...Endogenous growth theory addressed limitation associated with the neo classical growth model. To what extent is this assertion valid? Introduction Neo classical growth model is an approach in economics focusing on the determination of price, output and income distributions in markets through supply and demand. These is done through a hypothesized maximization of income- constrained utility by individuals and of cost constrained profits of firms employing available information and factors of production. This economic model was developed from the classical school of economics, which was dominant in the eighteenth and nineteenth centuries. It can be traced to the marginal revolution of the 1860’s, which came up with the concept of utility as a key factor in deterging value in contrast to the classical views that the costs involved in production were value’s determinant. The Neo classical approach became increasing mathematical, focusing on the perfect competition and equilibrium. Neo classical growth model considered two factors production function with capital and labour as determinants of output. Besides, it added exogenously determined factor, technology, to the production function. Neo classical growth model uses this production function: Y=AF (K, L)……….(1) Y= Gross Domestic Production (GDP) K= Stock of Capital L= Amount of unskilled labour A= Exogenously determined level of technology. *Note a change in this exogenously variable and technology...
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...October 26 08 Fall The Determinants of Economic Growth ------------------------------------------------- Executive summary ------------------------------------------------- Introduction Barro (1991) and Fernandez, Ley, and Steel (2001) use various regression techniques to determine the key determinants of growth, and in particular, the driving forces behind cross-country variations. Neoclassical growth theory proposes that cross-country and per capita income will converge due to diminishing returns to capital and the diffusion of technology. There are samples of countries that display this ‘absolute convergence, however, such a phenomenon is not universal. These seemingly inexplicable variations in growth present an important question of what are the determinants and is there a role for stabilizing policy. Explain why the study is important. Why is economic growth so important? Coexistence of Growth miracles, Growth Disasters Barro (1991) provides that it is ultimately the relationship between the level of human capital and initial GDP that allows some poor countries to converge on rich countries. Ultimately, our conclusion parallels that of Barro’s and we find that the driving determinants of growth are Human capital, Investment and the initial GDP level. Our analysis follows the key ideas and assumptions of Barro’s model. We use both Primary and High School enrolment as a proxy for the accumulation of Human capital, however, this does pose some restrictions...
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...ELECTRICITY CONSUMPTION AND ECONOMIC GROWTH IN NIGERIA: NEW INSIGHTS INTO THE CAUSALITY RELATIONSHIP AN ECONOMETRICS ASSIGNMENT SUBMITTED BY ------------------------------------------------- OLUWAFEMI JOSHUA IBRAHIM MATRIC NUMBER: 121937 LEVEL: 700 LECTURER IN-CHARGE: PROFESSOR E.O. OGUNKOLA November, 2010 1) STATEMENT OF THE PROBLEM Electricity plays a very important role in the socio-economic and technological development of every nation. It is widely accepted that there is a strong correlation between socio-economic development and the availability of electricity (Sambo, 2008). It is generally recognized that energy, including electricity, plays a significant role in economic development, not only because it enhances the productivity of capital , labour and other factors of production, but also that increased consumption, particularly commercial energy like electricity, signifies high economic status of a country(Aklas & Yilmaz, 2008). The relationship that exists between electricity consumption and economic growth has been of great interest to many researchers. The study of this relationship arises from the need to understand the complex links between these variables. Such understanding is basic to regulators and investors in deregulated electricity markets, in order to design a system that is reliable, efficient and growth-efficient. The empirical argument has been centered on whether economic growth responds to increase in electricity consumption, or whether...
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...[pic][pic][pic] [pic] Answer: a. Since carrot prices and quantities are determined by a system of demand and supply equations, carrot farmers are price-takers and the demand for carrots should be estimated using 2SLS. b. P and Q are endogenous variables in the system while t and W are exogenous variables. Demand is identified because supply contains an exogenous variable (W) that is not contained in the demand equations. c. The printout from STATISTIX 7 looks like: [pic] The estimated demand for carrots is: Qd=-1848628-545.782P+938.443t d. Yes, ḃ and ĉ are statistically significant at 13.57% level or better. The algebraic signs of ḃ and ĉ are as expected. The law of demand requires that ḃ be negative. Since carrots grew more popular with consumers during the period of the sample, ΔQd/Δt should be positive. e. Carrots demand over the range of prices in the 1983-2000 sample, which does not include any periods of unusually high or low prices, should tend to be price inelastic because: 1) Carrots are relatively inexpensive and so comprise a small fraction of household spending on food; 2) At the relatively low price just mentioned, consumers are not likely to be willing to substitute other vegetables if they wish to eat carrots. f. Qd=-1848628-545.782X14.432+938.443X1991.5=12,404.51, which is the sample mean value of Q. Ed=-545.782X14.432/12,407.51=-0.635, So carrots demand is measured at sample mean value of P, Q and...
