Economics(PhD)

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Browsing Economics(PhD) by Subject "Economic Growth"

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    Access to Bank Loans, Income Distribution and Economic Growth in agent Based Modeling: Evidence from Evolutionary Perspective
    (Addis Ababa University, 2017-06) Atnafu, Gebremeskel; Almas, Heshmati (Prof)
    This doctoral dissertation consists of three inter-related studies which constitute its main text, with introductory and summary chapters. The three main studies share a common feature in that they investigate the link between access to bank loans, income distribution and productivity growth. The second chapter is a theoretical framework that uses agent-based computational economics (ACE) to detect the link between access to bank loans and functional income distribution. The third chapter uses Ethiopian firm-level and national income data to validate the second chapter. The fourth chapter investigates the effect of functional income distribution on productivity growth from an evolutionary economic perspective. The second chapter (first study) focuses on Dosi et al.’s (2013) agent-based model which assumes that a well-functioning banking system exists and that industries are composed of both capital and non-capital goods’ producing sectors. As such, monetary policy has a minimal role in impacting functional income distribution leading to an active use of macroeconomic policy. Chapter 2 modifies this model to capture the realities of developing countries where the banking system’s supply of services is smaller than what is considered optimal. The system is heavily influenced by inside agents and industries are dominated by non-capital goods’ producing firms.The modified model theoretically links firms’ access to bank loans and functional income distribution in agent-based modeling. The results based on the modified model indicate that when firms have access to bank loans, functional income distribution improves. Unlike many firm level studies which focus on the firms per se, Chapter 2 argues that it is possible to utilize firms’ economic actions and their access to bank loans to explain how income inequalities are generated and evolve over time. Theoretically the chapter finds that personal income distribution is an emergent phenomenon. This result is in agreement with Thomas Schelling’s ‘Micromotives and Macrobehaviour,’ where he established aggregate behavior as an emergent phenomenon. Its major conclusion is that access to bank loans at the firm level improves income distribution in society. The third chapter (second study) empirically validates the theoretical results obtained in Chapter 2 (first study). It employs the descriptive output and econometric (external as is usually said) validation techniques as an indirect identification strategy to examine the link between access to bank loans and income distribution. It uses data from the Ethiopian Central Statistical Agency (CSA) on medium and large scale manufacturing and national personal income distribution data from the Ethiopian Ministry of Finance and Economic Development (MoFED). Its major conclusions are: (i) firms’ access to bank loans is one mechanism through which income distributional issues can be explained, (ii) firms’ financial structures matter, that is, whatsoever the source of funds, if they are used as investments in fixed capital, the functional income distribution improves, and (iii) functional income distribution is strongly associated with personal income distribution. The chapter will contribute to policy and also enrich the limited literature on the finance-inequality relation. The fourth chapter (third study) links functional income distribution to productivity growth. Its main focus is on examining how functional income distribution can influence the evolution of productivity thereby promoting economic growth. It employs Nelson and winter’s (1982) evolutionary economic framework, evolutionary theory of economic change and the subsequent developments in the field of evolutionary economic modeling. These are used jointly with the evolutionary econometric approach which sees economic growth as an open ended process. The major conclusion of the fourth chapter (third study) is lack of strong evidence of evolution (intra-industry selection) to foster productivity growth and re-allocation (structural change). Thus, the three studies not only shed light on the inter-relationships between access to bank loans, income distribution and productivity growth through a deep analysis of the concepts, theories and their usefulness, but also empirically investigate the nature of their causal relationships and estimate their effects. These two aspects will contribute to the growing literature on ACE.
