nach oben

Erschienen in:

2017 | OriginalPaper | Buchkapitel

Financing Sustainable Growth Through Energy Exports and Implications for Human Capital Investment

verfasst von : Unurjargal Nyambuu

Erschienen in: Inequality and Finance in Macrodynamics

Verlag: Springer International Publishing

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config

KI-gestützte Suche

Aus

Abstract

This paper examines the impact of energy resources financing on investment in human capital through the mechanism of growth dynamics. This is done within a context that includes global financial markets and exports of non-renewable energy. These are frequently related to issues of debt accumulation, which naturally raises questions relating to sustainability and welfare—both present and future. Energy export’s contribution to economic growth is emphasized and the distinction between resource-rich and resource-poor countries is highlighted. Major external disturbances for sustained resource-driven development, which can make a country more vulnerable to economic shocks, are discussed. Numerical analysis using Nonlinear Model Predictive Control confirms the empirically observed long-run patterns when non-renewable resources decline monotonically and become depleted. The solutions also confirm typical boom/bust cycle phenomena, where excessive debt may effectively strangle growth. In addition, the implications of investment in human capital for inequality are discussed.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Jetzt informieren

Vorheriges Kapitel Demographic Change and the Rates of Return to Risky Capital and Safe Debt

Nächstes Kapitel Macroeconomic Risk, Fiscal Policy Rules and Aggregate Volatility in Asymmetric Currency Unions: A Behavioral Perspective

Nur mit Berechtigung zugänglich

According to IMF (2012) and Berg et al. (2012), countries with at least a 20% share of natural resource exports in total exports (average of 2006–2010) are classified as resource-rich countries.

A number of studies including Auty (1990, 1993, 2001), Sachs and Warner (1995, 1999, 2001), and Smith (2004) show a negative relationship between natural resource abundance and economic performance.

This refers to the “top 1 percent highest incomes” in Piketty (2014, p. 273).

Piketty (2014, p. 23) highlights the destabilizing force of divergence “associated with the process of accumulation and concentration of wealth when growth is weak and the return on capital is high”.

Human capital was introduced in the basic closed economy growth model by early researchers, e.g., Uzawa (1965) and Lucas (1988). This endogenous Uzawa-Lucas growth model was estimated in Greiner et al. (2005) using data from the US and Germany. Their empirical evidence fits the actual data.

NMPC methodology is explained in Appendix 3.

Current account data before 2005 are compiled based on Balance of Payments Manual BPM5, but data after 2005 are compiled following the latest manual of BPM6.

According to the World Bank, gross external debt “is debt owed to nonresidents repayable in currency, goods, or services.” This includes not only public publicly guaranteed debt, but also private non-guaranteed long-term debt, use of IMF credit, and short-term debt.

See Appendix 3, on NMPC methodology, for a discussion of the finite upper limit in the integration term.

Solution of the theoretical model using a current-value Hamiltonian and optimality conditions is sketched in Appendix 1. Recent studies show that NMPC is effective in approximating longer-horizon decision problem (Grüne and Pannek 2011; Nyambuu and Semmler 2014). When NMPC is used, infinite decision horizons are truncated; they are replaced with finite horizons. Grüne et al. (2013) show how this method can be used in dynamic decision problems in economics. See Appendix 3 for a discussion of NMPC and, in particular, the finite upper limit in the integration term of Eq. (1).

With regard to specific parameter choices, I follow Blanchard (1983), Semmler and Sieveking (2000), and Mittnik and Semmler (2014). Although I have illustrated the ideas using specific parameters, the results presented herein are robust with respect to their variation. In Appendix 4 on NMPC solutions with different parameters, the sensitivity of the results to specific parameter choice is discussed. In addition, results for different initial conditions are shown in Appendix 4.

A basic closed economy growth model is estimated in Greiner and Semmler (2008) using a nonlinear least squares techniques. Their estimated data on capital stock/resources and consumption/resources ratios fit the data well and highlight the periods of oil crises in the 1970s.

For details, see Semmler and Sieveking (2000, p. 1124).

