capital taxation and accumulation in a life cycle growth model almost all of the serious economic work on savings decisions within the past decade has relied on some variant of the life cycle hypothesis in which savings arise out of individual choices of an optimum lifetime consumption path this paper reexamines the incidence and welfare consequences of capital income taxes within a realistic life cycle model the results suggest that the elimination of capital income taxation would have very substantial economic effects for example a complete shift to consumption taxation might raise steady state output by as much as 18 percent and consumption by 16 percent the long run welfare gain from such a shift would for plausible parameter values exceed 150 billion annually stated somewhat differently shifting to consumption taxation would raise the lifetime utility of the representative consumer by the equivalent of about six years income in the new steady state these estimates dwarf estimates of the static welfare cost of taxation and significantly exceed even extreme previous estimates of the dynamic loss this study departs from earlier analyses of the effects of taxes on capital income in several respects probably the most important difference between this treatment and most preceding ones lies in the assumptions about the interest elasticity of saving it is shown below that the common two period formulation of saving decisions yields quite misleading results a more realistic model of life cycle savings demonstrates that for a wide variety of plausible parameter values savings are very interest elastic this implies that shifting away from capital income taxation would significantly increase capital formation making possible long run increases in consumption many studies of the welfare effects of capital income taxation have ignored the general equilibrium effects of increased capital formation in an economy with life cycle savings there is no presumption that the undistorted growth path corresponds to any sort of social optimum as peter diamond has shown life cycle savings can lead to a steady state capital intensity either greater or less than the golden rule level more generally it is clear that there is no reason to believe that a life cycle economy will maximize any particular intertemporal social welfare function a fundamental tenet of welfare evaluation is that preexisting distortions must be considered in evaluating the consequences of tax changes the results presented in this paper take explicit account of the nonoptimal character of the no tax steady state this explains in large part why such a sizeable welfare effect of capital taxes is found in an economy far from the golden rule level of capital intensity there are substantial gains in steady state consumption achievable through increased capital formation section i of the paper examines the aggregate savings function in a continuous time life cycle framework the second section clarifies the differences between wage and consumption taxes an aggregate production function is added to complete the model in the third section the effects of changes in capital taxes on both steady state incidence and welfare are considered within a general equilibrium framework the final section of the paper discusses some implications of the results and suggests areas which appear to warrant further study assistant professor of economics massachusetts institute of technology and research analyst national bureau of economic research i am grateful to alan auerbach martin feldstein laurence kotlikoff to the participants in the nber workshop on business taxation and to the harvard public finance seminar for useful discussions james poterba and james buchal performed the numerical calculations

reverification of the resource curse hypothesis based on industrial agglomeration evidence from china abstract although the resource curse hypothesis has been supported by many empirical studies focusing on the transnational and regional levels there has always been a point of contention about the proper method of estimating and selecting natural resource indicators in literature this paper proposes a mixed estimation method for panel data of 10 typical oil and gas resource based cities in china from 1998 to 2015 the results show that resource industry agglomeration can mirror the distribution and dependence on the resource industry by location rather than by merely measuring the influence of the relative scale of resource extraction on economic growth using resource industry agglomeration as the main explanatory variable for regional economic growth verifies the resource curse hypothesis and shows the nonlinear characteristics of the negative correlation between resources and economic growth despite mostly similar indicator parameter estimates marked differences exist in measured effects for material capital investments and technological innovation investments the result of using resource industry agglomeration as the main explanatory variable is basically consistent with the economic theory and is more in line with observed reality than the alternative indicator the research conclusions can provide evidence and data for index selection in the studies on the mediating effect of resource curse transmission and international comparison

social security and aggregate capital accumulation revisited dynamic simultaneous estimates in a wealth generation model this paper re examines feldstein s 1974 1982 results of the effect of social security on private capital accumulation in the context of a simultaneous equation model of capital accumulation the model incorporates dynamic feedback effects in capital accumulation and is estimated by fiml to incorporate theoretical restrictions that are tested against the data it is then simulated as a full dynamic model to analyze the long run effect of ssw on private capital accumulation the simulated effects are in the same direction as found by feldstein but are considerably weaker

