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Growth Performance in Portugal since the 1960s: A Simultaneous Equation Approach with Cumulative Causation Characteristics

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  • Elias Soukiazis
  • Micaela Antunes

Abstract

The aim of this paper is to explain growth performance in Portugal in the last decades (1965-2006) through a multi-equation system with cumulative growth characteristics. The model uses a demand-orientated approach to determine the main relationships, which explain growth through a virtuous cycle. The idea is to identify the driving forces of growth with causal linkages and feedback tendencies that enable the process to be self-sustained. We estimate the multi-equation growth model by 3SLS to capture more efficiently the interrelations between the main growth forces and to control for the endogeneity of the regressors. Our evidence shows that the proposed model can successfully explain the Portuguese growth performance, highlighting the importance of export competitiveness as the key factor in this process. The cumulative growth process was interrupted at some points mainly due to the incapacity to transfer productivity gains into domestic prices and to make the economy more competitive. We also show that capital accumulation does not affect productivity growth, and domestic prices do not improve export competitiveness. These are the main drawbacks of the Portuguese economy that could explain the failure to achieve higher growth rates in the period 1965-2006.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Journal of Economic Issues.

Volume (Year): 47 (2013)
Issue (Month): 1 (March)
Pages: 169-192

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Handle: RePEc:mes:jeciss:v:47:y:2013:i:1:p:169-192

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Related research

Keywords: cumulative growth; export competitiveness; multi-equation system; productivity gap; 3SLS regressions;

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References

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  1. Kaldor, Nicholas, 1975. "What Is Wrong with Economic Theory," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 89(3), pages 347-57, August.
  2. Dixon, R & Thirlwall, A P, 1975. "A Model of Regional Growth-Rate Differences on Kaldorian Lines," Oxford Economic Papers, Oxford University Press, vol. 27(2), pages 201-14, July.
  3. Micaela Antunes & Elias Soukiazis, 2011. "How well the balance-of- payments constraint approach explains the Portuguese growth performance. Empirical evidence for the 1965-2008 period," ERSA conference papers ersa10p125, European Regional Science Association.
  4. Robert A. Blecker, 2009. "Long-Run Growth in Open Economies: Export-Led Cumulative Causation or a Balance-of-Payments Constraint?," Working Papers, American University, Department of Economics 2009-23, American University, Department of Economics.
  5. Fulvio Castellacci, 2002. "Technology Gap and Cumulative Growth: Models and outcomes," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(3), pages 333-346.
  6. Lydia Greunz, 2001. "European regional growth, technology gap and R&D efforts," ERSA conference papers ersa01p92, European Regional Science Association.
  7. Bernard Fingleton, 2000. "Convergence: International comparisons based on a simultaneous equation model with regional effects," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(3), pages 285-305.
  8. Kennedy, Charles & Thirlwall, A P, 1972. "Technical Progress: A Survey," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 82(325), pages 11-72, March.
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Cited by:
  1. Teixeira, Aurora A.C. & Tavares-Lehmann, Ana Teresa, 2014. "Human capital intensity in technology-based firms located in Portugal: Does foreign ownership matter?," Research Policy, Elsevier, vol. 43(4), pages 737-748.
  2. Ana Poças & Elias Soukiazis, 2013. "Explaining the interrelations between health, education and standards of living in Portugal. A simultaneous equation approach," International Journal of Public Policy, Inderscience Enterprises Ltd, Inderscience Enterprises Ltd, vol. 9(3), pages 167-187.

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