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Growth, Income and Regulation: a Non-Linear Approach

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Author Info

  • Tue Gørgens

    (Department of Economics, University of Copenhagen)

  • Martin Paldam

    (Department of Economics, University of Aarhus)

  • Allan H. Würtz

    (Department of Economics, University of Copenhagen)

Abstract

This paper analyzes the effect on GDP growth of income (GDP per capita) and economic regulation. A simple theoretical framework presents two opposing views. We analyze the empirical relation using a non-linear dynamic panel data model with fixed effects. The result shows that the effect of regulation on growth depends on income. For low-income countries, there is little effect of changing regulation. For highly regulated middle-income countries, deregulation can increase growth. For high-income countries, deregulation leads to higher growth. Holding regulation constant, there is catch-up growth with a maximum at an intermediate income level.

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File URL: http://www.econ.ku.dk/cam/wp0910/wp0406/2005-12.pdf/
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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics in its series CAM Working Papers with number 2005-12.

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Length: 19 pages
Date of creation: Aug 2005
Date of revision:
Handle: RePEc:kud:kuieca:2005_12

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Related research

Keywords: catch-up growth; economic freedom; fixed effects; GMM; specification tests;

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References

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  1. Johnson, Paul & Durlauf, Steven N & Temple, Johnathan R. W., 2004. "Growth Econometrics," Vassar College Department of Economics Working Paper Series 61, Vassar College Department of Economics.
    • Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677 Elsevier.
  2. Easton, Stephen T & Walker, Michael A, 1997. "Income, Growth, and Economic Freedom," American Economic Review, American Economic Association, vol. 87(2), pages 328-32, May.
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Cited by:
  1. Luis Costa & Miguel St. Aubyn, 2012. "The Macroeconomic Effects of Legal- Simplification Programmes," Working Papers Department of Economics 2012/12, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.

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