income inequality and efficiency a decomposition approach and applications to china abstract this paper suggests a new interpretation for a decomposition of the theil inequality index when income can be expressed as multiplicative components applying the method to china we find that the impact of technical inefficiency on inter regional inequality has shown a declining trend

the political economy of resource driven growth abstract in recent decades resource poor countries have out performed resource abundant ones a stylised facts model of competitive industrialisation describes the long run development of a resource poor country with a political state that is developmental only minor change is required to adapt the model to trace the development trajectory of a resource abundant country with a similar political state however most resource abundant countries engender a political state that is factional or predatory and distorts the economy in the pursuit of rents a staple trap model describes the development trajectory under these conditions the model predicts a growth collapse from which recovery is protracted especially for small economies that lack a niche trade link with a large economy

natural resources and economic development new panel evidence the question as to whether natural resources are a curse on economic growth and development is subject to considerable debates and remains controversial using heterogeneous panel cointegration techniques this paper provides a fresh re examination of the resource curse while allowing for cross section heterogeneity and commonalities in the nexus between natural resource abundance and economic development it finds in a sample of developing countries that economies endowed with abundant natural resources tend to develop more slowly than countries with scarce resources natural resources are on average a curse however there is considerable heterogeneity in the effects of resource abundance on economic development across countries perhaps because of differences in the extent of government intervention access to sound money legal structures and the security of property rights the degree of globalization and or corruption

convergence in per capita health expenditures and health outcomes in the oecd countries our analysis of 19 organization for economic co operation and development oecd countries over the period 1972 to 2006 provides evidence of convergence in per capita health care expenditures for 17 countries while the us and to a lesser degree norway follow a different path a simple decomposition of per capita health expenditures reveals that the divergence of the us comes from the divergence of the ratio of health care expenditures to gross domestic product gdp component while norway s divergence is mainly caused by the labour productivity component interestingly our results suggest that convergence in per capita health expenditures among the 17 oecd countries does not lead to convergence in health outcomes finally we extend our analysis to examine convergence in various determinants of health expenditures

extending the concept of the resource curse natural resources and public spending on health this paper extends the concept of the resource curse by studying whether and through which transmission channels natural resource wealth affects social spending even though the availability of vast natural capital reserves has commonly been linked to the neglect of human development most of the literature has continued to focus on economic performance this paper is the first to empirically investigate the link between natural resource wealth and public health expenditures in light of the hypothesis that resource wealth as a source of unearned state income enhances state autonomy and increases volatility which leads to policies that fail to prioritize human development using a large panel dataset of world countries covering the period from 1995 to 2009 we find a robust significant inverse relationship between natural resource dependence and even abundance and public health spending over time the effect remains significant after controlling for state autonomy volatility and other factors these findings have implications for national authorities as well as the extractive industry governments should be made accountable for natural resource wealth and correct taxation could provide additional resources earmarked for health the extractive industry could increase their investments in sustainable corporate social responsibility operations specifically in the health sector

the paradox of plenty a meta analysis since sachs and warner s seminal article in 1995 numerous studies have addressed the link between natural resources and economic growth although the resource curse effect was commonly accepted at first many articles have challenged its existence and the results found in the literature are ambiguous in this paper we aim to quantitatively review this literature in order to i identify the sources of heterogeneity and ii assess the impact of natural resources on economic growth a meta analysis is performed on 69 empirical studies on the resource curse totaling 1 419 estimates our findings show that i only developing countries suffer from the resource curse although it is soft ii the way natural resources are taken into account is crucial to understand the heterogeneity found in the literature iii the negative impact of the volatility of the terms of trade on growth should be qualified an additional mra performed on indirect effects size also indicate that when institutions are at their best level the resource curse disappears and may be turned into a blessing

natural resource abundance and economic growth this paper explores whether natural resource abundance leads other things equal to slower growth rates we distinguish between natural resource dependence rd and the natural resource endowment re we estimate three models using world bank data on national capital stocks in a one equation model we show that rd has a negative effect on growth rates apparently confirming the main results of the resource curse literature re however has a positive impact on growth we then estimate a twoequation model in which the impacts of re are much weaker finally we estimate a three equation model in which the impacts of natural resources on growth disappears

