Archive for the ‘Growth and development’ Category

Comparing Japan’s Lost Decade with the U.S. Great Recession

March 7, 2018

Guillaume Vandenbroucke of St Louis Fed has a nice piece.

He says that in Japan growth rate of GDP per capita slacked whereas in US the levels of GDP per capita declined:

Japan’s economy began its “Lost Decade” in the 1990s, with persistent slow growth and low inflation. One could argue, however, that the Lost Decade has persisted for nearly three decades.

In 2008, the United States entered into what is now called the “Great Recession.” The Great Recession was also characterized by slow growth and low inflation. These similarities between the Lost Decade and the Great Reces­sion have led many analysts to wonder whether the United States is in for the same persistent economic slump as Japan. 

In this analysis it is critical to draw a distinction between a change in the growth rate of gross domestic product (GDP) per capita and a change in its level. For instance, a country can experience a sudden decline in the level of its GDP per capita after a major recession, but its growth rate can remain constant. Conversely, a country’s rate of growth can decline without any sudden drop in the level of its GDP per capita. The Japanese data reveal that the Lost Decade is clearly a case of slow growth rather than of a sudden negative shock to GDP per capita. The U.S. data, slightly varied, reveal that the Great Recession is the opposite case.

The difference is that Japan will take much longer to double its income compared to US:



Why Greece is banking on China’s modern-day Silk Road to help its economic recovery

December 27, 2017

Interesting bit of news.

How one of the Greek ports which was used in earlier Silk Road is going to be used again in the modern day silk road:

Greece hopes to transform its ancient port of Piraeus into the entry point for an extensive network of roads and railways that will allow China to penetrate into the heart of Europe, its ambassador to Beijing has said.

China’s ambitious push to build a modern-day Silk Road through Asia and Europe has suffered a number of rebuffs in recent weeks after Pakistan, Myanmar and Nepal cancelled put on hold a number of major infrastructure projects funded by Chinese investment.

But Greece, a key point along the route of the ancient Silk Road, will once again serve as the hub connecting Asia, Europe and Africa, according to Leonidas C Rokanas.

“Eventually, Piraeus will become the main entry point for Chinese exports to southern, eastern and central Europe,” Rokanas told the South China Morning Post. “To use a Chinese metaphor, Piraeus will form the “head of the dragon” of the so-called land-sea express route, leading to the heart of Europe through Greece.”


This is a superb visual explainer of what the modern day Silk Road (called One Belt One Road) is proposing to do..

The changing geography of US manufacturing during the 20th century

December 13, 2017

Fascinating research by Profs Nicholas Crafts and Alex Klein.

They look at how economic geography has changed in US manufacturing from 1880-1997:

Religious faith can help people to build better cities?

December 12, 2017

Prof. Chris Ives and and PhD candidate Andre Van Eymeren think so and here is how.


Does finance lead to economic growth? Summary of literature…

December 12, 2017

Alexander Popov of ECB looks at the biggest question on finance: does it lead to economic growth and if yes how?

He sums up the literature so far:

This paper reviews and appraises the body of empirical research on the association between financial markets and economic growth that has accumulated over the past quarter-century. The bulk of the historical evidence suggests that financial development affects economic growth in a positive, monotonic way, yet recent research endeavors have provided useful and important qualifications of this conventional wisdom. Moreover, the proliferation of micro-level datasets has enabled researchers to study more precise links between theory and measurement. The paper highlights the mechanisms through which financial markets benefit society, as well as the channels through which finance can slow down long-term growth. 

Nice bit..

The Great Enrichment Was Built on Ideas, Not Capital

November 27, 2017

Deirdre N. McCloskey writes on how much ideas mattered in history of economic development:

The commercial bourgeoisie — the middle class of traders, inventors, and managers, the entrepreneur and the merchant, the inventor of carbon-fiber materials and the contractor remodeling your bathroom, the improver of automobiles in Toyota City and the supplier of spices in New Delhi — is, on the whole, contrary to the conviction of the “clerisy” of artists and intellectuals, pretty good.

Further, the modern world was made not by material causes, such as coal or thrift or capital or exports or exploitation or imperialism or good property rights or even good science, all of which have been widespread in other cultures and other times. It was made by ideas from and about the bourgeoisie — by an explosion after 1800 in technical ideas and a few institutional concepts, backed by a massive ideological shift toward market-tested betterment, on a large scale at first peculiar to northwestern Europe.


The origins of industrial revolution in UK and why the industrial revolution did not happen in Rome?

November 22, 2017

Just like Great Depression remains the holy grail for macroeconomics, industrial revolution is the grail for growth economics.

Two pieces on industrial revolution.


A Tale of Two Cities: Why Hamburg succeeded and Lübeck declined?