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...a l h o m e p a g e : w w w. e l s ev i e r. c o m / l o c a t e / e c m o d Regime-switching effects of debt on real GDP per capita the case of Latin American and Caribbean countries Tsangyao Chang ⁎, Gengnan Chiang Department of Finance, Feng Chia University, Taichung, Taiwan a r t i c l e i n f o a b s t r a c t In this paper, we try to investigate how the debt and real GDP per capita relationship varies with indebtedness levels and other country characteristics in a balanced panel of 21 developing Latin American and Caribbean countries over the period 1992–2006. The empirical results indicate that there exist two threshold values of 32.88% and 55.89%. The latter is lower than the Maastricht criterion and Stability and Growth Pact of a total external Debt per GDP ratio at 60% in the OECD countries. Both thresholds divide our panel into three regimes. In the middle (stimulus) regime, the Debt per GDP ratio has a positive impact on real GDP per capita, which is consistent with the stimulus view (Eisner, 1984). However, the impact becomes negative and consistent with the crowding-out view (Friedman, 1977, 1985) in the left and right (crowding-out) regimes. Based on our findings, we find no supportive evidence for Ricardian view (Barro, 1989). Therefore, our empirical results have important implications for fiscal policymakers in these Latin American and Caribbean countries. © 2011 Elsevier B.V. All rights reserved. Article history: Accepted 13 June 2011 JEL classification:...
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...The Mathematics of Simple Macroeconomic Models There are several advantages in presenting economic models in the form of equations. Equations are very concise; they readily give quantitative answers; and they are the language of most practising economics. Unfortunately, for a large proportion of students beginning the study of macroeconomics, the first sight of equations in the course is a traumatic experience. Old fears about their mathematical ability can make them doubt their capacity to cope with macroeconomics. It may even result in their premature withdrawal from the subject. Fortunately, in the vast majority of cases such doubts are unfounded. Consequently, once fears are removed, these students cope quite happily with the equations in macroeconomics. This chapter is designed to allay these old fears about mathematics. It does this by means of a step-by-step examination and manipulation of the equations that a student first meets in macroeconomics. Once the student has mastered these equations, the new-found confidence should enable him or her to tackle most of the elementary mathematics that macroeconomics requires. THE FIRST MODEL The first model in equation form seen by macroeconomics students is usually: Y = C + 1 (16-1) C = Co + cY (16-2) I = Io (16-3) It is convenient to think of the symbols in these equations as words, and the equations themselves as sentences. Thus it is possible to translate an English sentence into an...
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...Institute for Knowledge Intensive Entrepreneurship, Postbus 217, NL-7500 AE Enschede, The Netherlands c ¨ University of Liechtenstein, Furst-Franz-Josef-Strasse, LI-9490 Vaduz, Liechtenstein & Utrecht University, Janskerkhof 12, NL-3512 BL Utrecht, The Netherlands KEYWORDS Internationalization; SME; Trust; Cooperation; Entrepreneurship; Austria; Czech Republic; Slovenia Summary Self-commitment is the willingness of individuals to commit to cooperation with a partner without the safety net of controls or sanction mechanisms. This article shows the unique performance contribution of self-commitment in the context of cooperative internationalization of SMEs in several ways: First, we use a multiparadigmatic approach to cooperation theory to argue why self-commitment as a coordination mechanism is particularly relevant in the context of cooperative internationalization. Second, we develop a new operationalization of self-commitment which takes the context of international cooperations into account. Third, we show empirically that self-commitment is particularly important in international cooperations by applying a PLS analysis to a sample of 146 Austrian, Czech, and Slovenian cooperating SMEs. ª 2008 Elsevier Ltd. All rights reserved. Introduction Internationalization is an issue that – until recently – was in most cases only relevant for large companies (Wright et al., 2007). A major reason for...
