Regional growth in West Germany: convergence or divergence?

Using data from the 11 West German Länder for the period 1970–1994 we investigate the issue of regional convergence across Germany allowing for heterogeneity over cross-sections and over time. The paper finds evidence in favour of conditional convergence, but persistent inequality of regional steady states. © 1999 Elsevier Science B.V. All rights reserved.     

Convergence or divergence? The impact of technology on “why growth rates differ”

This paper presents an overview and assessment of the theoretical and empirical work on catch-up and growth, with particular emphasis on the impact of technology, and the consequences for developing countries. The point of departure is the neoclassical theory of economic growth, as laid out by Solow and others in the 1950s, and the applied work that followed (growth accounting). Then the contributions from economic historians and more heterodox economists, such as Schumpeter, Kaldor and others, are discussed, followed by an account of the most recent theoretical developments (new growth theory) and the empirical (econometric) work in this area.An earlier version of this paper was presented at the Joseph A. Schumpeter Society 1992 Conference, 19–22 August, Kyoto, Japan. I want to thank the commentator, Karl Heinrich Oppenländer, and the other participants at the session for comments and suggestions. The revision of the paper has also benefited from my recent work in this area, whether under single authorship (Fagerberg 1994) or together with Nick von Tunzelmann and Bart Verspagen (Fagerberg et al. 1994). I am grateful to Nick and Bart for allowing me to draw on our joint work.     

Innovation dynamics in the EU: convergence or divergence? A cross-country panel data analysis

This paper investigates whether a convergence or divergence of national innovation capabilities of the 15 EU countries occurs in the course of time. An answer to this question permits immediate conclusions with regard to the success prospects of a convergence of per capita incomes and labor productivities within the EU. For the empirical analysis based on patents granted at the US-Patent and Trademark Office, unit root tests for time series and panel data are used to scrutinize the convergence hypothesis. Taking all results together, evidence points to the fact that an absolute convergence of innovation capabilities is an exception. However, for a number of countries the results suggest either conditional convergence or convergence to their own growth paths.

Did globalization drive convergence? Identifying cross-country growth regimes in the long run

This paper is the first to apply a finite mixture model to a sample of 64 nations to endogenously analyze the cross-country growth behavior over the period 1870–2003. Results show that growth patterns were segmented in two worldwide regimes, the one characterized by convergence in per capita income, and the other by divergence. Interestingly, when three historical epochs are distinctly analyzed, in order to investigate the empirical link between globalization and convergence, the dynamics which dominated over the whole period seem to have emerged only during the post-1950 years. In contrast, the First Global Wave was marked by persistent heterogeneities.     

Convergence,divergence, or multiple steady states? New evidence on the institutional development within the European Union

Convergence in institutions and in per capita income across the European Union (EU) Member States are key goals of the European integrations process. Especially in the course of the various EU enlargement waves starting in 2004, it was intensively discussed whether institutional and structural homogeneity are necessary preconditions for real convergence and the smooth functioning of the EU or whether a (further) catching up in the institutional and economic development will endogenously occur after the EU accession. Our paper is dedicated to the analysis of these institutional dynamics within the EU. In particular, we analyze the formation of institutional convergence clusters using Phillips and Sul's (2007, 2009) log t-test over the period 2002 to 2018. Our results indicate the existence of multiple institutional clubs with various countries being stuck in a poor institutional trap. Moreover, we find that institutional convergence clubs are formed mainly on the basis of geographic region; in particular, we identify a northwest-southeast divide. When analyzing per capita income clubs, a rather similar picture emerges, suggesting that the underlying institutional clusters might drive the formation of income clubs. We also study the factors that determine institutional club membership by using an ordered probit model. Most importantly, we find that the initial levels of human capital and institutional quality are decisive for determining whether a country is on a high or low institutional growth path.     

A stable climate or economic growth?

The 2015 UN Paris Agreement reinforced and declared compatible the two goals of avoiding dire climate change and maintaining global economic growth, and it specified that technological innovation is ‘critical’ to this joint achievement. Unfortunately, any confidence that near-term global economic growth is consistent with a stabilized climate is severely undermined by empirical evidence. Despite the rapid increase of alternative energies in recent decades, global GDP growth continues to require burning greater quantities of climate-destabilizing fossil fuels. The dim outlook for sufficiently reducing CO₂ while maintaining economic growth is underscored by global data and Germany specific data on the decoupling of GDP from CO₂. This paper summarizes pertinent climate science, substantiates the dependence of economic growth on fossil fuels, and uses the Kaya identity to demonstrate the unfavorable prospects for reducing CO₂ while maintaining GDP growth.     