November 17, 2017

Nice post by Prateek Raj.

The German cities of Hamburg and Lübeck have an interwoven and eventful history. Whereas Lübeck offers an example of how dominant cities may become unattractive and decline when they end up serving the interests of a privileged few and refuse to change, Hamburg serves as a tale of how cities can reinvent themselves by changing with the times.


The deeply held religious convictions that kickstarted capitalism

November 13, 2017

A video which explains how Calvinism led to capitalism:


Origins of economic divide between North Italy and South Italy…

November 6, 2017

Most countries/regions/cities are developed in a lopsided manner with one part having higher/better economic part than the other. In India, one often sees Southern part more developed than Northern (South India vs North India, South Mumbai vs North Mumbai. South Delhi vs North Delhi) and even West being more developed than East (Western India vs Eastern India). There are all kinds of possibilities here.

In Italy, North Italy is more developed than South Italy. Giovanni Federico, Alessandro Nuvolari and Michelangelo Vasta investigate and find:


Finland thinks it has designed the perfect school: This is what it looks like….

November 2, 2017

Adam Jezard provides a glimpse of Finland schools. What is seen as a modern school looks more like India’s gurukul of yesteryears minus all today;s technology:


Missed Opportunities: The Economic History of Latin America

October 6, 2017

There is a new book on Latin America by Beatriz Armendáriz and Felipe Larraín.

IMF interviews Prof Larrain. What sums up the missed opportunities in the region?

Latin America has vast natural resources and a talented population. Why has the region remained so poor compared with its northern neighbors?

Our book highlights five theories of why Latin America has lagged behind, some of which date back to the region’s colonial origins.

The first is geography. Over 70 percent of Latin America is in the tropics, which makes everything more difficult. The region is more exposed to disease—malaria, yellow fever, dengue, cholera, and others—and it is far from key markets.

Second, Latin America was exposed to civil law tradition after independence, as opposed to common law. A common law system—where judges have a more active role—is more conducive to economic growth and development.

Third is large-scale agricultural plantations in Latin America. In the North, there was more mixed farming centered on grains and livestock, and smaller units, which led to more democratic political institutions, a more robust protection of property rights, and a larger middle class.

Fourth, the region’s institutional legacy is a part of the story too, where institutional arrangements in the South are weaker as opposed to the North.

And finally, ethno-linguistic and cultural fragmentation in Latin America, which goes back to the colonial periods, have also held back the region, although the influence of this factor is much less important than in Africa, for example.

Hmm… How these factors continue to impact the region..


20th Anniversary of British transferring Hong Kong to China: Remembering John Cowperthwaite’s role in shaping the island

July 3, 2017

On 20th anniversary of Hong Kong, Neil Monnery has a nice piece on role of John Copwerwaithe in shaping the island economy:

Could Industrial Revolution have happened in Mysore and Gujarat?

June 29, 2017

This looks like a fabulous book by Kaveh Yazdani of University of the Witwatersrand: India, Modernity and the Great Divergence Mysore and Gujarat (17th to 19th C.).  Industrial Revolution studies are mainly Eurocentric and this book looks at two regions from India – Gujarat and Mysore. These were two relatively advanced regions in India and so could they have their own industrial revolution as well?

Yazdani has a blogpost on the Economic Sociology blog:


Joblessness: The great Global crisis of the twenty-first century

June 28, 2017

Edward Galesar of Harvard University writes a long essay covering history, society, politics and economics. The kind of essay which was basically how economists wrote and tried communicating with the public. This art is mostly lost now as much of economic thinking has become garbled amidst equations and race for publishing.

He takes you through a tour on how the jobless problem in America started. He focuses on America joblessness is a global problem:


Comparing Rainfall patterns and human settlement in tropical Africa and Asia

June 15, 2017

Interesting study by Kostadis Papaioannou and Ewout Frankema. If geography was given adequate focus while teaching economics, these issues should have been pretty well-known:

Our study adds support to the idea that the climatological challenges posed to agricultural development were larger in tropical Africa than in tropical Asia, and that this may be one of the keys to understanding why large parts of tropical Asia have historically been more densely populated than tropical Africa. In so far as higher degrees of climatological variability posed more severe constraints to the adoption of modern, productivity-enhancing farming technologies, this may also partially account for the diverging trajectories of agricultural development in the post-1960 era.

However, the implications of our findings go even further. The increasing frequency and intensity of weather shocks observed today, such as heat waves, droughts, floods, and hurricanes, adversely affect conditions of agricultural production and jeopardise efforts to achieve global food security. A rapidly expanding literature shows that climate-induced food shortages pose severe threats to societal cohesion by triggering civil conflict, raising property crime rates, and increasing migration (Miguel et al. 2004, Papaioannou 2017).

