Economic growth in development : examining the effects of contemporary sources of economic growth in selected countries across continents

“Economic growth” is a synonym of the relative change of the gross domestic product (GDP) or GDP per capita. The GDP of a country is one of the most important economic indicators in politics because mostly policy-makers and the public interpret the GDP as proxy of welfare. Consequently, the growth rate of GDP (per capita) is an indicator of how fast the welfare is increasing. In the thesis, we examine the contemporary drivers of economic growth based on country-specific studies which spans over five continents – Africa (South Africa and Kenya), Asia (Bangladesh and Vietnam), America (Latin America and the Caribbean), Oceania (Fiji and other small island states) and Europe (Albania, Bulgaria, Hungary and Romania). The purpose of the thesis is to identify and highlight relevant sources of economic growth within the augmented Solow model (1956) specified using the Cobb-Douglas framework. The thesis comprises of a portfolio of peer-reviewed papers which are published in international journals between 2012 and 2015. In all cases, we follow the intuition of new structural growth (NSE) paradigm. One of the tenets of the NSE paradigms is that each country’s growth process is to some extent determined by its resource endowment and country-specific factors, and that the role of government is important in shaping the future of growth for a country. Subsequently, the factors and the sectors contributing to growth needs to have the potential to generate investment, employment and hence income for a country. In this regard, we examine some specific sources of growth that can be used to drive economic activities and is expected to support economic development, thus being of possible interest to policy makers and economic planners. The specific method used for empirical estimation is the auto-regressive distributed lag (ARDL) bounds procedure. We apply the Solow’s (1956) neoclassical growth model where we define output as a function of capital stock, labour and technology, and interpret the latter as a function depending on other exogenous factors. Notably, there is no clear definition of ‘technology’ in the model and hence it is regarded as a (Solow) residual. The technological progress is thus (a set) of factors that supports growth without necessarily adding more capital and labour. Consequently, we transform the model and show output per worker as a function of capital per worker and technological progress, where the latter is broadly defined. We identify and include technological progress as factors relevant to a country/region and estimate the long-run association, impacts and causality. While focusing on different countries in the region with different country-specific (relevant) plausible drivers of growth, the papers show the factors (which point to specific sectors) that may be of interest to policy planners in boosting growth. In what follows, we identify and highlight the effects of contemporary sectors which we consider as key drivers of growth in countries or group of countries that can be a representative of the continent or region. In Paper 1, Exploring polarization and uniformity in sectors and inflows vis-à-vis growth A study of Brazil-led and Mexico-led clusters in the region, we emphasise the important roles of broad sectors (agriculture, manufacturing and services) and capital inflows (Remittances, foreign direct investment, official development assistance and financial development) in a group of countries led by Mexico (Mexico-cluster) and Brazil (Brazil-cluster). In this study, we highlight the sectors that are specifically relevant for growth in the two clusters and finally, the uniformity in the sectors in the Latin America and the Caribbean. In Paper 2, Remittances and economic growth: A study of Guyana, we show that remittances inflow plays an important part in shaping the growth of Guyanese economy. In Paper 3: Exploring the role of technology, tourism and financial development: an empirical study of Vietnam, and Paper 4: Exploring the Nexus Between ICT, Remittances and Economic Growth A Study of Vietnam, the focus is on the emerging and rapidly industrializing economy of Vietnam, which is a member of the Association of Southeast Asian Nation (ASEAN). We note that the role of information and communications technology and financial sector development are instrumental in supporting growth of Vietnam. Moreover, in spite of noting the high inflow of remittances to Vietnam, we find that remittance only have short-run impacts on growth. In Paper 5: Exploring the nexus between remittances and economic growth: a study of Bangladesh, we focus on Bangladesh, which is one of the developing countries in South Asia and one of the largest recipients of remittances. The study shows that remittances support growth in the long-run. Next, in Paper 6: Exploring the nexus between information and communications technology, tourism and growth in Fiji and Paper 7: Accounting for telecommunications contribution to economic growth: A study of Small Pacific Island States, the focus is on small developing island States. In Paper 6, the focus is primarily on Fiji, and in Paper 7, we also include Kiribati, Marshall, Federated States of Micronesia, Palau, Solomon Islands, Timor- Leste, Tonga, Tuvalu and Vanuatu. In Paper 6, the focus is on technology and tourism, where we highlight that both are important drivers of growth in Fiji. Paper 7 mainly focus on the potential of information and communications technology and highlight the positive impact of technology on growth in the small island developing states. Finally, in Paper 8: Effects of energy consumption on per worker output: A study of Kenya and South Africa and Paper 9: Exploring the effects of energy consumption on output per worker: A study of Albania, Bulgaria, Hungary and Romania, we focus on energy as an important driver of growth in two African and four south-east European countries, respectively. In general, the studies show that energy has a long-run association and impact on growth for the countries in the two regions, although they are located on two very different continents Consequently, the collective contributions from the above papers included in the thesis are: 1) investigating the effects of major sectors (such as ICT and Telecommunications/technology development, Energy, Tourism, Remittances and financial development) which are considered as driving forces of economic growth using a well-established framework; 2) Examining the effects of the sectors on the countries/regions across five continents which to some extent have been either overlooked in the literature due to data constraints or received limited attention in the past due to its size and remoteness; 3) Applying a relatively advanced technique, the ARDL bounds test for cointegration or long-run association (Pesaran, Shin and Smith, 2001) to examine the effects of contemporary sources of economic growth relevant to a country/region; extending the previous literature about economic growth and development economics; 5) Providing a good guide for developing countries in terms of policy towards enhancing economic growth by focusing on the economic sources of growth; and 6) Getting an empirical evidence of the effects of specific and relevant sectors for a country/region to focus on, in order to further develop their economy