natural resource abundance and human capital accumulation summary this paper studies the link between resource abundance and human capital accumulation it reviews the commonly used indicators of resource abundance and human capital accumulation the case for a form of resource curse in human capital accumulation is not robust to reasonable changes in these indicators in fact subsoil wealth and resource rents per capita are shown to be significantly correlated with improved indicators of human capital accumulation if mineral wealth is what authors have in mind when they refer to natural resource abundance then they should choose indicators that measure this concept as accurately as possible

human capital and growth abstract this paper describes a growth model with the property that human capital accumulation can account for all observed growth the model is shown to be consistent with evidence on individual productivities as measured by census earnings data the central hypothesis is that we learn more when we interact with more productive people

social security and private saving new time series evidence in an important article in the journal of political economy martin feldstein 1974 estimated that the introduction of the social security system had reduced personal saving by 50 percent with serious consequences for capital formation and output his conclusion was based on a consumer expenditure function estimated with u s time series data and incorporating a social security wealth variable of his construction this paper presents new evidence that casts considerable doubt on feldstein s conclusion first the social security wealth variable used by feldstein was seriously flawed as a result of a computer programming error simply correcting this error substantially changes the estimated effect of social security on saving second the statistical evidence depends upon assumptions which are embedded in the construction of the social security wealth variable assumptions that are not demonstrably preferable and are in some cases inferior to alternative assumptions these assumptions relate first to how individuals form their expectations about the social security benefits they expect to receive and the social security taxes they expect to pay and second to estimates of the number of workers dependent wives and surviving

natural resources and economic growth a meta analysis summary an important question in development studies is how natural resources richness affects long term economic growth no consensus answer however has yet emerged with approximately 40 of empirical papers finding a negative effect 40 finding no effect and 20 finding a positive effect does the literature taken together imply the existence of the so called natural resource curse in a quantitative survey of 605 estimates reported in 43 studies we find that overall support for the resource curse hypothesis is weak when potential publication bias and method heterogeneity are taken into account our results also suggest that four aspects of study design are especially effective in explaining the differences in results across studies 1 controlling for institutional quality 2 controlling for the level of investment activity 3 distinguishing between different types of natural resources and 4 differentiating between resource dependence and abundance

rule of law and the resource curse abundance versus intensity we examine the resource curse using new data on historic resource stocks and an improved econometric methodology the paper distinguishes between resource abundance stocks and extractive intensity flows focusing on relationships between resources and rule of law previously unavailable information on past resource stocks is estimated we find that economically large initial natural resource stocks are associated with subsequent lower levels of rule of law and do not directly affect growth while raw resource exports do not have a significant effect on rule of law when stocks are included in the analysis but do affect average growth rates sample size is maximized through the use of an emis expectation maximization with importance sampling algorithm to replace missing data minimizing the bias and inefficiency associated with listwise deletion which commonly eliminates half or more of the available data in this setting

natural resources education and economic development economic growth since 1965 has varied inversely with the share of natural capital in national wealth across countries four main channels of transmission from abundant natural resources to stunted economic development are discussed a the dutch disease b rent seeking c overconfidence and d neglect of education public expenditure on education relative to national income expected years of schooling for girls and gross secondary school enrolment are all shown to be inversely related to the share of natural capital in national wealth across countries natural capital appears to crowd out human capital thereby slowing down the pace of economic development

social security income and the utilization of home care evidence from the social security notch this paper exploits social security law changes to identify the effect of social security income on the use of formal and informal home care by the elderly results from an instrumental variables estimation strategy show that as retirement income increases elderly individuals increase their use of formal home care and become less likely to rely on informal home care provided to them by their children this negative effect on informal home care is most likely driven by male children withdrawing from their caregiving roles the empirical results also suggest that higher social security benefits would encourage the use of formal home care by those who would not have otherwise used any type of home care and would also encourage the use of both types of home care services among elderly individuals

