Inclusive human development in pre-crisis times of globalisation-driven debts

Asongu, Simplice and EFOBI, Uchenna and BEECROFT, Ibukun (2014): Inclusive human development in pre-crisis times of globalisation-driven debts.

Abstract

The paper verifies the Azzimonti et al. (2014) conclusions on a sample of 53 African countries for the period 1996-2008. Authors of the underlying study have established theoretical underpinnings for a negative nexus between rising public debt and inequality in OECD nations. We assess the effects of four debt dynamics on inequality adjusted human development. Instrumental variable and interactive regressions were employed as empirical strategies. Two main findings were established which depend on whether debt is endogenous to or interactive with globalisation. First, when external debt is endogenous to globalisation, the effect on inclusive human development is negative, whereas when it is interactive with globalisation, the effect is positive. This may reflect the false economics of pre-conditions. The magnitudes of negative estimates from endogenous related effects were higher than the positive marginal interactive effects. Policy implications were discussed.

• Item Type: MPRA Paper
• Language: English
• Keywords: Debts; globalisation; inequality; inclusive development; Africa
• Subjects: D - Microeconomics > D6 - Welfare Economics > D60 - General; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E60 - General; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F40 - General; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F59 - Other; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

References

Abiad, D., Detragiache, E., & Tressel, T., (2008). “A New Database on Financial Reform”, IMF Working Paper No. 08/226.

Aker, J., & Mbiti, I., (2010). “Mobile Phones and Economic Development in Africa”, Journal of Economic Perspectives, 24(3), 207-232.

Asongu, S. A., (2013a). “Globalisation and Africa: Implication for Human Development”, International Journal of Development Issues, 12(3), pp. 213-238.

Asongu, S. A., (2013b). “Investment and Inequality in Africa: Which Financial Channels Are Good for the Poor”, African Finance Journal, 15(2), pp. 43-65.

Asongu, S. A., (2014a). “Financial development dynamic thresholds of financial globalisation: evidence from Africa”, Journal of Economics Studies, 41(2), pp. 166-195.

Asongu, S. A., (2014b). “The Questionable Economics of Development Assistance in Africa: Hot-Fresh Evidence, 1996-2010”, The Review of Black Political Economy, 41(4), pp. 455-480.

Asongu, S. A., (2015). “The impact of mobile phone penetration on African inequality”. International Journal of Social Economics, 26(4): Forthcoming

Atkinson, A. B., Piketty, T., Saez, E., (2011). “Top Incomes in the Long Run of History”, Journal of Economics Literature, 49(1), pp. 3-71.

Azzimonti, M., De Francisco, E., Quadrini, V., (2014). “Financial Globalisation, Inequality and the Rising Public Debt”, American Economic Review, 104(8), pp. 2267-2302.

Bagnara, A., (2012). “Aid Effectiveness: Effective Aid is Good Foreign Policy”, Partners in Research for Development, (Summer Issue), pp. 4-6.

Batuo, M. E., Guidi, F., & Mlambo, K., (2010, August). “Financial Development and Income Inequality: Evidence from African countries”. African Development Bank, Tunis.

Batuo, M. E., & Asongu, S. A., (2015). “The impact of liberalisation policies on income inequality in African countries”, Journal of Economics Studies: 41(1): Forthcoming.

Bhagwati, J., (1998). “The Capital Myth. The Difference between Trade in Widgets and Dollars”, Foreign Affairs, 7(3), pp. 7-12.

Blas, J., (2014). “Inequalities mar Africa’s rise”, Financial Times, The New Africa. http://www.ft.com/cms/s/0/9e74aa50-1e4d-11e4-ab52-00144feabdc0.html#axzz3LCd5ssUE (Accessed: 07/12/2014).

Boyce J. K., Ndikumana L. (2011), “Capital flight from sub-Saharan Africa: linkages with external borrowing and policy options”, International Review of Applied Economics, 25(2), 149-170.

Brambor, T., Clark, W. M., & Golder, M., (2006). “Understanding Interaction Models: Improving Empirical Analyses”, Political Analysis, 14, pp. 63-82.

Elu J., (2013). “Earnings Inequality and the Intersectionality of Gender and Ethnicity In Sub-Saharan Africa: The Case of Tanzanian Manufacturing”, American Economic Review, Papers and Proceedings 04/2013, 103(103), pp. 289-292.

Fischer, S., (1998). “Capital Account Liberalization and the Role of the IMF”, in “Should the IMF Pursue Capital-Account Convertibility?”, Essays in International Finance, Department of Economics, Princeton University, 207, pp. 1-10.

Fofack, H., (2014). “The Idea of Economic Development: Views from Africa”, WIDER Working Paper 2014/093. Fosu, A. K., (2014). “Growth, Inequality and Poverty in Sub-Saharan Africa: Recent Progress in a Global Context”, CSAE Working Paper Series 2014-17.

Fosu, A. K., (2008). “Inequality and the Growth-Poverty Nexus: Specification Empirics Using African Data”, Applied Economics Letters, 15(7), pp. 563-566.

Fosu, A. K., (2009). “Inequality and the Impact of Growth on Poverty: Comparative Evidence for Sub-Saharan Africa”, Journal of Development Studies, 45(5), pp. 726-745.

Fosu, A. K., (2010a). “Inequality, Income and Poverty: Comparative Global Evidence”, Social Sciences Quarterly, 91(5), pp. 1432-1446.

Fosu, A. K., (2010b). “The Effect of Income Distribution on the Ability of Growth to Reduce Poverty: Evidence from Rural and Urban African Economies”, American Journal of Economics and Sociology, 69(3), pp. 1034-1053.

