a positive effect of human capital on growth abstract recent studies have found that economic growth appears to be unrelated to increases in educational attainment in this note i show that there is a correlation in one dataset but it is typically hidden by unrepresentative observations

educational human capital and levels of income evidence from states in india 1965 92 abstract this paper examines the long run steady state relationship between levels of educational human capital and levels of income for the 15 major states of india between 1965 and 1992 the relationship is estimated using the pooled mean groups pmg technique which produces common long run coefficients but allows heterogeneity of the short run adjustment parameters the results suggest that levels of educational human capital proxied by high school enrollment rates have a robust positive impact on steady state levels of income this is true for male and female education and the regressions also suggest that states which have larger gender gaps in education have lower steady state incomes the estimated relationship is robust to the inclusion of alternative measures added controls and variation in the degree of state coverage

inequality and the environmental kuznets curve abstract is income inequality harmful to the environment the answer to this question has not reached a consensus in the literature this study seeks to provide insight into this question by examining the influence of income inequality on the environmental kuznets curve ekc i e the impact of income inequality on the ekc turning point two potential mechanisms through which inequality may affect the ekc turning point by reducing public demand for environmental protection and by increasing a power of capital owners to prevent such protection using a large sample n 170 174 of countries we find evidence of the ekc for so2 emissions and income inequality has a significant impact on the ekc turning point income inequality increases the ekc turning point suggesting that high inequality can be damaging to the environment the results are robust to potential outliers different data sources of income inequality a different so2 emissions measure changes in model specification different samples and an alternative estimation method we also find that inequality appears to be more important than corruption in determining the ekc turning point

global warming irreversibility and learning a number of economists have argued that the literature on the irreversibility effect implies that current abatement of greenhouse gas emissions should be greater when there is the possibility of obtaining better information in the future about the potential damages from global warming than when there is no possibility of obtaining better information in this paper we show that even the simplest model of global warming does not satisfy either of epstein s 1980 sufficient conditions so it is not possible to use epstein s analysis to tell whether the irreversibility effect applies to models of global warming we derive an alternative sufficient condition for the irreversibility effect to hold

the role of uncertainty and learning for the success of international climate agreements abstract transnational externalities e g transboundary pollution trade contagious diseases and terrorism warrant coordination and cooperation between governments but this proves often difficult one reason for the meager success is the public good character of many of these economic problems encouraging free riding another reason one might suspect is uncertainty surrounding most environmental problems and in particular climate change this provides often an excuse for remaining inactive paradoxically some recent papers have concluded just the opposite the veil of uncertainty can be conducive to the success of international environmental cooperation in this paper we explain why and under which conditions this can be true however we argue that those conditions are the exception rather than the rule most important we suggest a mechanism for those conditions where learning has a negative effect on the success of cooperation which removes this effect or even turns it into a positive effect our results apply beyond the specifics of climate change to similar problems where cooperation generates positive externalities

inequality and growth in the united states why physical and human capital matter we investigate the relationship between economic growth and top income inequality under the influence of human and physical capital accumulation using an annual panel of u s state level data our analysis is based upon the unified framework offered by galor and moav 2004 while the empirics account for cross section dependence parameter heterogeneity and endogeneity in nonstationary series we conclude that changes in inequality do not influence growth neither in the short run nor in the long run in the united states as a whole in the 1929 2013 period our findings are robust to the inclusion of overall income inequality measures these findings provide support for the theoretical prediction of the unified theory of inequality and growth according to which the growth effect of inequality becomes insignificant in the latest stages of economic development that the united states experiences during our period of investigation therefore future policies aiming at moderating the concentration at the upper end of income distribution are not likely to have adverse growth consequences in developed countries such as the united states jel i21 o47 c23

private versus social returns to human capital education and economic growth in india abstract this paper investigates whether differences between private and social returns to education of government sector employees can contribute to an explanation of the micro macro paradox in the literature on education and growth we hypothesize that in india educated people find privately rewarding jobs in a sector in which social returns are low namely the government sector this could help explain high returns to education at the micro level and small or negative coefficients on education growth in growth regressions at the macro level the empirical results which are consistent with this hypothesis are based on an analysis of state level data from india spanning 40 years

threshold effects of human capital schooling and economic growth abstract empirical growth studies have often found average years of schooling to be unrelated with economic growth this note shows that the significant positive effect of schooling can only be realized after an economy crosses a threshold level of development