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    Essays on Economic Growth, Poverty and Child Educational Performance in Africa
    (Addis Ababa University, 2018-11) Kahsay, Berhane; Scott, Hacker (Prof)
    This doctoral dissertation consists of an introduction and three independent single-author papers on economic growth, poverty and child educational performance in Africa. The introduction introduces the rest of the chapters and the motivation for studying these aspects and the contributions that the three papers make to existing literature. The dissertation has three standalone papers which were written so that they would eventually be published as separate articles in academic journals. Previous versions of these papers have been published as chapters in three different books published by Palgrave Macmillan, Routledge and Springer. The first paper studies the role of financial development and institutional quality in economic growth in an era of globalization based on the dynamic common correlated effect (DCCE) method in 40 African countries over the period 1980-2014. The overall financial development measure is calculated as an average of indices measuring the extensiveness of financial institutions and financial markets. The financial institutions index includes information on banks, insurance companies and pension and mutual funds, while the financial markets index includes information on stock and bond markets. This paper studies financial depth, access and efficiency of both financial institutions and financial markets. Its empirical findings show that overall financial development had a positive and significant effect on long-term economic growth in the entire sample. However, the effects of financial development in terms of financial depth, access and efficiency and its sub-components on economic growth varied across different levels of economic development and across the two dimensions of financial development -- extensiveness of financial institutions and of financial markets. The second paper analyzes the differentiated relationship between trade liberalization and poverty in 43 African economies over the period 1980-2014. It uses the augmented mean group (AMG) estimator which allows for parameter heterogeneity and cross-sectional dependence in its panel common-factor estimates to avoid biased and inconsistent estimates. Its findings show that generally speaking trade openness had a positive and significant relationship with poverty reduction. However, country-specific empirical results show that the effect of trade openness on poverty varied across countries. This suggests that the effect of trade liberalization on poverty is heterogenous and depends on country-specific trade policy and poverty reduction strategies. The third paper provides a micro-panel analysis of the impact of child nutrition, health and household wealth on children’s educational performance as measured by the Peabody Picture Vocabulary Test (PPVT) score in Ethiopia. The study uses the second and third rounds of longitudinal data from the Young Lives survey in Ethiopia on two cohorts of children. The survey covered 1,792 children aged around 5-years and 444 children aged around 12-years in 2006. The same children were covered in 2009 and are included in my analysis. The results show that the child-nutrition-and-health indicator had a positive and significant effect on child cognitive skills for the younger cohort, while it had an insignificant effect on the older cohort. The study also found that the household wealth index had a positive and significant relationship with children’s educational performance for all ages considered in the study. Furthermore, the findings also show that child labor had a negative effect on a child's academic achievements in the older cohort, and this effect was stronger for girls than it was for boys of similar ages.
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    The Impact of Foreign Capital Inflows (FCIs) on Economic Growth in Sub-Saharan Africa (SSA)
    (Addis Ababa University, 2019-06) Yemane, Michael; Almas, Heshmati (Prof)
    This chapter analyzes FDI’s impact on economic growth in SSA countries for which relevant macroeconomic data is available for the period 2001-15. To achieve this, it develops a dynamic system GMM model to capture FDI’s impact on economic growth. It chooses the dynamic panel system GMM because of its superiority over other models in that it takes care of endogeneity problems and alleviates possible biases in the estimation. Besides, it also provides a solution to the problem associated with time-invariant individual heterogeneity, among others. The study includes 43 SSA countries for which data is available. The countries are categorized into ‘resource-rich’ and ‘resource-poor’ using data on their natural resource endowments and other important factors. The study found that there was no meaningful difference in the growth of per capita GDP and in these countries’ ability to attract FDI inflows based on their resource endowments. These findings indicate that FDI had a negative and statistically significant effect on the per capita GDP growth rate in SSA countries in the study period. However, the own lagged value of the growth rate of per capita GDP and gross capital formation, which is used as a proxy for domestic investments and exports, had positive and statistically significant effects on the growth rate of per capita incomes. Though FDI is touted as a catalyst for growth, the empirical findings of this study do not support this claim in SSA. The study provides an explanation for the possible reasons for this divergence from the expected positive effects. It is clear that FDI is not a panacea for the economic malaise in the region and is not contributing to the betterment of lives and welfare. Hence, it is time for SSA governments and policymakers to find out where the problem lies and align policies in a way that make FDI have a more meaningful positive contribution in dragging millions of people out of poverty.