Multiple regimes and cross‐country growth behaviour

Abstract

This paper provides some new evidence on the behaviour of cross‐country growth rates. We reject the linear model commonly used to study cross‐country growth behaviour in favour of a multiple regime alternative in which different economies obey different linear models when grouped according to initial conditions. Further, the marginal product of capital is shown to vary with the level of economic development. These results are consistent with growth models which exhibit multiple steady states. Our results call into question inferences that have been made in favour of the convergence hypothesis and further suggest that the explanatory power of the Solow growth model may be enhanced with a theory of aggregate production function differences.

Social capital, barriers to production and capital shares: implications for the importance of parameter heterogeneity from a nonstationary panel approach

“…Many researchers, including Bernard and Jones (1996), Durlauf and Johnson (1995), Caselli, Esquivel and Lefort (1996), Lee, Pesaran andSmith (1997, 1998) and Masanjala and Papageorgiou (2004) have noted that, empirically, capital factors shares appear to vary considerably across countries. For example Durlauf and Johnson (1995) employ a regression tree analysis to show that a cross sectional regression of the Summers and Heston data appears to provide support for several distinct regimes in which aggregate production functions vary among countries according to their level of development.…”

“…For example Durlauf and Johnson (1995) employ a regression tree analysis to show that a cross sectional regression of the Summers and Heston data appears to provide support for several distinct regimes in which aggregate production functions vary among countries according to their level of development. As Durlauf and Johnson (1995) point out, however, a cross sectional based approach is inherently limited in its ability to deal with omitted variables such as social capital, which are difficult to quantify. The reason for this is straightforward.…”

“…For example, while Durlauf and Johnson (1995) conclude that a panel approach may be required in order to more fully investigate the nature of the cross country variations in these coefficients, Durlauf and Quah (1999) point out that conventional panel approaches also have important limitations in that they may inadvertently tend to uncover high frequency relationships rather than the long run low frequency relationships that are of interest for the growth literature. The reason for this is also straightforward.…”

Regional Inequality in China

“…It is also possible that the Chinese economy was not ready to converge until the late 1990s. Empirical research fi nds that there exists a hurdle for convergence to happen both internationally (Durlauf and Johnson 1995) and domestically (Peng, Wang, and Wu 2007). Perhaps China was only able to overcome that hurdle in the late 1990s.…”

Do University Rankings Matter for Growth?

“…Education quantity is measured by enrolment rates (Mankiw, Romer and Weil 1992, Barro 1991, Levine and Renelt 1992, the average years of schooling Woessmann 2007, Krueger andLindhal 2001), adult literary rate (Durlauf andJohnson 1995, Romer 1990), education spending (Baladacci et al).…”