a note on the econometric use of constant dollar inventory series abstract one dollar of finished goods inventories does not represent the same amount of physical goods as one dollar of sales when department of commerce constant dollar series are used this can cause seriously biased regression estimates

production sales and the change in inventories an identity that doesn t add up we examine two measures of monthly manufacturing production the first is the index of industrial production the second is constructed from the accounting identity that output equals sales plus the change in inventories we show that the means variances and serial correlation coefficients of the log growth rates differ substantially between the two series and the cross correlations are in most cases less than 0 4 a model of classical measurement error indicates that in 15 of 20 two digit industries measurement error accounts for over 35 of the variation in the monthly growth rates of seasonally adjusted industrial production

accounting for output fluctuations in manufacturing there is a substantial body of evidence to the effect that output is more volatile than sales among manufacturing industries numerous explanations have been advanced to account for this excess output volatility some examples are pro cyclical inventory movements induced by a stockout avoidance motive cost and technology shocks and decreasing marginal costs this article assesses the contribution of these different motives to output volatility for six different manufacturing industries linear quadratic models are estimated for each of the industries and then dynamic simulations are employed to determine the volatility of output when one or more of the factors are removed from the model technology shocks provide the most significant contribution to output volatility the stockout avoidance motive is also important cost shocks provide a very small contribution and marginal production costs are increasing at the margin and thus stabilize output it is also shown that output volatility declines when curre

a cost benefit analysis of slowing climate change there are many conflicting views regarding the true dimensions of the climate change problem often these viewpoints are based on different estimates of key parameters with little indication as to why parameter estimates vary so much and which ones might be the more reliable the prospects for a co ordinated strategy to tackle climate change appear dim little consensus has emerged for example regarding the costs of abating carbon emissions some take the view that considerable improvements in energy efficiency are available at negative cost by setting minimum efficiency standards for vehicles and domestic appliances e g mills et al 1991 others regard the macroeconomic costs of even small reductions in carbon emissions as substantial manne and richels 1993 in the judgement of other researchers a proportion of carbon emissions arise purely as a result of institutional failings either at a regional level in the subsidies paid to fossil fuel energy producers in the erroneous belief that this promotes economic growth shah and larsen 1994 in failure to deal with air pollution glomsrod et al 1992 and vehicle congestion in urban areas hughes 1994 or at a global level in failing to make appropriate transfers to those countries whose forests contain rich biodiversity which we would wish to preserve pearce 1991

an indirect effect of education on growth abstract several recent studies have found that increases in educational attainment are not related to economic growth the results of this paper suggest education may not directly enhance economic growth but does so indirectly through productivity improvement

generalizations that aren t evidence on education and growth abstract several papers have suggested that the relationship between changes in average schooling and growth is weak in the cross country data this might call into question the relevance of micro estimates of returns to schooling at least for developing countries this paper examines the reliability of some of the aggregate evidence and presents an alternative framework for analysing these questions

optimal climate policy is a utopia from quantitative to qualitative cost benefit analysis abstract the dominance of quantitative cost benefit analysis cba and optimality concepts in the economic analysis of climate policy is criticised among others it is argued to be based in a misplaced interpretation of policy for a complex climate economy system as being analogous to individual inter temporal welfare optimisation the transfer of quantitative cba and optimality concepts reflects an overly ambitious approach that does more harm than good an alternative approach is to focus the attention on extreme events structural change and complexity it is argued that a qualitative rather than a quantitative cba that takes account of these aspects can support the adoption of a minimax regret approach or precautionary principle in climate policy this means implement stringent ghg reduction policies as soon as possible

human capital and the reduction of inequalities an intra national analysis in italy human capital is a fundamental economic resource in the knowledge economy era and improvements in education are usually associated with both economic development and the reduction of inequality i

are preliminary announcements of the money stock rational forecasts abstract we develop a theoretical framework of analyzing preliminary announcements of economic data and then apply this framework to the money stock we find that preliminary announcements of the money stock are best characterized as measured with classical errors in variables that is the revision is not correlated with the true value of the series the revision is however forecastable using information available at the time of the preliminary announcement our ability to forecast the revision implies that preliminary announcements are not rational estimates of the true money stock

