Labour institutions and vulnerability of developing economies under capital inflows
Journal Title: Economic Research-Ekonomska Istraživanja - Year 2016, Vol 29, Issue 1
Abstract
The paper argues that labour institutions, such as efficiency wages or their analogues more typical for the former planned economies, can aggravate a vulnerability of developing economies caused by windfalls, such as additional oil income or foreign aid. The economy is modelled by use of the, so-called, fK endogenous growth model based on microfoundations describing the labour institutions. Despite a rather small formal difference, the model differs much in its properties from traditional growth models. The fK model generalises the well-known AK model but is free of the known shortcomings of the latter. Our analytical results as well as computer simulations show that, despite the presence of temporary acceleration opportunities, the unstable windfalls prohibit long-run sustainable growth. The windfall can be followed by a restructuring leading to a long-run economic decline after ceasing the capital inflow. The effect of the capital inflow depends on the relation between the expected inflow growth rate and the economic growth rate of the benchmark model (without inflow), as well as on the time preferences in the economy. If the capital inflow is expected to grow faster than the proper growth rate of the economy, this can lead to a decline in wages.
Authors and Affiliations
Vladimir Matveenko
Keywords
Related Articles
- EP ID EP203541
- DOI 10.1080/1331677X.2016.1193947
- Views 81
- Downloads 0
Determinants of tourism industry in selected European countries: a smooth partial least squares approach
Various events, such as the global economic crisis, have seriously hampered long-term stable tourism processes with a particular relevance to international visits. In this study, we use the smooth paths of partial least...
Residential market ratings using fuzzy logic decision-making procedures
The recent global financial crisis has highlighted the important role that the real estate market plays in the global economy. The specific character of the real estate market, the availability of market information and...
Economic crisis, women entrepreneurs and bank loans: some empirical evidence from Italy
This paper presents the main findings from an empirical research project, whose aim was to answer the following research questions: (1)Did men and women entrepreneurs ask for new bank loans during the crisis? (2) Did the...
Outward foreign direct investment and domestic investment: evidence from China
This paper examines the relationship between outward foreign direct investment (OFDI) and domestic investment (DI) in China using cointegration and Granger causality analyses (including bivariate and multivariate Granger...
Analysis of the efficiency of insurance companies in Serbia using the fuzzy AHP and TOPSIS methods
The aim of this study is to propose a fuzzy multi-criteria model that will facilitate the assessment of insurance companies’ efficiency. This study includes all companies operating within the insurance sector in Serbia i...