Solution of the open economy model with a current-value Hamiltonian and optimality conditions is sketched in Appendix 2.

This relationship can be shown from definition of the GDP which is Y = C + I + G + CA. From here we derive the current account as CA = Y − C − I − G or CA = S − I + T − G with S = Y − T − C.

Potential non-monetary costs of a very high debt can be issues of solvency and political risks as discussed in Blanchard (1983). The penalty term in the objective function, depending on whether the cost of debt is high or low, determines the path of the debt growth. Based on the analysis of marginal cost of debt and implications of different parameters in the penalty term, Blanchard (1983, p. 195) argues that “if a reduction in the growth of debt has to be achieved, it must be done by reducing consumption rather than investment”.

Again, with regard to the choice of values for the parameters and the penalty term, I follow Blanchard (1983), Semmler and Sieveking (2000), and Mittnik and Semmler (2014).

Some of these parameter values are taken from Blanchard (1983), Semmler and Sieveking (2000), and Mittnik and Semmler (2014).

For details see Greiner and Semmler (2008, p. 64) and Greiner et al. (2005, p. 26). Earlier studies by Wan (1970) and Ryder and Heal (1973) highlighted the weighted contribution of the investment in human capital.

See Grüne and Pannek (2011).

Acemoglu, D. (2002). Technical change, inequality, and the labor market. Journal of Economic Literature, 40(1), 7–72.CrossRef

Aghion, P. (2002). Schumpeterian growth theory and the dynamics of income inequality. Econometrica, 70(2), 855–882.CrossRef

Alvaredo, F., & Gasparini, L. (2015). Recent trends in inequality and poverty in developing countries. In A. B. Atkinson & F. Bourguignon (Eds.), Handbook of income distribution (Vol. 2B. pp. 1845–1881, 697–805). Amsterdam, New York: North Holland, Elsevier.

Autor, D. (2010). The Polarization of Job Opportunities in the U.S. Labor Market: Implications for Employment and Earnings. The Center for American Progress and the Hamilton Project Working Paper, Washington, DC.

Auty, R. M. (1990). Resource-based industrialization: Sowing the oil in eight developing countries. Oxford: Clarendon Press.

Auty, R. M. (1993). Sustaining development in mineral economies: The resource curse thesis. New York: Oxford University Press.CrossRef

Auty, R. M. (2001). Resource abundance and economic development. New York: Oxford University Press.

Bekaert, G., Harvey, C. R., & Lundblad, C. (2006). Growth volatility and financial liberalization. Journal of International Money and Finance, 25, 370–403.CrossRef

Berg, A., Portillo, R., Yang, S. S., & Zanna, L. F. (2012). Public Investment in Resource-Abundant Developing Countries. IMF Working Paper No. 12/274. International Monetary Fund, Washington, DC. https://www.imf.org/external/pubs/cat/longres.aspx?sk=40105.0.

Bernard, L., & Nyambuu, U. (2015). Global warming and clean energy in Asia. OUPblog. Oxford University Press’s Academic Insights for the Thinking World. http://blog.oup.com/2015/07/global-warming-clean-energy-asia/.

Bernard, L., & Semmler, W. (2012). Boom–bust cycles: Leveraging, complex securities, and asset prices. Journal of Economic Behavior and Organization, 81(2), 442–465. ISSN: 0167-2681. doi:10.1016/j.jebo.2011.07.002.

Bhagwati, J., & Kosters, M. H. (1994). Trade and wages. Washington, DC: AEI Press.

Blanchard, O. J. (1983). Debt and the current account deficit in Brazil. NBER Chapters. National Bureau of Economic Research, Inc. http://www.nber.org/books/arme83-1.

Blanchard, O. J., & Fischer, S. (1989). Lectures on macroeconomics. Oxford: MIT Press.

Bloom, D. E., & Brender, A. (1993). Labor and the emerging world economy. Population Bulletin, 48(2), 2–39.

Caner, M., Grennes, T., & Koehler-Geib, F. (2010). Finding the Tipping Point—When Sovereign Debt Turns Bad. World Bank Policy Research Working Paper No. 5391. World Bank, Washington, DC. doi:10.1596/1813-9450-5391.