what s the big idea the third generation of policies for economic growth economists and reform minded policymakers in latin america are asking themselves and are being asked hard questions these days the broad consensus is that two decades of reform have had too little toshow for it sporadic and sputtering economic growth and stagnant real wages especially for the unskilled is not what was expected this paper puts the latin american experience in the global context and examines the processes that brought the region to this point we look at the trends in policy advice on economic growth and how they were formed and we address the question of what economists can do now to help the region move in restoring economic growth

education and economic growth a meta regression analysis summary this paper surveys the literature which examines the effect of education on economic growth specifically we apply meta regression analysis to 57 studies with 989 estimates and show that there is substantial publication selection bias toward a positive impact of education on growth once we account for this the genuine growth effect of education is not homogeneous across studies but varies according to several factors specifically it is attributed to differences in education measurement and study characteristics mainly model specification as well as type of data used and the quality of research outlets where studies are published e g academic journals vs working papers

joint production quasi fixed factors of production and investment in finished goods inventories inventory investment has long been an important area of inquiry for empirical work in macroeconomics this is due in large measure to the fact that inventory investment is a major source of fluctuations in aggregate output empirical work on inventories however has been dominated by the use of simple univariate flexible accelerators 1 the major objective of this paper is to propose and test a multivariate flexible accelerator model for inventory investment the model is tested with data on finished goods inventories from the manufacturing sector of the u s economy there are two reasons for undertaking such a task first at a theoretical level a univariate flexible accelerator model asserts that investment in say finished goods inventories is proportional to the gap between the desired and actual stocks of finished goods such a model presumes that decisions by firms on finished goods inventories are made independently of decisions on other stocks but theory suggests that when firms make simultaneous decisions on a variety of stocks which includes not only finished goods but also goods in process inventories the size of the work force etc decisions on finished goods will interact with decisions on

the resurgence of inventory research what have we learned abstract recent empirical and theoretical research on business inventories is surveyed and critically evaluated while most inventory research has had macroeconomic motivations we focus on its microtheoretic basis and on potential conflicts between theory and evidence the paper asks two principal questions first how can inventories which are allegedly used by firms to stabilize production nonetheless be a destabilizing factor at the macroeconomic level second why if firms are following the production smoothing model is production more variable than sales in many industries we suggest that the so called s s model may help answer both questions

where has all the education gone cross national data show no association between increases in human capital attributable to the rising educational attainment of the labor force and the rate of growth of output per worker this implies that the association of educational capital growth with conventional measures of total factor production is large strongly statistically significant and negative these are on average results derived from imposing a constant coefficient however the development impact of education varied widely across countries and has fallen short of expectations for three possible reasons first the institutional governance environment could have been sufficiently perverse that the accumulation of educational capital lowered economic growth second marginal returns to education could have fallen rapidly as the supply of educated labor expanded while demand remained stagnant third educational quality could have been so low that years of schooling created no human capital the extent and mix of these three phenomena vary from country to country in explaining the actual economic impact of education or the lack thereof

rational expectations and the smoothing properties of inventories of finished goods abstract this paper formulates and estimates a dynamic rational expectations equilibrium model of inventories of finished goods and employment of labor the view that the primary role of inventories of finished goods is to act as a buffer stock in the face of fluctuating demand is examined both the model and estimation results indicate that this is the case because of differences in the costs involved for firms in changing their inventory stocks and labor force in addition to providing some new evidence on the behavior of inventories of finished goods and employment the paper illustrates a technology for maximum likelihood estimation of structural parameters under the hypothesis of rational expectations

uncertainty learning and heterogeneity in international environmental agreements this paper concerns the formation of international environmental agreements under uncertainty about environmental damage with different models of learning complete learning partial learning or no learning the results of the existing literature are generally pessimistic the possibility of either complete or partial learning generally reduces the level of global welfare that can be achieved from forming an iea relative to no learning that literature regards uncertainty as a parameter common to all countries so that countries are identical ex ante as well as ex post in this paper we extend the literature to the case where there is no correlation between damage costs across countries each country is uncertain about a particular parameter in our case the benefit cost ratio drawn from a common distribution but ex post each country s realized parameter value is independently drawn consequently while countries remain identical ex ante they may be heterogeneous ex post we show that this change reinforces the negative conclusions about the effects of partial learning on international environmental agreements but under certain conditions moderates the negative conclusions about the effects of complete learning

