Atul A. Dar

Government size, factor accumulation, and economic growth: evidence from OECD countries

Abstract This study examines the role of government size in explaining the differences in economic growth rates of the 19 Organization for Economic Co-operation and Development (OECD) countries over the 1971–1999 period using a random coefficients model. Our results indicate that, on average, total factor productivity growth, as well as the productivity of capital, are weaker in countries where government size is larger. The advantage of a small government sector, in general, likely reflects the greater efficiencies resulting from fewer policy-induced distortions (such as the burden of taxation), the greater discipline of market forces which fosters efficiency of resource use, and the absence of crowding-out effects that weaken the incentives to create new capital which embodies new technologies. From a policy perspective, this does not mean that the optimal policy is one that minimizes the size of government. Rather, a small as opposed to a large government could potentially be as effective in providing the legal, administrative, and governance infrastructure critical for growth, as well as for offsetting market failures. At the same time, the country-specific results indicate that the nature of country-specific institutions as well as the mix of government activities are as important for growth performance as the aggregate size of government.

An empirical study of the patterns and sources of technical inefficiency in traditional and HYV rice cultivation in Bangladesh

Production frontiers are estimated from survey data from a village in Bangladesh to examine the technical efficiency of farmers in the cultivation of traditional and high‐yielding‐variety (HYV) rice. In spite of much higher yields, HYV cultivation displays lower technical efficiency and much greater variability in efficiency. Also, efficiency is not independent of household endowments in that small farmers, and/or those with the least education and growing experience, are least efficient. Policies that promoted education and provided smaller farmers with greater access to public services would promote efficiency and equity, and help reduce HYV yield variability.

On the impact of trade openness on growth: further evidence from OECD countries

This study attempts to examine empirically the implications of the degree of openness for total and individual factor productivity growth in a group of 19 OECD countries over the last three decades. The study combines both time series and cross-sectional data. The model employed is a generalization of the commonly used, growth-accounting model based on the concept of an aggregate production function in which the rate of economic growth is a function of capital and labour accumulation and total factor productivity. It is explicitly assumed that total factor productivity depends, in turn, upon the rate of export expansion. The model is then estimated using the random coefficients approach. While results generally indicate that the relative importance of trade openness on economic growth varies significantly across countries, they also indicate that the role of capital and labour accumulation in fostering economic growth varies with the degree of openness, cross-sectionally as well as across time.

A varying-coefficients model of export expansion, factor accumulation and economic growth: Evidence from cross-country, time series data

Abstract In this study we re-examine the role of export expansion in developing countries in a production function framework. However, our study goes beyond previous studies by not only using more recent data, but more importantly, by adopting a random coefficients model that can be viewed as a refinement of laws as stated by Pratt and Schlaifer. The random coefficients model is clearly more general than those adopted in previous studies, not only because it more correctly describes the law relating growth to its determinants, but also permits the impact for those determinants to be country specific. This is particularly important when considering a diverse group of developing countries. We estimate the model using Swamy-Mehta methods. Our results show that economic growth bears a statistically significant relationship to export growth for all except the strongly inward oriented group of countries. However, our findings suggest that there is no major difference between moderately inward oriented countries and moderately and strongly outward-oriented countries in-so-far as the impact of export expansion on economic growth is concerned.

Testing for Capital Mobility: A Random Coefficients Approach

This paper extends the Feldstein-Horioka (1980), Feldstein (1983) and subsequent studies on the degree of capital mobility, by adopting a random coefficients model. This approach is more general in that it permits inter-country variations in the degree of capital mobility to arise due to the differences in size as well as in other institutional or structural characteristics. In addition, it is a refinement of stochastic laws as defined by Pratt and Schlaifer (1984, 1988). Our results point to significant inter-country differences in the degree of capital mobility, thereby lending support to the random coefficients approach. In particular, our results indicate that, on average, the degree of capital mobility is much higher than implied by fixed coefficients approach. Finally, country size itself does not appear to bear a systematic relationship with the degree of capital mobility as suggested by Murphy (1984).

Saving-investment correlations, capital mobility and crowding out: some further results

Abstract This study attempts to reassess the evidence on the degree of capital mobility and crowding out by applying a varying coefficients model to data on 19 OECD countries over the 1971–1999 period. Our period-specific results strongly support the crowding-out effect as well as the low capital mobility argument for this group of countries as a whole. However, the strength of the crowding-out effect appears to weaken and the degree of capital mobility to increase in the 1990s as compared to the 1970s and 1980s. We also classify countries into five groups according to the relative size of the government sector. Our group-specific results indicate that the degree of capital mobility is generally lower and the crowding-out effect generally stronger, in country groups with smaller governments. The differences are especially evident when we compare the group with largest government size with all other groups, those differences between the latter being much more modest. However, significant differences in the country-specific results suggest that it is prudent to be cautious when we draw conclusions about crowding-out and capital mobility for specific countries from the period-wise or group-wise results. This is particularly important in drawing policy implications for specific countries.

On the Dynamics of the Interrelationships between Fiscal Deficits and Some Important Macroeconomic Aggregates in Canada

Broadly speaking, three views about the macroeconomic implications of fiscal deficits can be identified. The traditional Keynesian argument, assuming chronic unemployment, states that fiscal deficits stabilize aggregate demand, increase private saving and foster investment and growth. The neoclassical view, assuming self-equilibration of the economy, states that deficits crowd out private investment, and are, therefore, damaging to a countrys growth prospects. Between these two diametrically opposing views, is the Ricardian Equivalence Theorem. This theory argues that increasing fiscal deficits are matched by an equivalent increase in private saving with no real effects. In this paper, we investigate the dynamics of the interrelationships among fiscal deficits, private saving, investment and other macroeconomic aggregates in Canada over the period 1961-90 using vector autoregressions, cointegration tests and error-correction models.