Cecchetti, S., Mohanty, M., & Zampolli, F. (2011). The real effects of debt. Bank for International Settlements Working Paper No. 352. http://www.bis.org/publ/work352.htm.

Costinot, A. (2009). An elementary theory of comparative advantage. Econometrica, 77, 1165–1192.CrossRef

Dasgupta, P., & Heal, G. (1974). The optimal depletion of exhaustible resources. In The Review of Economic Studies, Vol. 41, Symposium on the Economics of Exhaustible Resources (pp. 3–28).http://www.jstor.org/stable/2296369.

Davis, D. R. (1996). Trade Liberalization and Income Distribution. NBER Working Paper No. 5693, National Bureau of Economic Research, Cambridge, MA

Di Giovanni, J., & Levchenko, A. (2008). Trade Openness and Volatility. IMF Working Paper, WP/08/146. http://www.imf.org/external/pubs/ft/wp/2008/wp08146.pdf.

Easterly, W., Islam, R., & Stiglitz, J. E. (2001). Shaken and stirred: Explaining growth volatility. In B. Pleskovic & N. Stern (Eds.), Annual World Bank Conference on Development Economics.

Exploration in South America (2001). Mining Journal, April 20.

Feenstra, R., & Hanson, G. (1996). Foreign investment, outsourcing and relative wages. In R. C. Feenstra et al. (Eds.), Political economy of trade policy: Essays in honor of Jagdish Bhagwati (pp. 89–127). Cambridge, MA: MIT Press.

Feenstra, R., & Hanson, G. (1997). Foreign direct investment and relative wages: Evidence from Mexico’s maquiladoras. Journal of International Economics, 42(3–4), 371–393.CrossRef

Goldberg, P., & Pavcnik, N. (2007). Distributional Effects of Globalization in developing Countries. NBER Working Papers, No. 12885.CrossRef

Greiner, A., Grüne, L., & Semmler, W. (2013). Economic growth and the transition from non- renewable to renewable energy. In Environment and development economics. Cambridge: Cambridge University Press. doi:10.1017/S1355770X13000491.

Greiner, A., Rubart, J., & Semmler, W. (2004). Economic growth skilled-biased technical change and wage inequality: A model and estimations for the U.S. and Europe. Journal of Macroeconomics, 26(4), 597–621.CrossRef

Greiner, A., & Semmler, W. (2008). The global environment, natural resources, and economic growth. New York: Oxford University Press.CrossRef

Greiner, A., Semmler, W., & Gong, G. (2005). The forces of economic growth: A time series perspective. New Jersey: Princeton University Press.CrossRef

Grossman, G. (2013). Heterogeneous Workers and International Trade. NBER Working Paper No. 18788.

Grüne, L. (2013). Economic receding horizon control without terminal constraints. Automatica, 49(3), 725–734.CrossRef

Grüne, L., & Pannek, J. (2011). Nonlinear model predictive control: Theory and algorithms. Berlin: Springer.CrossRef

Grüne, L., Semmler, W., & Stieler, M. (2013). Using nonlinear model predictive control for dynamic decision problems in economics. doi:10.2139/ssrn.2242339.

Harberger, A. C., Smith, G. W., & Cuddington, J. T. (1985). Lessons for debtor-country managers and policymakers. In International debt and the developing countries. World Bank. http://www.econbiz.de/Record/lessons-for-debtor-country-managers-and-policy-makers-arberger-arnold/10002651663.

Helpman, E., Itskhoki, O., & Redding, S. (2010). Inequality and unemployment in a global economy. Econometrica, 78(4), 1239–1283.CrossRef

IMF (2012). Macroeconomic Policy Frameworks for Resource-Rich Developing Countries. IMF Policy Paper. https://www.imf.org/external/np/pp/eng/2012/082412.pdf.

IMF (2013). World Economic Outlook. April 2013. http://www.imf.org/external/pubs/ft/weo/2013/01/pdf/text.pdf.

IMF (2016). International Financial Statistics. http://elibrary-data.imf.org/finddatareports.aspx?d=33061&e=169393. Accessed 8 July 2016.