global environmental risks the need to manage climate risks is not a new it has shaped social institutions for many centuries in medieval england a peasant farmer s land was broken into many widely dispersed parcels economic historians interpret this as a way of hedging climate risk see references in bromley 9 land in different locations would be affected differently by droughts floods and frosts by spreading land holdings over different locations as well as by organizing agricultural cooperatives and buying insurance farmers have managed climate risk for many centuries

measurement error in education and growth regressions the use of the perpetual inventory method for the construction of education data per country leads to systematic measurement error this paper analyzes its effect on growth regressions we suggest a methodology for correcting this error the standard attenuation bias suggests that using these corrected data would lead to a higher coefficient our regressions reveal the opposite we discuss why this is the case

investment in risky r d programs in the face of climate uncertainty we analyze how the socially optimal technology rd and that uncertainty in damages interacts with uncertainty in the returns to rd and r d that reduces the emissions to output ratio and argue that this is a good representation of r d into fossil fuel technologies for r d programs into non carbon technologies optimal investment is higher in riskier programs our empirical model indicates that the optimal investment in a risky program is about 3 1 2 times larger than in a program with certain returns for r d programs aimed at reducing emissions in fossil fuel based technologies our results show that qualitatively investment is higher in less risky programs under most uncertain damage scenarios our empirical model shows however that the risk profile of fossil fuel based r d programs generally has little quantitative impact on optimal investment the exception is that when the probability of a catastrophe inducing full abatement is very high investment is about twice as high in risky programs compared to programs with certain returns

inventories and the volatility of production a stylized fact associated with inventory behavior is that the variance of production exceeds the variance of sales this paper presents a model of production decisions with demand uncertainty that incorporates no nnegativity constraints on inventories even with no productivity shocks optimal behavior by the firm is consistent with this stylized fact either if demand exhibits positive serial correlation or if the firm can backlog excess demand the reason is that a demand shock affects both the actual inventory level given unchanged production and the desired level production must replenish the stock and adjust to the new desired level copyright 1987 by american economic association

can the production smoothing model of inventory behavior be saved the production smoothing model of inventory behavior has a long and venerable history and theoretical foundations that seem very strong yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework but actually to argue that the basic idea of production smoothing is all wrong most prominent among these is the fact that the variance of detrended production exceeds the variance of detrended sales this paper first documents the stylized facts then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts finally it reviews the theoretical and empirical evidence and tries to draw some tentative conclusions

specifying human capital a review of the measures of the stock of human capital used in empiricalgrowth research including adult literacy rates school enrollmentratios and average years of schooling of the working age population reveals that human capital is mostly poorly proxied the simple use ofthe most common proxy average years of schooling misspecifies therelationship between education and the stock of human capital based onhuman capital theory the specification of human capital is extended toallow for decreasing returns to education and for differences in thequality of a year of education the different specifications give riseto hugely differing measures of the stock of human capital acrosscountries and development accounting results show that misspecifiedhuman capital measures can lead to severe underestimation of thedevelopment effect of human capital

the stylized facts about the behavior of manufacturers inventories and backorders over the business cycle 1959 1980 recent theoretical work has highlighted the role of inventories in propagating business cycles this paper attempts to provide an empirical foundation for current and future research on the role inventories play in business cycles the evidence presented here indicates that inventories and backorders are major variables in predicting output fluctuations further the evidence is that disaggregating inventories by stage of fabrication is important in predicting output in concert with previous findings our results suggest that disaggregated inventories ought to be a component of models of the business cycle

initial human capital or the rule of law what matters for the income convergence of poor countries the article analyses conditional convergence among the low income countries using a panel data framework covering the period 1960 to 2008 the estimation of conditional income convergence is based on the augmented solow model with system gmm technique for the dynamic panel data more importantly the article assesses the role of initial human capital stock and the rule of law in the income convergence of poor countries by considering further categorizations of the poor countries based on these two variables this is the first study on the comparative properties of human capital and the rule of law in the income convergence of poor countries utilizing a dynamic panel framework the full sample of low income countries does not show any evidence of conditional income convergence the categorizations on the basis of initial human capital stock do not alter the conclusion of no income convergence however the subsample of low income countries with a better rule of law exhibits positive evidence of convergen

international evidence on the persistence of economic fluctuations abstract this paper presents new evidence on the persistence of fluctuations in real gnp we estimate two measures of persistence nonparametrically using post war quarterly data from canada france germany italy japan the united kingdom and the united states we compare these estimates with monte carlo results from various ar 2 processes for six out of seven countries the point estimates indicate that a 1 shock to output should change the long run unvariate forecast of output by well over 1 low order arma models yield similar conclusions finally we examine the persistence in relative outputs of different countries