Creative accounting or creative destruction? Firm-level productivity growth in Chinese manufacturing

We present the first comprehensive set of firm-level total factor productivity (TFP) estimates for China's manufacturing sector that spans China's entry into the WTO. For our preferred estimate, which adjusts for a number of potential sources of measurement error and bias, the weighted average annual productivity growth for incumbents is 2.85% for a gross output production function and 7.96% for a value added production function over the period 1998-2007. This is among the highest compared to other countries. Productivity growth at the industry level is even higher, reflecting the dynamic force of creative destruction. Over the entire period, net entry accounts for over two thirds of total TFP growth. In contrast to earlier studies looking at total non-agriculture including services, we find that TFP growth dominates input accumulation as a source of output growth.     

Why do growth rates differ? Evidence from cross-country data on private sector production

We estimate standard production functions with a new cross-country data set on business sector production, wages and R&D investment for a selection of 14 OECD countries including the US. The data sample covers years the 1960–2004. The data suggest that growth differences can largely be explained by capital deepening and the ability to produce new technology in the form of new patents. We also find strong evidence of complementarity between patents and openness of the economy, but little evidence of increasing elasticity of substitution over time.     

Does the digital divide matter? The role of information and communication technology in cross-country level and growth estimates

The bulk of information and communication technology is made of weightless, implementable, and infinitely reproducible knowledge products (such as software and databases). These products are transferred by telephone lines, accessed through internet hosts, and processed through personal computers. In this work, the coefficient of the labour augmenting factor in the aggregate production function has been estimated using proxies of variables crucially affecting the diffusion of (non-rival and almost non-excludable) knowledge products. This specification provides interesting answers to some of the open issues in the existing growth literature. The most recent information, though available for a limited period, shows that telephone lines, personal computers, mobile phones, and internet hosts significantly affect levels and growth of income per worker across countries. The result is robust to changes in sample composition, econometric specification, and estimation approach.     

Policies to stimulate growth: should we invest in health or education?

Empirical studies in the literature on economic growth have focused on the affect of education and yet Knowles and Owen (1995, 1997) found health, proxied by life expectancy, to be highly statistically significant with education having a modest role. This study extends their model and employs variables that are more conducive to policy formulation: calorific intake and school enrolment ratios. Results suggest that reducing undernutrition would only make a modest contribution to economic growth while increasing enrolment ratios, especially secondary, has a positive and more significant effect. Policies to increase economic growth should favour investments in education over health.     

Energy consumption promotes economic growth or economic growth causes energy use in China? A panel data analysis

This study tries to examine the causal relationship between energy consumption and economic growth for twenty-nine provinces of China by employing the panel Granger causality analysis. The econometric methodology used in this paper allows us to untangle the causal nexus between energy consumption and economic growth and helps us to discriminate between competing theories on which hypothesis is applicable to China. Among the main results, it is found that there is no causality in two out of twenty-nine provinces and bidirectional causality is observed in sixteen out of twenty-nine provinces. Unidirectional causality is observed in eleven out of twenty-nine provinces of China. When bootstrap critical values are used, our empirical findings indicate that there is an unidirectional causal link running from real output to energy use for China, implying that economic growth significantly affects energy consumption, and hence, the conservation hypothesis is applicable to China.     

EU-Russia Strategic Energy Culture: Progressive Convergence or Regressive Dilemma?

This article argues that strategic culture, long consigned to the margins of broader, more substantial IR theories, offers a novel mode by which to explore recent developments in EU-Russia energy relations. Approaching seminal strategic policies from the perspective of institutionalised norms and cultural value-sets, strategic culture explores the power of the past and its ability to produce and influence national attitudes in governments and societies. This enables analyses of strategic energy relations between actors like the EU and Russia to move beyond obvious polarities to nuanced insights about the national value sets by which energy security is itself rendered strategic. Beginning with the individual strategic cultures of both the EU and Russia within the area of contemporary energy security policies, the article then appraises the range of bilateral EU-Russia energy security policies, suggesting that in many ways, these shared policies constitute a sector-specific strategic energy culture that includes both the EU and Russia. Areas of ongoing intransigence and policy convergence in EU-Russia energy security approaches constitute the case studies, illustrating that both sides are essentially motivated toward the same goals of energy security, market prosperity and actor-based prestige, but on the basis of vastly different visions, using widely diverse modes of implementation, and with dissimilar standards of evaluation. The analysis then appraises whether this co-constituted area is progressive or regressive in terms of the cooperation or conflict generated between the two sides, concluding that a basis of acknowleged commonalities – made available through strategic culture perspectives – both sides retain the impetus to cooperate to the point of complete agreement on some areas, whilst simultaneously remaining in conflict to the point of aggression in others.     

Trade volume and economic growth in the MENA region: Goods or services?

