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Openness, Human Development, and Fiscal Policies: Effects on Economic Growth and Speed of Adjustment

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  • Delano Villanueva

    (International Monetary Fund)

Abstract

The model developed here postulates that learning through experience raises labor productivity with three major consequences. First, the steady-state growth rate of output becomes endogenous and is influenced by government policies. Second, the speed of adjustment to steady-state growth increases, and enhanced learning further reduces adjustment time. Third, both steady-state growth and the optimal net rate of return to capital are higher than the sum of the exogenous rates of technical change and population growth. Simulation results confirm the model's faster speed of adjustment, and regression analysis finds that a large part of the divergent growth patterns across countries is related to the extent of economic openness, the depth of human development, and the quality of fiscal policies.

Suggested Citation

  • Delano Villanueva, 1994. "Openness, Human Development, and Fiscal Policies: Effects on Economic Growth and Speed of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 41(1), pages 1-29, March.
    • Handle: RePEc:pal:imfstp:v:41:y:1994:i:1:p:1-29
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    Cited by:

    1. Delano S Villanueva & Roberto S Mariano & Diwa C Guinigundo & Abbas Mirakhor, 2023. "Finance and Endogenous Growth," World Scientific Book Chapters, in: Economic Adjustment and Growth Theory and Practice, chapter 5, pages 96-118, World Scientific Publishing Co. Pte. Ltd..
    2. Delano S Villanueva & Roberto S Mariano & Diwa C Guinigundo & Abbas Mirakhor, 2023. "External Debt, Adjustment, and Growth," World Scientific Book Chapters, in: Economic Adjustment and Growth Theory and Practice, chapter 9, pages 222-249, World Scientific Publishing Co. Pte. Ltd..
    3. Roberto Mariano & Delano Villanueva, 2005. "Sustainable External Debt Levels : Estimates for Selected Asian Countries," Macroeconomics Working Papers 22468, East Asian Bureau of Economic Research.
    4. Dilip Dutta & Nasiruddin Ahmed, 2004. "Trade liberalization and industrial growth in Pakistan: a cointegration analysis," Applied Economics, Taylor & Francis Journals, vol. 36(13), pages 1421-1429.
    5. Shahbaz, Muhammad, 2012. "Does trade openness affect long run growth? Cointegration, causality and forecast error variance decomposition tests for Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2325-2339.
    6. Slotmaekers, Veerle & de Souza, Lúcio Vinhas, 2005. "Effects of the EU-Mexico Free Trade Agreement," Conference papers 331345, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Sumbal Fatima & Bateer Chen & Muhammad Ramzan & Qamar Abbas, 2020. "The Nexus Between Trade Openness and GDP Growth: Analyzing the Role of Human Capital Accumulation," SAGE Open, , vol. 10(4), pages 21582440209, November.
    8. Savvides, Andreas, 1995. "Economic growth in Africa," World Development, Elsevier, vol. 23(3), pages 449-458, March.
    9. Agenor, Pierre-Richard & Izquierdo, Alejandro & Fofack, Hippolyte, 2003. "The integrated macroeconomic model for poverty analysis : a quantitative macroeconomic framework for the analysis of poverty reduction strategies," Policy Research Working Paper Series 3092, The World Bank.
    10. Delano S. Villanueva, 2008. "Social and Political Factors in a Model of Endogenous Economic Growth and Distribution: An Application to the Philippines," World Scientific Book Chapters, in: Macroeconomic Policies For Stable Growth, chapter 6, pages 176-210, World Scientific Publishing Co. Pte. Ltd..
    11. Mr. Philip R. Gerson, 1998. "The Impact of Fiscal Policy Variables on Output Growth," IMF Working Papers 1998/001, International Monetary Fund.
    12. Robert Holzmann & Christian Thimann & Angela Petz, 1994. "Pressure to Adjust: Consequences for the OECD Countries from Reforms in Eastern Europe," International Trade 9403001, University Library of Munich, Germany.
    13. Holzmann, Robert, 1996. "Fiscal issues of shifting from unfunded to funded pension," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 34300, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    14. AGENOR Pierre-Richard & IZQUIERDO Alejandro & FOFACK Hippolyte, 2010. "IMMPA: A Quantitative Macroeconomic Framework for the Analysis of Poverty Reduction Strategies," EcoMod2003 330700003, EcoMod.
    15. Aurora Teixeira & Natércia Fortuna, 2003. "Human Capital, Innovation Capability and Economic Growth," FEP Working Papers 131, Universidade do Porto, Faculdade de Economia do Porto.
    16. Tarján, Tamás, 2011. "Egyenes vagy S alakú a Jánossy-féle trendvonal?. Hosszú távú egyensúlyi állapot Maddison adatai és az új növekedéselmélet tükrében [A simple or an S-shaped Jánossy trend?. A long-term state of equi," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 552-564.

    More about this item

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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