social security and private saving reply i am embarrassed by the programming error that dean leimer and selig lesnoy uncovered but grateful to them for the care with which they repeated my original study feldstein 1974 they set an admirable example of the tradition of replication on which all scientific work ultimately rests as economic research increasingly involves large and complex computer programs to analyze macroeconomic data sets or to simulate models that cannot be solved analytically replication studies like that of leimer and lesnoy social security and private saving new time series evidence in this issue should become increasingly important in their comment leimer and lesnoy also suggest a variety of modifications to the social security wealth variable to incorporate alternative employee perceptions and actuarial assumptions as i explain below i have strong doubts about the appropriateness of these modifications i therefore do not agree with their conclusion that the time series evidence does not support the hypothesis that the introduction of social security has substantially reduced personal saving in the united states more specifically as i show in this reply correcting the computerprogramming error and reestimating the original equation for the original sample period produces results that are not substantially different from the results that were originally published in 1974 the point estimate of the coefficient of social security wealth implies that the level of social security wealth in the final year of the sample 1971 depressed personal saving by an amount equal to 44 percent of the actual personal saving in that year although the estimated coefficient of the social security wealth variable is smaller than in the original version and its standard error larger the conventional statistical test

the role of intergenerational transfers in aggregate capital accumulation this paper uses historical u s data to directly estimate the contribution of intergenerational transfers to aggregate capital accumulation the evidence presented indicates that intergenerational transfers account for the vast majority of aggregate u s capital formation only a negligible fraction of actual capital accumulation can be traced to life cycle or hump savings a major difference between this study and previous investigations of this issue is the use of more accurate longitudinal age earnings and age consumption profiles these profiles are simply too flat to generate substantial life cycle savings this paper suggests the importance of and need for substantially greater research and data collection on intergenerational transfers life cycle models of savings that emphasize savings for retirement as the dominant form of capital accumulation should give way to models that illuminate the determinants of intergenerational transfers

resource rents redistribution and halving global poverty the resource dividend summary this paper considers the proposal that each country distributes its resource rents directly to citizens as a universal and unconditional cash transfer or resource dividend and estimates its potential impact on global poverty for the years 2000 06 using a global dataset on resource rents and the distribution of income i find that if every developing country implemented the policy then the number of people living below 1 a day would be cut by between 27 and 66 depending on the year and the assumptions made looking ahead poverty could be better than halved as long as commodity prices do not drop below their 2004 level

carbon curse in developed countries among the ten countries with the highest carbon intensity six are natural resource rich countries this suggests the existence of a carbon curse resource rich countries would tend to follow more carbon intensive development paths than resource poor countries we investigate this assumption empirically using a panel data method covering 29 countries oecd and bric and seven sectors over the 1995 2009 period first at the macroeconomic level we find that the relationship between national co 2 emissions per unit of gdp and abundance in natural resources is u shaped the carbon curse appears only after the turning point second we measure the impact of resource abundance on sectoral emissions for two groups of countries based on their resource endowments we show that a country rich in natural resources pollutes relatively more in resource related sectors as well as all other sectors our results suggest that the debate on climate change mitigation should rather focus on a comparison of resource rich countries versus resource poor countries than the developed country versus developing country debate

how to spend it resource wealth and the distribution of resource rents natural resource revenues differ from other government revenues both in their time profile and in their political and legal status they are volatile and exhaustible and belong to all citizens of the country in which they are located this paper discusses the theory of natural resource revenues and examines expenditure practices in a range of resource rich countries it considers both the distributional impact and the efficiency of expenditure policies focusing on the extent to which they succeed in providing all citizens with their share of the benefits due to natural resources

natural resource dependence human capital accumulation and economic growth a combined explanation for the resource curse and the resource blessing abstract in existing studies no consensus has been reached on the relationship between natural resource dependence and human capital accumulation to narrow the divergence this paper carries out a normative research to explain the co existence of the phenomena of the resource curse and the resource blessing based on an organic combination of conceptual and mathematical models it first establishes a conceptual model to analyse the potential effects of the government s policy preference and natural resource development activities on human capital accumulation and economic growth furthermore it develops an endogenous growth model to normatively illuminate the effects in the conceptual model and to explore the condition for the occurrence of the resource curse the conceptual model analysis indicates that the rate of return on education investment and government behaviours play the crucial role in promoting the formation of the economic virtuous circle at the micro level and macro level respectively while resource development activities exert dual impacts on the circle the main mechanisms in the conceptual model can be validated in the mathematical model the rise in the subjective discount rate the elasticity of intertemporal substitution and resource goods price are adverse to the economic virtuous circle while high quality education and the institutional environment giving priority to manufacturing can become the necessary condition and sufficient condition for forming the circle respectively the allocation efficiency of production factors plays a decisive role in whether the blessing occurs whereas sufficient human capital is an essential guarantee for evading the curse

