Elias Soukiazis

Tourism as an economic growth factor: a case study for Southern European countries

This paper examines the importance of tourism as a conditioning factor for improving the host populations standard of living. In so doing, the well-known conditional convergence approach of Barro and Sala-i-Martin is used to test for convergence in per capita income among four Southern European countries (Greece, Italy, Portugal and Spain), each with a long tradition as a tourist destination. The empirical analysis uses panel data techniques to estimate growth equations, combining time-series and cross-sectional data for the four countries, from 1990 to 2004. The results indicate that tourism contributes significantly to the improvement of the standard of living in these countries and acts as a factor of convergence.

How the Maastricht criteria and the Stability and Growth Pact affected real convergence in the European Union: A panel data analysis

The European Central Bank (ECB) monetary policy has been criticised for giving more attention to price stabilisation in Europe rather than encouraging higher growth and employment. It is now largely accepted that the Maastricht norms reinforced by the Stability Pact have imposed serious macroeconomic constraints on economic performance by not taking into account specific problems of the individual economies. An interesting issue to examine is how the Maastricht obligations and the Stability Pact restrictions have affected the process of real convergence between the European economies in the last two decades. The purpose of this paper is to test for convergence in living standards, productivity, investment and unemployment among the European countries. From this analysis and using panel data estimation techniques, it is possible to detect any significant influence (favourable or not) of the Maastricht rules on real convergence.

The Impact of the Maastricht Criteria and the Stability Pact on Growth and Unemployment in Europe

This paper attempts to measure the direct effects of the Maastricht criteria and the Stability Pact on growth and unemployment in the EU countries, and covers the period 1980-2001. The evidence from a panel empirical analysis suggests that growth was negatively influenced by the imposition of the Maastricht criteria, showing a fall of 0.5 percentage points on the growth of real output. Estimating the pre- and post-Maastricht periods separately, it was found that the increment of public debt affected both periods equally. However, the negative effects of the public deficit ratio and inflation rate are slightly stronger in the pre-Maastricht period. Nevertheless, the evidence shows that the higher fiscal discipline after Maastricht did not benefit the growth of real output. Exchange rate stability seems to have a negative effect on growth but interest rates did not seem to have any influence on the growth of real output. The unemployment analysis through growth confirms the idea that unemployment follows the economic cycle and that the fall in unemployment due to growth of real GDP was smaller in the post-Maastricht period. Our main conclusion is that the Maastricht criteria and the Stability Pact have been unfavourable to growth and unemployment in Europe, so we argue that a more flexible Stability Pact is now needed to stimulate aggregate demand and encourage productive investment in order to achieve full employment and a higher economic activity.

Growth Rates Constrained by Internal and External Imbalances: A Demand-Orientated Approach

Thirlwall’s Law considers that growth can be constrained by the balance of payments when the current account is in permanent deficit.* The law focuses on external imbalances as impediments to growth and does not consider the case where internal imbalances (budget deficits or public debt) can also constrain growth. The recent European public debt crisis shows that when internal imbalances are out of control they can constrain growth and domestic demand in a severe way. The aim of this chapter is to fill this gap by developing a growth model in line with Thirlwall’s Law that takes into account both internal and external imbalances. The model is tested for Portugal, which in 2010 fell into a public debt crisis with serious negative consequences on growth. The empirical analysis shows that the growth rate in Portugal is in fact balance of payments constrained and the main drawback is the high import elasticity of the components of demand and in particular that of exports.

Growth rates constrained by internal and external imbalances and the role of relative prices: empirical evidence from Portugal

Thirlwalls law (Thirlwall 1979) considers that growth can be constrained by the balance of payments when the current account is in permanent deficit. The law focuses on external imbalances as impediments to growth and does not consider the case where internal imbalances (budget deficits or public debt) can also constrain growth. The recent European public debt crisis shows that when internal imbalances are out of control they can constrain growth and domestic demand in a severe way. Recently, Soukiazis, Cerqueira, and Antunes (2012a) developed a model-hereafter the SCA model-that takes into account both internal and external imbalances but in which relative prices do not play any role on the pace of economic growth. The aim of this paper is to extend the SCA model by relaxing this assumption and introducing explicitly relative prices into it. The model is tested for Portugal, which recently (2011) fell into a public debt crisis with serious negative consequences for growth. It is shown that our new model makes a significant improvement in explaining actual growth in Portugal. Our empirical analysis reveals that Portuguese growth is balance-of-payments constrained and that policies aimed at reducing external imbalances and changing the share of imports and exports toward trade equilibrium will help the economy to grow faster. Competitive devaluations and lower costs of financing the economy also produce an important stimulus to growth.

