Alexandru Florea Economic Development and Growth
Indicators of economic development: Labor productivity Weighted Machine tool industry in total industry Weighted Machine tool exports in total exports Weighted Brain drain in total export Weighted Employment in services Economic growth is represented by the evolution of specific economic indexes, with benefits for the social and economic life, in a specific time and area.The most known index for calculating the economic growth is the GAP/ capita.Types of economic growth Extensive economic growth- based on growing the GAP/capita by increasing the number of workers, arable lands etc.
Consolidated economic growth: it would be realized at the global scale Zero economic growth: is happening when the economic indexes and the population of the country are increasing with the same percentage.
The single way that a state can achieve economic development and growth is by using their economies to make investments. Economic development represents a qualitative process while economic growth is a quantitative one. However the processes of economic development and growth are produced simultaneous therefore they must be considered together. The first part of the analysis will provide an overall picture of Roman’s economic performance.
It will be presented the current economic development situation and its growth during the analyzed years. The second part of the analysis represents an econometric exercise which will provide the connection between GAP, Urban Population and Employment. At the end of the exercise it will 3 be possible to predict values of GAP depending on Urban Population and the level of employment. The third part of the analysis will provide information regarding the development lacks of Roman’s economy. The fourth part of analysis refers to Romania market inefficiency.
It will provide the most important issues about market failures in Romania. The fifth part of analysis includes the Development Policies. It will present the main targets to improve Roman’s economy for the next years. B. Analysis 1. Methodology For this analysis were chosen indexes from 5 areas: Romania, Bulgaria, Germany, France and European Union. Besides Romania, which is the main subject of the analysis, it was chosen Bulgaria like a state with similar economic situation. Germany and France were chosen because they represent two of the most developed country in Europe.
In the same time they represent examples of how the economic situation should be in a developed country therefore Romania must achieve a close level to them in order to become a State with a developed economy. Nevertheless, all of them are member states of European union therefore all of them must converge to the same level, as result, it is absolutely necessary to include the European union indexes. First part of the analysis contains statistical results about the economic development and growth situation in Romania. The analyzed period refers to 1990-2013.
For this part there were seed data series, with annual frequency, from the official website of World Bank. Second part of the analysis is represented by a linear regression model. For analyzing the correlation between variables, were used data series (1991-2012), with annual frequency, from the official website of World Bank. The data refers only to Romania. The purpose of the exercise was to find the influence Of that urban population and employment have on GAP. The form of linear regression model is: AMPLE+?* POP 4 Where: BIB – Gross Domestic Product AMPLE -? Employment POP – the urban population percentage
The GAP was deflated referring to the year 2005 as the base year. Views was the soft used for testing and correcting the regression model. The intensity between the dependent variable and the independent variables was analyzed considering the correlation coefficient R The sign efficacy of linear correlation coefficients was tested using t-test Starting from the hypothesis: HO: the model is not valid and HI: the model is valid, the validity of the regression model was tested using the Fischer test.
The model’s significance was tested with: – Wald test for testing the regression coefficients F test for testing the significance of the correlation ratio. – graphic method, Durbin Watson test and Breach Godlier test for verifying the independence of the random errors. – White test for verifying the homosexuality. -Jarred-Berea test for verifying the normality hypothesis. Third part of the analysis contains statistical results about the development lacks in Romania. The analyzed period refers to 1990-2013.
For this part there were used data series, with annual frequency, from the official website of World Bank. Fourth part of the analysis contains statistical results about the market inefficiency in Romania. The analyzed period refers to 1990-2013. For this part there were used data series, with annual frequency, from the official website of World Bank. Fifth part of the analysis presents the main targets of the current development policy. It represents a summary of the Romania “National Strategy for Development’. 5 Economic Development and Growth Of Romania 2.
Used data Gross Domestic Product: According to Ryan Barnes: “The GAP is the predecessor of all macroeconomic indexes; as an aggregate measure of the total economic output of a country, GAP represents the total value of goods and services produced by the economy, in a specific period”. Frequency: annual Source of collected data: World Bank website Other changes: *only for the regression model: 1,000,000,000 Expressed in: US$ Inflation: Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase.
As inflation rises, every dollar you own buys a smaller percentage of a good or service. Frequency: annual Expressed in: percentage Urban population index According to National Statistic Office: “Urban population index refers to the number of people which live in urban areas” Other changes: *only for the regression model: 1 ,OHO Expressed in: percentage of the total population Employment index Employment index refers to the active population (15-64 years old) rate: the ratio between the active population and the total number of people with the same age. Other changes: *only for the regression model: AMPLE( 1)= AMPLE(O)* 1,000 Health Expenditure index Health expenditure refers to the sum of public and private health expenditure. It covers the provision of health services (preventive and curative), family planning activities, nutrition activities, and emergency aid assassinated for health but does not include provision of water and sanitation. It is calculated as the percentage of a nation’s GAP. Frequency: annual Pupil-teacher index Pupil-teacher ratio: the number of pupils enrolled in primary school divided by the number of primary school teachers.
Expressed in: absolute number Public spending on education index Public expenditure on education as % of GAP is the total public expenditure (current and capital) on education expressed as a percentage of the Gross Domestic Product (GAP) in a given year. Public expenditure on education includes government spending on educational institutions (both public and private), education administration, and transfers/subsidies for private entities (students/households and other private entities) 7 3.
Literature review About Roman’s Economy According to the Constitution of 1991, Economy of Romania is an economy based on supply and demand rule therefore it means that the state must ensure the freedom of trade and the fair competition. In 1 939 the most important branches of industry were the oil and natural gas industries. 6. 24 million tons of oil was produced in Romania in 1939 and the total exports of oil valued 56 million dollars. Furthermore, with a production slightly lower than Germany, Romania had a very good situation in terms of grain.
However salt and tobacco had also an important role for Roman’s economy during this period. Even if it was of poor quality, tobacco was the main source of income for the people from the Danube Plain. After more than four decades, at the end of 1 989, economy of Romania had the basic communist economy, in all branches of industry’ it was a state cooperative monopoly. Price, credits, salaries, the interest rate were directed y the “single national plan” without reflecting the supply and demand needs. On 21st of December 1 989 Romania had no external debt, the external debt was fully paid by the end of February 1989.