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...C:\Documents and Settings\Arshad\Desktop\usman thesis\Full model.amw Analysis Summary Date and Time Date: Saturday, December 03, 2011 Time: 9:36:33 AM Title Full model: Saturday, December 03, 2011 09:36 AM Groups Group number 1 (Group number 1) Notes for Group (Group number 1) The model is recursive. Sample size = 261 Variable Summary (Group number 1) Your model contains the following variables (Group number 1) Observed, endogenous variables AttitudeMob AttitudeBrand PurchaseIntention Observed, exogenous variables Informativeness Irritation Credibility Personalization AttitudePrivacy AttitudeAd Entertainment Unobserved, exogenous variables e2 e1 e3 Variable counts (Group number 1) Number of variables in your model: 13 Number of observed variables: 10 Number of unobserved variables: 3 Number of exogenous variables: 10 Number of endogenous variables: 3 Parameter summary (Group number 1) Weights Covariances Variances Means Intercepts Total Fixed 4 0 0 0 0 4 Labeled 0 0 0 0 0 0 Unlabeled 8 0 10 0 0 18 Total 12 0 10 0 0 22 Models Default model (Default model) Notes for Model (Default model) Computation of degrees of freedom (Default model) Number of distinct sample moments: 55 Number of distinct parameters to be estimated: 18 Degrees of freedom (55 - 18): 37 Result (Default model) Minimum was achieved Chi-square = 1110.628 Degrees of freedom = 37 Probability level = .000 Group number 1 (Group number 1 - Default model) Estimates...
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...Havard model HRM is generally considered to be either Hard or Soft where hard HRM is quantitative, calculative and treats people as a factor of production (an object). Soft HRM on the other hand draws from the Human Resource school of thought which treats people as strategic resources who can provide an organisation with strategic flexibility through being committed, innovative and working in a team so as to achieve a competitive advantage. The Harvard Model is considered to be more soft in nature because it views individuals as potential assets or human assets rather than variable costs. [pic] The Harvard map of HRM A large part of this section in Human Resource Management, 4th edition is devoted to the Harvard 'map' of HRM. This is probably the most seminal model of HRM and has had a major influence on academic debate on the subject. 'We noted that the Harvard Business School generated one of the most influential models of HRM. The Harvard interpretation sees employees as resources. However, they are viewed as being fundamentally different from other resources - they cannot be managed in the same way. The stress is on people as human resources. The Harvard approach recognizes an element of mutuality in all businesses, a concept with parallels in Japanese people management, as we observed earlier. Employees are significant stakeholders in an organization. They have their own needs and concerns along with other groups such as shareholders and customers.' The Harvard...
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...Part (A) IS-LM, Aggregate Demand and Aggregate Supply Behavioral Equations, Identities, Equilibrium Conditions and List of Exogenous and Endogenous Variable The IS-LM Model is based upon six Behavioral equations, each describing the determinants of one of the macroeconomic variable considered by the model: 1. Consumption 2. Investment 3. Government spending 4. Tax revenue 5. Money demand 6. Money supply The description of the IS-LM model is completed by three key identities that are defining the links between aggregate demand, aggregate supply and the equilibrium level of income. Aggregate demand: Z = C=I=G --------------------------------1 Since firms produce as many goods and services as demanded in the economy, the aggregate supply is written as: Y=Z --------------------------------2 Combination of the equation 1 and 2 gives income identity for a closed economy Y = C + I + G. This states that in equilibrium aggregate income must be equal to aggregate demand. Exogenous variables: G: Government spending T: Tax on income M: Money supply P: Price level (fixed in the short-run) Endogenous variables: Y: Production C: Consumption I: Investments R: Interest rate Behavior Equations Y= C + I + G C= C0 + Cyd Yd –Cr r I= I0 + Ir r G= G TA = TA + Ty Y LM Behavior Equation L=M L=L0 + LyY – Lr r M=M0/P Production Function Y= Aƒ (K,N) Identities of IS C= ƒ (Y+, r –) I = ƒ (r -) G=G S=...
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...ECON864 Mathematical Economics Early Semester Quiz 2014 Instructions: Answer the questions first on paper. Then log on to ilearn to answer the questions in order to be accessed. There are 30 marks in total. Printed on September 6, 2014 Page 1 of 7 ECON864 Early Semester Quiz Final Total Demand Output 40 $200 70 $300 120 $250 160 $400 Agriculture Agriculture 10 Manufacturing 40 Services 60 Other 50 Value added 40 Total Input 200 Manufacturing Services 80 40 40 60 25 20 30 60 125 70 300 250 Other 30 90 25 100 155 400 Table 1: Interindustry Transaction Matrix (Values) 1.39 0.51 0.46 0.33 0.67 1.49 0.65 0.57 Leontief Inverse: 0.56 0.33 1.34 0.27 0.73 0.48 0.67 1.61 Question 1. See Lecture Notes Week 4, the textbook Section 5.7, and Chapter 12 Introduction to Mathematical Economics, (Dowling 2001). Use Table 1 and the given Leontief inverse to answer the following. 1.1 [1 Mark] Determine the value of the agriculture goods required to produce $1 dollars worth of manufacturing. 1.2 [1 Mark] Determine the increase in the size of the economy caused by a $1 increase in the final demand for manufacturing. 50 100 1.3 [2 Marks] Determine the total outputs vector x1 for final demands given by y1 = . The 100 140 amount for each sector should be rounded to the nearest integer. ∂xi 1.4 [2 Marks] See section 7.5 pages 173 – 175 in the textbook. Observe that denote the partial ∂d j derivative of the total output from sector i with respect to final demand...