Explaining the Uneven Economic Performance of the EU Cohesion Countries: An Export-Led Growth Approach

This article explains the differences in growth rates between the cohesion countries of the EU: Ireland, Spain, Portugal and Greece. Employing a decomposition growth approach, it is found that the main driver of growth differences lies in productivity. The remarkably higher Irish growth rates in the 1990s are sourced to greater productivity growth resulting from higher investment in human capital and technology. The export-led growth approach reasonably predicts the growth rates and the prediction is more precise when differences in productivity growth are controlled for. Higher economic growth is explained by the higher income elasticity of exports relative to imports.

Foreign trade, human capital and economic growth: An empirical approach for the European Union countries

While neoclassical growth theory does not consider external demand to be a constraint to growth, the Keynesian approach emphasizes that demand forces are actually the key factors determining growth. In this paper, an attempt is made to introduce the balance-of-payments constraint hypothesis into the neoclassical growth model through a consideration of a sample of 14 European Union (EU) countries over the period 1980–2004. A panel data model is estimated using different proxies for human capital and foreign trade as conditioning factors to explain growth. The income-elasticity ratio with respect to exports and imports and the degree of openness are also used to capture the effects of (non-price) competitiveness and trade intensification on growth. The regression analysis shows that the inclusion of human capital, external trade and interaction terms between them have significant effects on growth. Depending on the combination of variables used, the constraining factorto growth can be shown to be due to foreign trade, human capital or both.

Human Capital and the Convergence Process Among Countries

This paper examines the convergence process across countries for the period 1980-2000, giving special attention to the role of human capital as a conditioning factor. The originality of the study is in the use of new proxies for human capital, such as publications and patents ratio and the patents/articles ratio which reflect the efficiency of the scientific work, in contrast to the quantitative measures usually used in the growth literature. The analysis suggests that: (i) convergence is conditional on structural factors, population growth, human and physical capital; (ii) the new proxies of human capital control fairly well the different steady-states among countries; (iii) the different levels of human capital affect countries differently, according to their levels of development. Higher levels of human capital are suitable to differentiate the convergence process among developed countries, and basic or intermediate levels are more suitable to differentiate convergence among the less developed countries.

Growth Performance in Portugal since the 1960s: A Simultaneous Equation Approach with Cumulative Causation Characteristics

The aim of this paper is to explain growth performance in Portugal in the last decades (1965-2006) through a multi-equation system with cumulative growth characteristics. The model uses a demand-orientated approach to determine the main relationships, which explain growth through a virtuous cycle. The idea is to identify the driving forces of growth with causal linkages and feedback tendencies that enable the process to be self-sustained. We estimate the multi-equation growth model by 3SLS to capture more efficiently the interrelations between the main growth forces and to control for the endogeneity of the regressors. Our evidence shows that the proposed model can successfully explain the Portuguese growth performance, highlighting the importance of export competitiveness as the key factor in this process. The cumulative growth process was interrupted at some points mainly due to the incapacity to transfer productivity gains into domestic prices and to make the economy more competitive. We also show that capital accumulation does not affect productivity growth, and domestic prices do not improve export competitiveness. These are the main drawbacks of the Portuguese economy that could explain the failure to achieve higher growth rates in the period 1965-2006.

Human Capital as a Conditioning Factor to the Convergence Process Among the Brazilian States

This paper examines the convergence process among the Brazilian states using different concepts of convergence and giving special attention to the role of human capital as the conditioning factor to convergence. Different measures of human capital are used in the estimation of the convergence equations and the results show that they play a significant role in explaining the improvement of the standards of living of the Brazilian population. An interesting finding is that different levels of human capital have different impacts on the growth of per capita income depending on the level of development of the Brazilian states. Lower levels of human capital explain better the convergence process among the less developed states and higher levels of human capital are more adequate for controlling differences in the “steady-states†of the more developed Brazilian regions. The impact of the intermediate levels of human capital on growth is stronger in all samples.