Derek Hung Chiat Chen

Knowledge and Development: A Cross-Section Approach

This paper assesses the effects of knowledge on economic growth. By using an array of indicators, each of which represents an aspect of knowledge, as independent variables in cross-section regressions that span 92 countries for the period 1960 to 2000, the paper shows that knowledge is a significant determinant of long-term economic growth. In particular, we find that the stock of human capital, the level of domestic innovation and technological adaptation, and the level of information and communications technologies (ICT) infrastructure all exert statistically significant positive effects on long-term economic growth. More specifically with regard to the growth effects of the human capital stock, we find that an increase of 20 percent in the average years of schooling of a population tends to increase the average annual economic growth by 0.15 percentage point. In terms of innovation, we find that a 20 percent increase in the annual number of USPTO patents granted is associated with an increase of 3.8 percentage points in annual economic growth. Lastly, when the ICT infrastructure, measured by the number of phones per 1,000 persons, is increased by 20 percent, we find that annual economic growth tends to increase by 0.11 percentage point.

Linking Representative Household Models with Household Surveys for Poverty Analysis: A Comparison of Alternative Methodologies

The authors compare three approaches to linking representative-household macro models with micro household income data in terms of their implications for measuring the poverty and distributional effects of policy shocks. These approaches are a simple micro-accounting method, an extension of that method to account for changes in employment structure, and the Beta distribution approach. Even though in the authors simulation exercises the three methods do not lead to fundamentally different results in absolute terms, they show that potential differences in the measurement of distributional and poverty effects of policy shocks can be very large.

Gender equality and economic development : the role for information and communication technologies

The author focuses on the role that information and communication technologies (ICTs) can play in improving gender equality, so as to enhance long-term economic growth. Employing OLS and IV panel regressions with country fixed-effects, he shows that increases in the level of ICT infrastructure tend to improve gender equality in education and employment. In addition, the author shows that education among the general population is important for improving gender equality. The results provide evidence indicating that gender equality in education is an important contributor to gender equality in employment. Lastly, the results show that economic development tends to lead to some improvements in gender equality in the labor market. Hence, the use of ICTs to improve gender equality in education and employment may initiate a continuous cycle of positive reinforcing feedback effects between gender equality in employment and economic development, leading to further improvements in both.

A Model on Knowledge and Endogenous Growth

The authors present a model of endogenous growth in which the main engine of economic development is knowledge. Using a two-sector closed economy model that comprises of a conventional goods-producing sector and a research and development sector, their model incorporates two key aspects of knowledge: technology and human capital. Steady-state equilibrium conditions show that the growth rate of per capita income hinges on the growth rate of human capital. While the growth rate of human capital has been previously shown to affect the growth of the economy in transition between steady states or balanced growth paths, the authors are the first to link the growth rate of human capital to the steady-state growth rate of productivity and output per worker. Furthermore, this result does not exhibit scale effects or policy invariance, both of which have been longstanding concerns with the predictions of endogenous growth models developed in the 1990s.

Intertemporal excess burden, bequest motives, and the budget deficit

The author aims to empirically determine the significant factors that affect the levels of budget deficits of central governments across time and across countries. He empirically tests two prominent theories of budget deficits-the Barro (1979) tax-smoothing approach, and the still-untested theory of negative bequest motives advocated by Cukierman and Meltzer (1989). The author uses econometric techniques including fixed-effects (both country and time) panel regressions spanning 87 countries over the period 1975 to 1992, and the Griliches treatment of missing data. The author finds relatively stronger statistical support for the tax-smoothing approach among developing countries but not in industrial countries. The existence of empirical evidence supporting the theory of negative bequest motives is indeterminate. The author also conducted post-regression analyses to assess the proportion of observed differences in budget deficits the factors were actually able to explain. These reveal that both theories are generally weak in accounting for inter-temporal changes in budget deficit shares for both industrial and developing countries. The theories performed significantly better in accounting for cross-section differences. The author has many contributions to the literature. First, he analyzes the question of what determines the size of central government budget deficits using cross-country time series data leading into the 1990s. Second, he provides empirical tests of the still-untested Cukierman-Meltzer (1989) negative bequest motive theory of budget deficits. By using the panel data, the author attempts to determine the factors that influence not only the inter-temporal differences in budget deficits but also those factors that lead to cross-country differences. Last but not least, he provides some preliminary evidence that poverty reduction is necessary for long-term government budget deficit reduction.

Macro Models and Household Survey Data: Linkages for Poverty and Distributional Analysis

This paper focuses on approaches to linking macroeconomic models to household income data for poverty and distributional analysis. Given that linkage methods can influence the resulting poverty and income distribution effects, understanding the benefits and costs of various linkages is important. Simulation exercises do not show fundamentally different results when comparing three approaches: a simple micro-accounting method, an extension of that method to account for changes in employment structure, and the Beta distribution approach. However, potential differences can be very large. We also highlight the extended micro-accounting method as a practical approach to linking macroeconomic models to household income data.

The RMSM-S+P : a minimal poverty module for the RMSM-X

The authors present a new tool, the RMSM-X+P, which essentially consists of a RMSM-X model with an additional module for poverty and social indicators. This linkage facilitates the analysis of the impact of various macroeconomic shocks on a selected set of key social indicators. Poverty analysis is performed by the use of a poverty equation (which is estimated using pooled data for a group of low-income countries) that links the incidence of poverty to inflation, the literacy rate, real GDP per capita, the degree of trade openness, and income inequality. Similarly, the authors analyze the effects of various macroeconomic shocks on education and health with the aid of equations for education and health. This new tool allows the user to address a limited number of policy issues. However, it does possess several merits, perhaps the most substantial being that it permits the users to move beyond approaches that focus on the partial correlation between growth and poverty in discussions of poverty reduction.

Regional Dimensions of Recent Weakness in Investment: Drivers, Investment Needs and Policy Responses

Investment growth in many emerging market and developing economies (EMDEs) has slowed sharply since 2010. Investment growth performance has varied significantly across different regions, however. This paper examines the temporal evolution of investment growth in six EMDE regions, documents remaining investment needs, especially for infrastructure, and presents a set of region-specific policy responses to address these needs. It reports three main findings. First, investment growth has been particularly weak in EMDE regions with a large number of commodity exporters. In regions with a substantial number of commodity-importing economies, investment growth has been somewhat resilient but has also declined steadily since 2010. Second, sizable investment needs remain in most EMDE regions to make room for expanding economic activity and rapid urbanization. A sizeable portion of these investment needs is in infrastructure and human capital. Finally, while specific policy priorities vary across regions, several policy options to address remaining investment needs apply universally. These include more, or more efficient, public investment and measures to improve overall growth prospects and the business climate. Improved project selection and monitoring, as well as better governance, may enhance the efficiency and benefits from public investment.