Irwin, D. (2008). Trade and wages, reconsidered: comments and discussion. Brookings Papers on Economic Activity, Spring, 38(1), 138–143.CrossRef

Kanbur, R. (2015). Globalization and inequality. In A. B. Atkinson & F. Bourguignon (Eds.), Handbook of income distribution (Vol. 2B, pp. 1845–1881). Amsterdam, New York: North Holland, Elsevier.

Katz, L. (2008). Trade and wages, reconsidered: comments and discussion. Brookings Papers Economic Activity, 2008(1), 143–149.

Katz, L. F., & Murphy, K. M. (1992). Changes in relative wages, 1963–1987: Supply and demand factors. Quarterly Journal of Economics, 107, 35–78.CrossRef

Kose, A., Prasad, E., & Terrones, M. (2006). How do trade and financial integration affect the relationship between growth and volatility? Journal of International Economics, 69, 176–202.CrossRef

Krugman, P. (2008). Trade and wages, reconsidered. Brookings Papers Economic Activity, 39(1), 103–137.CrossRef

Krugman, P. (1994). Past and prospective causes of high unemployment (Fourth Quarter, pp. 23–43). Federal Reserve Bank of Kansas City: Economic Review.

Levy, F., & Murnane, R. J. (1992). US earnings levels and earnings inequality: A review of recent trends and proposed explanations. Journal of Economic Literature, 30, 1333–1381.

Lewis, N. S. (2007). Powering the planet. Engineering and Science, 70(2), 12–23.

Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22, 3–42.CrossRef

Manzano, O., & Rigobon, R. (2001). Resource curse or debt overhang? NBER Working Paper No. 8390. National Bureau of Economic Research, Inc. http://ssrn.com/abstract=277300.CrossRef

Mittnik, S., & Semmler, W. (2014). Overleveraging, Financial Fragility and the Banking-Macro Link: Theory and Empirical Evidence. Discussion paper No. 14–110, ZEW Center for European Economic Research.

Nyambuu, U. (2016). Foreign exchange volatility and its implications for macroeconomic stability: An empirical study of developing economies. In L. Bernard, & U. Nyambuu (Eds.), Dynamic modeling, empirical macroeconomics, and finance (pp. 163–182). Springer International Publishing.

Nyambuu, U., & Bernard, L. (2015). A quantitative approach to assessing sovereign default risk in resource-rich emerging economies. International Journal of Finance and Economics, Wiley 1512. doi:10.1002/ijfe.1512.

Nyambuu, U., & Semmler, W. (2014). Trends in the extraction of non-renewable resources: The case of fossil energy. Economic Modelling Elsevier, 37(C), 271–279. doi:10.1016/j.econmod.2013.11.020.CrossRef

Nyambuu, U., & Semmler, W. (2017a). Emerging markets’ resource booms and busts, borrowing risk and regime change. Structural Change and Economic Dynamics, 41, 29–42.

Nyambuu, U., & Semmler, W. (2017b). The challenges in the transition from fossil fuel to renewable energy. In: T. Devezas, J. Leitão, & A. Sarygulov (Eds.), Industry 4.0 entrepreneurship and structural change in the new digital landscape (pp. 157–182). Springer International Publishing.

Nyambuu, U., & Tapiero, C. S. (2017). Globalization, gating, and risk finance. England: Wiley. Forthcoming.

Pattillo, C., Poirson, H., & Ricci, L. (2002). External Debt and Growth. IMF Working Paper No. 02/69. International Monetary Fund, Washington. http://www.imf.org/external/pubs/ft/wp/2002/wp0269.pdf.

Pearce, D. W., Barbier, E., & Markandya, A. (1990). Sustainable development: Economics and environment in the third world. Aldershot: Edward Elgar Publishing.

Piketty, T. (2014). Capital in the twenty-first century. Cambridge: Harvard University Press.CrossRef

Richardson, D. J. (1995). Income inequality and trade: How to think, what to conclude. Journal of Economic Perspectives, 9, 33–55.CrossRef

Rodrik, D. (1997). Has globalization gone too far? Washington, DC: Institute for International Economics.

