An Investigation of Uncertainty’s Welfare Effects in Economy

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Setayesh Valipour, Abolfazl | 2017

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 49302 (44)
University: Sharif University of Technology
Department: Management and Economics
Advisor(s): Madanizadeh, Ali
Abstract:
We consider the impact of long-run uncertainty on relative GDP per Capita of an economy and show this effect is negative and significant. We show one standard deviation increase in uncertainty, decreases the economy’s GDP per Capita by 1.3%.In other words uncertainty affects the development of economies in addition to their growth rate. We show the significance of this effect in presence of human capital and physical capital. We consider the impact of uncertainty on relative productivity and show its significant negative impact. We consider the uncertainty impact on GDP per Capita’s time trend and show the effect diminishes over time.Additionally, we investigate the important channels of uncertainty and show that investment channel cannot explain this effect on the level of development. We also consider R&D channel and show that it partially explains that impact. Finally, we consider the structural development parameters of countries and inspect the impact of financial development on the negative impact of uncertainty
Keywords:
Uncertainty ; Development ; Financial Development ; Research and Development Strategy ; Productivity Analysis ; Balanced Growth Pathy

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