factor decomposition of cross country income inequality 1960 1990 abstract in this paper we present esteban s 1994 esteban j 1994 la desigualdad interregional en europa y en espana descripcion y analisis in esteban j m a vives x dirs crecimiento y convergencia regional en espana y en europa vol 2 instituto de analisis economico decomposition of the theil index of inequality over per capita incomes into the unweighted sum of the inequality indices of i the productivity per employed worker ii the employment rate iii the active over working age population rate and iv the working age over total population rate each of these factors clearly have different meanings for analysis as well as for policy we apply this factoral decomposition to a set of 120 countries we also contrast the empirical findings with the results obtained for the 23 oecd countries oecd labour force statistics several issues paris

minerals institutions openness and growth an empirical analysis competing explanations of the resource curse are tested using panel data the data support the existence of a mineral resource curse for developing countries with weak institutions consistent with the hypothesis that owners of mineral resources use weak institutions and openness to trade to stifle the development of human capital to the detriment of growth in other sectors of the economy manufacturing imports substitute for the development of domestic production so openness to trade correlates with lower growth in mineral dependent economies the dutch disease and debt overhang explanations of the resource curse are not supported

do koreans save optimally abstract korea s constant price saving rate as a share of gnp has been doubled since 1971 and was 32 7 percent in 1991 this paper examines whether this seemingly high saving rate is an optimal level the estimates based on the modified golden rule show that it falls short of the optimal saving rate by 5 7 percentage points when technical progress adjustment costs of capital accumulation of human capital and equipment investment are fully considered the result implies that koreans save too little and that it is necessary for the government to implement long run optimal growth policies to increase saving to the optimal level

corruption and the political economy of resource based development a comparison of asia and sub saharan africa we model how the supply and demand for bribes affects resource use by an economy and the reinvestment of resource rents in other assets this requires adjusting the world bank s measure adjusted net savings for any rent dissipation due to corruption the impacts of corruption on long run changes and periodic growth in the adjusted net savings rate are estimated across african and asian economies from 1970 to 2003 corruption rather than resource dependency per se affects negatively the ability of african countries to reinvest resource rents in the short term but for asian countries corruption is less important than point resources corruption influences long run growth in adjusted net savings rates in all countries and is also the pathway through which this growth is affected by patterns of resource use trade and abundance

productivity growth technical progress and efficiency change in industrialized countries this paper analyzes productivity growth in 17 oecd countries over the period 1979 1988 a nonparametric programming method activity analysis is used to compute malmquist productivity indexes these are decomposed into two component measures namely technical change and efficiency change we find that u s productivity growth is slightly higher than average all of which is due to technical change japan s productivity growth is the highest in the sample with almost half due to efficiency change jel c43 d24 in this paper we apply recently developed

cursing the blessings natural resource abundance institutions and economic growth summary since sachs and warner s sachs j d warner a m 1995a natural resource abundance and economic growth nber working paper no 5398 contribution there has been a lively debate on the so called natural resource curse this paper re examines the effects of natural resource abundance on economic growth using new measures of resource endowment and considering the role of institutional quality we find a positive direct empirical relationship between natural resource abundance and economic growth in both ols and 2sls regressions the positive resource effects are particularly strong for subsoil wealth our results also show no evidence of negative indirect effects of natural resources through the institutional channel

natural resources a curse on education spending abstract in line with the rising interest in harnessing natural resource revenues for economic and human development through productive government investments this paper aims to address an important blind spot in our understanding of the resource curse by contributing innovative insights on how natural resource wealth impacts government priorities and expenditure practices using a large panel dataset of 140 countries covering the period from 1995 to 2009 we find an adverse effect of resource dependence on public education expenditures relative to gdp that is robust to controlling for a range of additional covariates furthermore our findings indicate that this resource curse effect on the government prioritization of education mainly stems from point source natural resources these results are of particular importance for the sustainable management of natural resource wealth in developing countries as they could achieve especially high returns by investing resource revenues in public goods such as education while this paper underlines the importance of institutions and government accountability our findings also raise questions on the role of the private sector as a partner in development as the extractives industry could consider increasing funding for education through corporate social responsibility csr initiatives