This paper explores the macroeconomic and sectoral effects of goods and service trade on the economic performance of MENA countries for the period 1960–2011. While the MENA region has been widely neglected in the trade and growth literature, this paper offers a decomposition of MENA GDP growth in order to disentangle the contributions of both service and goods trade. The results show a positive association between real GDP and both service and goods trade. The interaction term between trade in goods and trade in services is negative, suggesting that as goods trade increases, the marginal effect of service trade on real GDP decreases. However, the overall effect of service trade on real GDP is positive. The decomposition of GDP growth reveals a greater impact of goods trade, although service trade is important, and for most countries greater than the effect of tertiary enrolment.     

A curse or a blessing? Natural resources in a multiple growth regimes analysis

The literature on the impact of an abundance of natural resources on economic performance remains inconclusive. In this article we consider the possibility that countries may follow different growth regimes, and test the hypothesis that whether natural resources are a curse or a blessing depends on the growth regime to which an economy belongs. We follow recent work that has used a mixture-of-regressions method to identify different growth regimes, and find two regimes such that in one regime resources have a positive impact on growth, while in the other they have a negative impact or at best have no impact on growth. Our analysis of the determinants of whether a country belongs or not to the blessed resources regime indicates that the level of democracy plays an important role while education and economic institutions have no effect.     

What drives cross-country differences in export variety? A bilateral panel approach

A worldwide event like the 2020 Coronavirus outbreak can only reinforce the interest in modelling trade diversification as a key factor in countries’ vulnerability to external shocks. This paper adopts a detailed relative framework to study the determinants of product-level export variety in a large bilateral panel of developing and developed economies (16,770 country pairs in the period 1988–2014). We find that country pairs characterized by large differentials in productivity and in the makeup of the labour force differ in export variety patterns. This result holds after controlling for other endowments and for trade costs. Further, productivity plays a significant role in the reduction of export variety dissimilarities between countries belonging to different income groups. Hence, without successful technological convergence the low-income economies will not be able to reduce their exposure to export risk.     

Can the augmented Solow model explain China’s remarkable economic growth? A cross-country panel data analysis

China’s economy grew at an average annual rate of 9% over the last three decades. Despite the vast empirical literature on testing the neoclassical model of economic growth using data on various groups of countries, very few cross-country regressions include China and none of them particularly focuses on the explanation of China’s remarkable economic growth. We attempt to fill this gap by utilising panel data on 146 countries over the period 1980–2004 to examine the extent to which the rapid growth of China and the huge gap in the growth rate between China and other countries can be explained by the augmented Solow model. Using system GMM estimation techniques, we find that, in spite of the restrictive assumptions involved, the Solow model augmented by both human capital and structural change provides a fairly good account of international variation in economic growth. In particular, China’s relative success in economic growth is due to high physical capital investment, conditional convergence gain, dramatic changes in the structure of employment and output, and low population growth.     

Immigrant earnings growth: selection bias or real progress?

We use longitudinal tax data linked to immigrant landing records to study the effect of selective attrition on the estimated earnings assimilation of immigrants to Canada. Contrary to findings in the existing international literature, we show that the immigrant‐native earnings gap closes at the same pace in longitudinal and cross‐sectional data. Low‐earning immigrants are likely to leave the cross‐sectional samples over time, but the same is true for the native born. Our study suggests that immigrants to Canada have labour market participation dynamics similar to those of the native born.     

Rich or alive? Political (in)stability,political leader selection and economic growth

We develop a model that studies the incentives of the ruling elite regarding the selection of the political leader. We show that it is optimal for the ruling elite to choose leaders with more military experience in a politically unstable regime while more educated leaders are preferred in politically stable regimes. Using a dataset that includes 1569 national leaders from 177 countries over the period 1946–2011, we find empirical evidence that political stability contributes to the selection of more educated leaders, while the reverse holds for leaders with high military ranks. The empirical findings are robust to different subsamples, various proxies for educational and military attainment, and different measures for political stability. Our results suggest that leader selection is another reason why political instability is harmful for economic growth.     

Does corruption impede economic growth in Pakistan?

The present study reinvestigates the impact of corruption on economic growth by incorporating financial development and trade openness in growth model in case of Pakistan. We have used time series data over the period of 1987–2009. We have applied structural break unit root test to test the integrating order of the variables. The structural break cointegration has also been applied to examine the long run relationship between the variables.The long run relationship between the variables is validated in case of Pakistan. We find that corruption impedes economic growth. Financial development adds in economic growth. Trade openness stimulates economic growth. The causality analysis has exposed the feedback effect between corruption and economic growth and same inference is drawn for trade openness and corruption. Trade openness and economic growth are interdependent. Financial development Granger causes economic growth implying supply-side hypothesis in case of Pakistan.