

ABSTRACTWe examine the importance of total factor productivity (TFP) growth in middle-income countries (MICs) based on cross-country panel data for the period of 1975–2014. We find that TFP growth contributed significantly to a country’s upward transition from middle-income to high-income country group. The TFP growth model reveals that the catch-up effect, human capital, smaller population, weak currency, and research and development growth are significant sources of TFP growth. We do not find a systematic difference in the TFP growth models for MICs. In analyzing the role of factors influencing TFP growth at different income stages, strengthening innovative activities and building innovative capacities are important in overcoming the challenges that MICs face when transitioning to the high-income group. Governments of upper MICs need to initiate reform to motivate innovation by optimizing national R&D systems, and redesigning the educational system to target promoting innovation.

Trade Diversification, Sophistication and Economic Growth in Middle Income Countries

Trade Diversification, Sophistication and Economic Growth in Middle Income Countries

Bangladesh 2000-2017: Sustainable Growth, Technology and the Irrelevance of Productivity

This paper focuses on the case of Bangladesh as an example of a country that is at risk of falling into the ‘middle income trap’, in other words the risk that a country that has attained middle income levels will then be unable to join the club of developed countries. This paper uses the theory of Unequal Exchange from the Dependency School to understand the middle income trap in Bangladesh and further argues that the ideas of productivity, competitiveness and technological change derived from orthodox economic thinking are not useful in understanding growth prospects and policy responses in contemporary middle income countries. Alternately, the paper explains the role of structural change as a means of sustaining growth in middle income countries.