Fosu, A. K., (2010c). “Does Inequality Constrain Poverty Reduction Programs? Evidence from Africa”, Journal of Policy Modeling, 32(6), pp. 818-827.

Fosu, A. K., (2011). “Growth, Inequality and Poverty Reduction in Developing Countries: Recent Global Evidence”, UNU WIDER Working Paper 2011/01.

Henry, P. B., (2007). “Capital Account Liberalization: Theory, Evidence and Speculation” Journal of Economic Literature, XLV, pp. 887-935.

Kai, H., & Hamori, S., (2009). “Globalization, financial depth and inequality in Sub-Saharan Africa”, Economics Bulletin, 29 (3), pp. 2025-2037.

Kanbur, R., (1998). “Aid, Conditionality and Debt in Africa”, Africa Notes (October) http://iad.einaudi.cornell.edu/system/files/Aid_Conditionality_and_Debt_in_Africa.pdf (Accessed: 07/12/2014).

Kose, M. A., Prasad, E. S., and Rogoff, K., Wei, S. J., (2006). “Financial globalization: a reappraisal”, IMF Staff Papers 56(1), pp. 8-62.

Kose, M. A., Prasad, E. S., & Taylor, A. D., (2011). “Threshold in the process of international financial integration”, Journal of International Money and Finance 30(1), pp.147-179.

Kuznets, S., (1955). “Economic Growth and Income Inequality”. American Economic Review 45 (March), pp. 1-28

Kuznest, S., (1971) Economic Growth of Nations: Total Output and Production Structure. Belknap Press/Harvard University Press: Cambridge (Mass).

Lewis, A., (1955). Theory of Economic Growth. Milton Park: Routledge.

Miller, D. C., (2014). “Explaining Global Patterns of International Aid of Linked Biodiversity Conservation and Development”, World Development, 59, pp. 341-359.

Mlachila, M., Tapsoba, R., & Tapsoba, S. J. A., (2014). “A Quality of Growth Index for Developing Countries: A Proposal”, IMF Working Paper No. 14/172.

Monga, C., (2014). “The False Economics of Pre-Conditions: Policymaking in the The African Context”, Journal of African Development, 16(2), pp. 121-140.

Monika, A., & Bobbin, T., (2012). “The Billion Dollar Solution that Isnt: How systems modeling in foreign aid could save billions and serve the poor”, Development, 55(1), pp. 71-80.

Mthuli, N., Anyanwu, J. C., & Hausken, K., (2014). “Inequality, Economic Growth and Poverty in the Middle East and North Africa (MENA)”, African Development Review, 26(3), pp. 435-453.

Obstfeld, M., & Taylor, A. M., (2005). “Global Capital Markets Integration, Crisis and Growth”, Cambridge University, New York.

Ouattara, B., (2006). “Aid, debt and fiscal policies in Senegal”, Journal of International Development, 18(8), pp. 1105-1122.

Ozgur, K., Ilker, K., & Lewell, G., (2013). “Foreign Aid and the Quest for Poverty Reduction: Is Aid to Agriculture Effective?”, Journal of Agricultural Economics, 64(3), pp. 583-596.

Piketty, T., (2014). “Capital in the Twenty First Century”, Harvard University Press.

Pinkivskiy, M., & Sala-i-Martin, X., (2014). “Africa is on time”, Journal of Economic Growth, 19(3), pp. 311-333.

Price, G. N., & Elu, J. U., (2014). “Does regional currency integration ameliorate global macroeconomic shocks in sub-Saharan Africa? The case of the 2008-2009 global financial crisis”, Journal of Economic Studies, 41(5), pp. 737-750.

Rodrik, D., (1998). “Who Needs Capital-Account Convertibility?” Essays in International Finance, No. 207 (Princeton, New Jersey: Princeton University).

Schmukler, S., & Vesperoni, E., (2006). “Financial globalisation and debt maturity in emerging economies”, Journal of Development Economics, 79(1), pp. 183-207.

Singh, P., (2014, September). “Austerity, Welfare State and Eco-Socialism: With Special reference to the United Kingdom”, Economic and Political Weekly, XLIX(39), pp. 111-118.

Stiglitz, J., (2000). “Capital Market Liberalization, Economic Growth and Instability”, World Development, 28(6), pp. 1075-1086.

Summers, L. H., (2000). “International Financial Crises: Causes, Prevention and Cures”, American Economic Review, 90(2), pp. 1-16.

Timmons, R. J., Bradleyc, P., Tierney, M., & Hicks, R., (2009). “Has Foreign Aid Been Greened?”, Environment: Science and Policy for Sustainable Development, 51(1), pp. 8-21.

United Nations (2013a). “A New Global Partnership: Eradicate Poverty and Transform Economies Through Sustainable Development”, The Report of the High-Level Panel of Eminent Persons on the Post-2015 Development Agenda. http://www.un.org/sg/management/pdf/HLP_P2015_Report.pdf (Accessed: 07/12/2014).

United Nations (2013b). “The Industrial Competitiveness of Nations: looking back, forging ahead”, Competitive Industrial Performance Report 2012/2013, http://www.unido.org/fileadmin/user_media/Services/PSD/Competitive_Industrial_Performance_Report_UNIDO_2012_2013.PDF (Accessed: 07/12/2014).

World Bank (2013). Africa Continues to Grow Strongly but Poverty and Inequality Remain Persistently High. http://www.worldbank.org/en/news/press-release/2013/10/07/africa-continues-grow-strongly-poverty-inequality-persistently-high (Accessed: 09/12/2014)

Young, A., (2012). “The African growth miracle”, Journal of Political Economy, 120 (4), pp. 696-739.