Ryder, H. E., & Heal, G. M. (1973). Optimal growth with intertemporally dependent preferences. Review of Economic Studies, 40, 1–31.CrossRef

Sachs, J. D., & Warner, A. M. (1995). Natural Resource Abundance and Economic Growth. NBER Working Paper No. 5398. National Bureau of Economic Research, Inc. http://www.nber.org/papers/w5398.

Sachs, J. D., & Warner, A. M. (1999). The big push, natural resource booms and growth. Journal of Development Economics, 59(1), 43–76. http://EconPapers.repec.org/RePEc:eee:deveco:v:59:y:1999:i:1:p:43-76.

Sachs, J. D., & Warner, A. M. (2001). The curse of natural resources. European Economic Review, 45, 827–38. http://www.earth.columbia.edu/sitefiles/file/about/director/pubs/EuroEconReview2001.pdf.CrossRef

Semmler, W. (2003). On the Mechanisms of Inequality. Center for Empirical Macroeconomics, Bielefeld and New School University. http://www.wiwi.uni-bielefeld.de/forschung/cemm_wpapers/upload/Mechanisms_of_Inequality.pdf.

Semmler, W., & Sieveking, M. (2000). Critical debt and debt dynamics. Journal of Economic Dynamics and Control, 24(5–7), 1121–1144.CrossRef

Smith, B. (2004). Oil wealth and regime survival in the developing world, 1960–1999. American Journal of Political Science, 48(2), 232–246. doi:10.1111/j.0092-5853.2004.00067.x.CrossRef

Solow, R. M. (1973). Is the end of the world at hand?, In A. Weintraub, E. Schwartz, & J. R. Aronson (Eds.), The economic growth controversy (pp. 38–61). New York: International Arts & Sciences Press.

Stein. J., & Paladino, G. (2001). Country Default Risk: An Empirical Assessment. Center for Economic Studies & Ifo Institute for Economic Research Working Paper No. 469. Munich, Germany.

Stiglitz, J. (1974). Growth with exhaustible natural resources: efficient and optimal growth paths. The Review of Economic Studies, Vol. 41, Symposium on the Economics of Exhaustible Resources (pp. 123–137). http://www.jstor.org/stable/2296377.

Ursua, J., & Wilson, D. (2012). Risks to growth from build-ups in public debt. Global Economics Weekly (No. 12/10).

U.S. Energy Information Administration (2016). Statistics. Energy Information Administration. http://www.eia.gov/. Accessed 5 July 2016.

Uzawa, H. (1965). Optimum technical change in an Aggregative model of economic growth. International Economic Review, 6, 18–31.CrossRef

Wan, H. Y. (1970). Optimal saving programs under intertemporally dependent preferences. International Economic Review, 11, 521–547.CrossRef

Wood, A. (1994). North-south trade, employment and inequality: Changing fortunes in a skill-driven world. Oxford: Clarendon Press.

Wood, A. (1999). Openness and wage inequality in developing countries: The Latin American challenge to East Asian conventional wisdom. In R. Baldwin et al. (Eds.), Market integration, regionalism and the global economy. Cambridge: Cambridge University Press.

World Bank (2016). Databank. http://databank.worldbank.org/data/home.aspx. Accessed 1 July 2016.

World Commission on Environment and Development (1987). Our Common Future (The Brundtland Report). New York: Oxford University Press.

Wright, G., & Czelusta, J. (2007). Resource-based growth past and present. In D. Lederman & W. F. Maloney (Eds.), Natural resources: Neither curse nor destiny (pp. 183–212). Washington, DC: World Bank.

Titel: Financing Sustainable Growth Through Energy Exports and Implications for Human Capital Investment
verfasst von: Unurjargal Nyambuu
Verlag: Springer International Publishing
Buch: Inequality and Finance in Macrodynamics
Print ISBN: 978-3-319-54689-6

Electronic ISBN: 978-3-319-54690-2

Copyright-Jahr: 2017
DOI: https://doi.org/10.1007/978-3-319-54690-2_9