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

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  • Elias Soukiazis

    ()
    (Faculdade de Economia Universidade de Coimbra / GEMF)

  • Micaela Antunes

    (Faculdade de Economia Universidade de Coimbra)

Abstract

The aim of this paper is to explain growth performance in Portugal in the last decades 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 turn the process self-sustained. The multi-equation growth model is estimated 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 be used to explain the Portuguese growth performance, highlighting the importance of exports competitiveness as the key factor in this process. The cumulative growth process can be interrupted at some points mainly due to the incapacity of transferring productivity gains into domestic prices and to turn the economy more competitive. Capital accumulation is also shown not to affect productivity growth and domestic prices not to improve exports competitiveness. These are the main drawbacks of the Portuguese economy that could explain the failure to achieve higher growth rates in the last decades.

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Bibliographic Info

Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2011-06.

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Length: 31 pages
Date of creation: Mar 2011
Date of revision:
Publication status: Published in Journal of Economic Issues 47(1): 147-169, 2013.
Handle: RePEc:gmf:wpaper:2011-06

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Keywords: Cumulative growth; multi-equation system; exports competitiveness; productivity gap; 3SLS regressions;

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References

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  1. Lydia Greunz, 2001. "European regional growth, technology gap and R&D efforts," ERSA conference papers ersa01p92, European Regional Science Association.
  2. Robert A. Blecker, 2009. "Long-Run Growth in Open Economies: Export-Led Cumulative Causation or a Balance-of-Payments Constraint?," Working Papers 2009-23, American University, Department of Economics.
  3. Micaela Antunes & Elias Soukiazis, 2009. "How well the balance-of- payments constraint approach explains the Portuguese growth performance: empirical evidence for the 1965-2008 period," GEMF Working Papers 2009-13, GEMF - Faculdade de Economia, Universidade de Coimbra.
  4. 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.
  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. 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.
  7. Kaldor, Nicholas, 1975. "What Is Wrong with Economic Theory," The Quarterly Journal of Economics, MIT Press, vol. 89(3), pages 347-57, August.
  8. Kennedy, Charles & Thirlwall, A P, 1972. "Technical Progress: A Survey," Economic Journal, Royal Economic Society, vol. 82(325), pages 11-72, March.
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Cited by:
  1. Ana Poças & Elias Soukiazis, 2012. "Explaining the interrelations between health, education and standards of living in Portugal. A simultaneous equation approach," GEMF Working Papers 2012-06, GEMF - Faculdade de Economia, Universidade de Coimbra.
  2. 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.

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