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...of the 19th century neoclassical economists emerged as a revolt against the school of classical economic thought. Neoclassical economics sought to explain the maximisation of utility with an underlying theory of rational choice theory. In the post war period a movement occurred that sought to synthesis the macroeconomic, long run theories of John Maynard Keynes with the microeconomic, short-run theories of neoclassical economics. This essay will explore how John Hick’s ISLM synthesis of Keynes is related to the neoclassical growth model. In addition it will explore how both the growth model and theory of capital reproduce problems inherent in the explanation of multi-sector economies. The Keynesian revolution, one of the “most significant events in twentieth century economic science,” disputed society’s adherence to classical laissez-faire economics (Yaroufakis, Halevi, & Theocarakis, 2011). The unsubstantiated ability of the self-clearing markets to maintain equilibrium was challenged during the early twentieth century by John Maynard Keynes in his text The General Theory. Yet as the depression strengthened and the global economic climate changed, a group of economists emerged that ceased to be either anti- or pro-Keynesian. Known as the Neo-Keynesians, they incorporated the macroeconomic framework of Keynes’ theory for understanding short run aggregate issues while the neoclassical model remained relevant for long term microeconomic analysis of growth. With the creation of...
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...liberalisation. The policies pursued by these supranational organisations are based on western economic concepts and theories and have become broadly known as the ‘Washington Consensus’, a term first coined by John Williamson in 1989. The Washington Consensus is rooted firmly in the Neoclassical approach to economic thinking and has been criticised by two main schools of thought; Structuralists and Dependency Theory. These two schools question many of the assumptions made by the Neoclassical framework and use real world observations to discredit Neoclassical policies. While Neoclassical theory suggests that all free trade is eventually mutually beneficial to everyones welfare, Dependency Theory advocates argue that free trade is a destructive force and a threat to the Developing World or the Least Developed Countries (LDC’s). Structuralist make their position in the middle ground and acknowledge that while there are gains from free trade to be made for LDC’s and Developed Countries (DC’s) alike, free trade is potentially harmful to developing economies and needs to be managed appropriately. This essay will consider each argument and ultimately show how Neoclassic philosophy, which has underpinned WTO and IMF policy for much of the past half century, relies upon too many unsatisfactory assumptions and that many observations made in the real world are contradictory to what the theory...
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...Economic growth is sought after by every country because it promises to build and strengthen a country’s foundation in several ways. Primarily, it seeks to reduce poverty which means to improve the people’s access to basic amenities. Governments will be able to expend on public goods like healthcare, education and infrastructure because of the added tax revenues earned from higher income earners. This consequently leads to improved standards of living for all classes of people. Economic growth also injects investments into the economy as savings become capital for business ventures. It brings twin benefits by boosting productivity and raising income levels for those working in the industrial and service sectors. Thus, an increase in gross domestic product (GDP) is not the only determinant of economic development. It is directly correlated with human welfare factors. Hence, the economic growth models that we study examine the varying degrees of this correlation across different economies and highlight the underlying importance of savings. Out of the three emerging countries given, I have chosen Malaysia to discuss in my essay. Malaysia is a steadily developing economy that has been constantly growing since 2001 as can be seen from the chart below. And it has experienced a 7.2% real GDP growth rate in 2010, highest so far since the 8.6% growth in 2000. Chart 1: GDP Real Growth Rate Chart by Year (Source: http://www.indexmundi.com/g/g.aspx?c=my&v=66) As identified by the...
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...INTRODUCTION Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits by cost-constrained firms employing available information and factors of production, in accordance with rational choice theory. The neo-classical view of economics was under the Type A definition which had to do with the wealth and material welfare. This school of thought was headed by Alfred Marshall in the 18th century, the neo-classical view came to buttress the explanation of the classical view of economics, it gave economics a stand above all other social sciences. According to Alfred Marshall, he defined Economics as the study of mankind in the ordinary business of life.There were other contributions to this view like E.Cannan who said the aim of political economy is the explanation of the general causes on which material welfare of human being depends Beveridge defined it as the study of general methods by which men cooperate to meet their material needs,and also to Pigou he said economics welfare is the subject matter of economic science Neoclassical economics dominates microeconomics, and together with Keynesian economics forms the neoclassical synthesis which dominates mainstream economics today.Although neoclassical economics has gained widespread acceptance...
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