uncertainty learning and international environmental agreements the role of risk aversion this paper analyses the formation of international environmental agreements ieas under uncertainty learning and risk aversion it bridges two strands of the iea literature i the role of learning when countries are risk neutral ii the role of risk aversion under no learning combining learning and risk aversion seems appropriate as the uncertainties surrounding many international environmental problems are large often highly correlated e g climate change but are gradually reduced over time through learning the paper analyses three scenarios of learning a key finding is that risk aversion can change the ranking of these three scenarios of learning in terms of welfare and membership in particular the negative conclusion about the role of learning in a strategic context under risk neutrality is qualified when countries are significantly risk averse then it pays them to wait until uncertainties have been largely resolved before joining an iea this may suggest why it has been so difficult to reach an effective climate change agreement

money growth output growth and inflation a reexamination of the modern quantity theory s linchpin prediction 1 introductionover the years the quantity theory of money has been extended and refined all versions however begin with the well known equation of exchange mv pq where q is the level of national output real gross domestic product gdp p is the general price level v is the velocity of money circulation and m is the quantity of money to convert this equation actually an identity into a theory one of the four variables contained therein must be specified as functionally dependent on the other three monetarists argue that p is the dependent variable sprinkel 1971 specifically they argue that m is determined by the national monetary authority that v is determined by a variety of both secular and cyclical factors 1 that changes in v do not consistently offset changes in m and that q is determined by capital labor and technological advances sprinkel 1971 the monetarist theory of inflation is a long run theory it does not purport to explain short run increases in the general price level hafer and wheelock 2001 monetarists argue that short run inflation stabilization is not feasible and therefore that monetary policy should be confined to inflation concerns over a relatively long horizon 2john moroney 2002 p 399 asserts that in the traditional version of the quantity theory a country s long run inflation rate increases one to one with its money growth rate the modern wrinkle is that inflation is mitigated by real gdp growth emphasis added this assertion is consistent with the famous dictum of milton friedman 1968 p 18 that inflation is always and everywhere a monetary phenomenon produced in the first instance by an unduly rapid growth in the quantity of money emphasis added friedman s assertion is not that an increased money growth rate is the sole cause of inflation in the long run just the most important cause friedman and friedman 1980 an increase in inflation can also be caused by a decrease in the growth rate of q or theoretically even an increase in the growth rate of v as is easily seen by solving the equation of exchange for p and then taking logs and first differences after taking logs and first differences 3 moroney 2002 obtains an estimating equation in which inflation is functionally dependent on the growth rates of the money stock and real gdp formula omitted see article image where y is ln p x is ln m z is ln q and u is a random disturbance term that includes velocity changes is the first difference operator the modern quantity theory s model implied restrictions which are testable predictions are that the intercept is zero the coefficient of the money stock growth rate is plus one and the coefficient of the growth rate of real gdp is minus one arguably this joint hypothesis is the linchpin prediction of the modern quantity theory if the hypothesis is rejected by the data the theory falls using long run 1980 1993 cross section data on 81 countries which he takes from the world bank s world development report 1995 moroney 2002 tests the joint hypothesis 0 0 1 1 2 1 and incorrectly claims that the hypothesis cannot be rejected at even the 0 01 level of significance 4 as will be shown in the next section the joint hypothesis is rejected decisively fortunately however it will also be shown that a modification to moroney s model specification helps to salvage the most substantive part of the modern quantity theory s implied restrictions 2 modification to the quantity theory setupin contrast to the conventional quantity theory setup in which the economy s real activity is determined entirely outside its monetary sector fama 1982 moroney 2002 that is in which no provision is made for the possibility that the monetary authority s actions could have an adverse effect on output5 the present article entertains the possibility that y and z are jointly determined

natural resources and economic growth the role of investment is it possible that excessive reliance on natural resources affects saving and investment in a way that retards economic growth and thus in the long run the level of output per capita this paper reviews the literature explores the data and compares and contrasts the explanatory power and interplay of natural resources and civil liberties our proxy for institutional variables currently under scrutiny in the literature we propose that natural resource dependence may be viewed as an exogenous factor that impedes economic growth and investment as well as institutions even if we stress that natural resource abundance may be good for growth