Economic Growth in an Interdependent World Economy

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Economic Growth in an Interdependent World Economy

Author Info

Roger E. A. Farmer
Amartya Lahiri

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Abstract

The open-economy Solow-Swan growth model predicts (1) that growth should be uncorrelated with the ratio of national investment to GDP and (2) instantaneous convergence of GDP per capita across countries. In the presence of capital market imperfections convergence is predicted to occur more slowly. But savings and investment ratios should still differ substantially across countries. In the data, investment ratios are strongly correlated with growth across countries and investment ratios are closely correlated with savings ratios within countries. We argue that a two-sector two-country AK model provides a better description of the data than the Solow-Swan model. Copyright 2006 The Author(s). Journal compilation Royal Economic Society 2006.

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 116 (2006)
Issue (Month): 514 (October)
Pages: 969-990
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Handle: RePEc:ecj:econjl:v:116:y:2006:i:514:p:969-990

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Paper
- Farmer, Roger E A & Lahiri, Amartya, 2002. "Economic Growth in an Interdependent World Economy," CEPR Discussion Papers 3250, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Mino, Kazuo, 2008. "Financial integration and volatility in a two-country world," MPRA Paper 16953, University Library of Munich, Germany. [Downloadable!]
Kazuo Mino, 2008. "Preference Structure and Volatility in a Financially Integrated World," Discussion Papers in Economics and Business 08-05, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]
Roger E. A. Farmer & Amartya Lahiri, 2005. "A Two-Country Model of Endogenous Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 68-88, January. [Downloadable!] (restricted)
Other versions:
- Farmer, Roger E A & Lahiri, Amartya, 2002. "A Two-Country Model of Endogenous Growth," CEPR Discussion Papers 3245, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
Yunfang Hu & Kazuo Mino, 2009. "Financial Integration and Aggregate Stability," Discussion Papers in Economics and Business 09-01, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP). [Downloadable!]

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