The effects of climate change are felt harder in Africa than elsewhere. Our study suggests that African farmers also have a longer experience in coping with climate shocks, even though more evidence is needed to explore whether this has been a structural historical condition, or one specific for the interwar era.


Kerala diaspora in West Asia jittery..

June 6, 2017

It is always fascinating to learn about people’s migration to other regions in search for better economic opportunities. Kerala-West Asia ties are as old as any such migration history.

So this story tells you how Kerela people are preferring Qatar in recent times and why that is worrying now:

Apprehension prevails among the Kerala diaspora in West Asia, with the Gulf states, including Saudi Arabia and the United Arab Emirates, severing diplomatic ties with the oil-rich Qatar.

Non-Resident Keralites and their families are panicked as consular ties have been severed by these countries, and all land, sea, and aviation ports to Qatar closed. Of the 6.5 lakh Indians working in the gas-rich Qatar, 3.5 lakh are from Kerala, and their safety has become a concern for their families back home as well as the State government.

Though Qatar Airways, the state-owned flag carrier of the Emirate, has cancelled its flights to Saudi Arabia following the diplomatic crisis, flights to the three international airports of the State were operated according to schedule on Monday.

The airline conducts daily flights to Thiruvananthapuram and Kozhikode international airports and 11 weekly flights to Cochin International Airport. Keralites working in Gulf states prefer to travel via Doha, and it is reflected in the flights being operated from the Hamad International Airport to the State.

Though sources in the airline maintained that flights to Kerala on Tuesday would be operated as per schedule, uncertainty prevails over the travel of Keralites to Gulf states like the United Arab Emirates, Saudi Arabia, Bahrain, Yemen, and Egypt. Many use Qatar as the gateway to reach Saudi Arabia.

 Abu Dhabi’s state-owned Etihad Airways has suspended all its flights to and from Doha. As a result, those proceeding via Emirates flights from its hub in Dubai to Doha will have to depend on other airlines.

Sources in the airlines said the impact of the diplomatic crisis on the aviation sector would be felt in the coming days, and flyers would have to skip the Hamid International Airport in Doha for proceeding to other Gulf states.

The crisis will also be a setback for the Kerala diaspora in Qatar that has been growing noticeably in the wake of the booming construction sector as part of the build-up to the FIFA World Cup 2022.

Unlike other the Gulf Cooperation Council (GCC) nations where the Kerala diaspora is shrinking due to a host of reasons, Keralites have been looking forward for greener pastures in Qatar of late.


How Paul Romer has been sidelined in World Bank due to war over words and usage of ‘and’…

May 26, 2017

Interesting piece on politics of economic research and grammar usage  in World Bank.

The World Bank’s chief economist has been stripped of his management duties after researchers rebelled against his efforts to make them communicate more clearly, including curbs on the written use of “and.”

Paul Romer is relinquishing oversight of the Development Economics Group, the research hub of the Washington-based development lender, according to an internal staff announcement seen by Bloomberg. Kristalina Georgieva, the chief executive for the bank’s biggest fund, will take over management of the unit July 1.

Romer will remain chief economist, providing management with “timely thought leadership on trends directly affecting our client countries, including the ‘future of work,’” World Bank President Jim Yong Kim said in the note to staff dated May 9.

Romer said he met resistance from staff when he tried to refine the way they communicate. “I was in the position of being the bearer of bad news,” he said in an interview. “It’s possible that I was focusing too much on the precision of the communications and not enough on the feelings my messages would invoke.”

It’s unusual for the World Bank’s chief economist, a role once occupied by heavyweights such as Stanley Fischer and Lawrence Summers, not to run the Development Economics Group, known as DEC, which publishes original research, develops the bank’s forecasts and oversees its data. The move raises questions about how much freedom the bank’s economists will have to do outside-the-box research on policies to help the world’s poorest.


As developing world aspires to become the developed US, the developed US is becoming like a developing country..

April 26, 2017

Prof Peter Temin of MIT who is a distinguished economic historian warns about decline of US. He actually goes a step further and says US has descended into a developing economy. He has recently written a book called The Vanishing Middle Class.

He actually says America is no more one country but divided into two parts. One part keeps growing and other keeps declining. The explanation is quite similar to India vs Bharat:


Why have both Venezuela and South Africa failed to achieve what their leaders sought?

March 20, 2017

Another interesting piece by Prof Ricardo Hausmann. He brings in the case of South Africa whose leaders have tried to redistribute capital. But like most others, the results have not materialised.

Why? The reason is leaders have been inspired by Marx who seek to redistribute income. In a Marxian world only two ingredients matter: capital and labour. But another key ingredient – knowhow- misses from their thinking:


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