Essays in Growth and Development

This thesis contributes to economic growth and long-run economic development literature which continues to be the most exciting, challenging and admissible sub-areas of economics. Growth and development is multi-faceted as it is not just concerned with the growth at aggregate levels but it also includes the elemental changeover of the economy, for instance, social, institutional, sectoral and structural transformations. This leads to the rich cluster of questions and various new econometric methods and approaches to find their answers. Some of these questions such as sources of growth pattern differences among countries, the factors responsible for the differences in progress of a nation and the impact of financial development and remittances on economic growth are the subjects of present work. The suitable modelling techniques are adopted to recognize the sources and causes, and also to explain the underlying factors and variables responsible for such growth variations and differences across countries. This dissertation comprises of three chapters addressing three different aspects related to growth and development of the countries. In second chapter, the sources of growth are determined around growth regime changes using DEA- Malmquist Productivity Index technique combined with the derived structural breaks in growth series. The variant of unified Fit and Filter methodology is applied, which allows to detect large number of breaks in growth series which get excluded in case of filter based methods or statistical techniques. This approach helps to determine the structural breaks in the growth series firstly, by identifying true breaks in the volatile growth series, generally related to developing countries and secondly, by detecting the false breaks in relatively smooth growth series, usually associated with developed countries. Moreover, the productivity growth is decomposed into efficiency change, technological progress, capital deepening and human capital accumulation using DEA-Based Malmquist Productivity Index approach. The results suggest importance of efficiency changes for both positive and negative structural breaks in growth series. Besides, they also highlight the positive role of factor accumulation on growth accelerations. A two-stage (DEA and regression) analysis of the determinants of Nation's progress is conducted in the third chapter. Nation's progress of a country is an essential element in growth theory, and its measurement is not exclusively based on economic factors but also on social, environmental and human welfare variables. The aim of this study is to examine the influence of the potential economic, institutional, demographic and geographic determinants on the progress of a nation. The performance of a nation is measured as an estimated efficiency score within which it transforms a given number of endowments such as human and physical capital into national well-being and general human welfare. The economic, environmental and human well-being yardsticks, namely GDP per capita, persons employed, carbon dioxide emission and availability of clean water with proper sanitation facilities are used to measure the nation's progress. The estimated bias adjusted performance scores in stage 1 are regressed on the potential covariates. Simar and Wilson's double bootstrap procedure is used, which allows valid inferences in the presence of an unknown serial correlation in the efficiency scores. The second stage results reveal that the considered covariates play a significant role in the progress of a nation. In fourth chapter, a panel of 103 countries including developed and developing economies over the period 1980-2014 is used to study the role of financial development, remittances and their interaction terms on economic growth and total productivity. The results suggest positive role of financial development (FD) and remittances (REM) on economic growth. Moreover, the interaction terms (FD.REM) support the substitution hypothesis, which suggest the relaxing role of remittances in case of weak financial markets in receiving countries. However, the role of financial development and remittances on productivity growth is insignificant. Furthermore, the state of development of the countries also influences the corresponding roles of remittances, financial development and their interaction terms on economic growth.