Contingencies in Economic Growth and Development: An Empirical Investigation of Potential Sources of Exogenous Variation

Vusal Musayev

Research output: ThesisDoctoral Thesis

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This thesis builds on the recent developments in methods of panel estimation to investigate four questions in the economics of growth and development, concentrating on the effects of three variables of interest – ad-valorem tariff rates, military expenditure shares and natural resource windfalls. Particularly, in the light of endogeneity concerns, the analysis employs the generalized method of moments (GMM) framework to investigate whether the effects of all three variables of interest are heterogeneous across the income distribution, i.e. contingent on a country’s economic development level, and what are the potential sources of exogenous variation for externalities that might drive this heterogeneity leading to contradicting outcomes found in the literature.
The first chapter examines the effects of tariff rates on indicators of long-run development by analysing the effects of ad-valorem tariffs on fertility rates, life expectancy, infant mortality and education contingent on income levels. The analysis confirms previous findings of a differential effect of tariffs on economic growth, suggesting a detrimental impact of trade limitations for high income level countries, but not for low income level economies. In addition, the investigation contributes to the literature showing that for high income economies, tariffs are harmful not only for economic growth, but also for long-run development. However, these effects are less clear for lower income economies. In particular, for developing countries there is a paucity of evidence for the effects of tariffs on indicators of long-run development. The investigation also attempts to identify the channels through which tariffs might affect the economic growth and development indicators for lower income economies, the results suggesting infrastructure as a potential driver.
The second chapter clarifies the ambiguous results found in the military spending and economic growth literature, where the impact of military expenditure is frequently found to be non-significant or negative. The investigation examines the effects of military spending on growth by analysing this relationship contingent on initial income per capita using a large dataset on military expenditure. The findings reveal that while growth falls with higher levels of military spending, the marginal impact of military spending is increasing in initial income levels. In contrast to previous findings from the literature, this increase is consistent across different income groups and type of economies, and is monotonic in direction, going towards zero for sufficiently high income level countries.
The third chapter examines the potential sources of externalities for the relationship between economic growth and military spending using a large panel dataset on military spending and variety of conflict measures. The investigation reproduces many of the results of the existing literature and provides a new analysis on the relationship between conflict, corruption, natural resources and military expenditure and their direct and indirect effects on economic growth. The analysis finds that the impact of military expenditure on growth is generally negative as found in the literature, but that it is not significantly detrimental for countries facing either higher internal or external threats, and for countries with large natural resource wealth, once corruption levels are accounted for.
The fourth chapter empirically investigates the relationships between resource windfalls, political regimes, conflict and growth employing a distinctive commodity price shock measurement. The analysis clarifies the potential mechanism behind the ambiguous outcomes of the existing resource literature, particularly showing that resource windfalls have significant effects on conflict only in politically unstable autocracies, where these effects are heterogeneous in the response, conditional on a country’s initial political violence level. The findings also demonstrate that resource shocks are positively associated with economic performance in democracies and in politically stable autocracies, while reducing growth for unstable autocracies.
Original languageEnglish
Awarding Institution
  • Royal Holloway, University of London
  • Mountford, Andrew, Supervisor
Award date1 Mar 2015
Publication statusUnpublished - 2015


  • Generalized Method of Moments (GMM)
  • Economic Growth
  • Development
  • Tariff rates
  • Long-run Development
  • Contingency
  • Military expenditure
  • Conflict
  • Natural Resources
  • Corruption
  • Commodity Price Shocks
  • Political Regimes
  • Political Violence
  • Health
  • Education
  • Infrastructure
  • Fertility
  • Infant Mortality
  • Life Expectancy
  • Socioeconomic Stability

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