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Growth Outside The Stable Path: Lessons From The European Reconstruction Author info | Abstract | Publisher info | Download info | Related research | Statistics Francisco Alvarez-Cuadrado ()
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This paper exploits a natural experiment, the large destruction of capital in continental Europe during World War II, to characterize the transitional dynamics of an economy that begins with a capital stock below its steady state level. We use these regularities as a benchmark to discriminate among competing growth specifications. A model that combines non-separabilities in preferences with a technology that restricts the degree of substitutability between inputs outperforms the widely used AK and Cobb-Douglas specifications with time-separable preferences. Our results suggest that policy evaluations based in growth models that overlook non-separabilities in preferences or impose strong restrictions on the technological structure might be grossly misleading.
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Paper provided by McGill University, Department of Economics in its series Departmental Working Papers with number
2006-02.
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Length: 32 pages
Date of creation: Aug 2006Date of revision:
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Find related papers by JEL classification: O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
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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.)
Francisco Alvarez-Cuadrado & Mihaela I. Pintea, 2008.
"A Quantitative Exploration of the Golden Age of European Growth ,"
Working Papers
0805, Florida International University, Department of Economics.
[Downloadable!]
Other versions: Simon Gilchrist & John C. Williams, 2004.
"Transition Dynamics in Vintage Capital Models: Explaining the Postwar Catch-Up of Germany and Japan ,"
NBER Working Papers
10732, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
Simon Gilchrist & John C. Williams, 2001.
"Transition dynamics in vintage capital models: explaining the postwar catch-up of Germany and Japan ,"
Finance and Economics Discussion Series
2001-07, Board of Governors of the Federal Reserve System (U.S.).
[Downloadable!] Simon Gilchrist & John C. Williams, 2001.
"Transition Dynamics in Vintage Capital Models: Explaining the Postwar Catch-up of Germany and Japan ,"
Boston University - Department of Economics - The Institute for Economic Development Working Papers Series
dp-113, Boston University - Department of Economics.
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"Transition dynamics in vintage capital models: explaining the postwar catch-up of Germany and Japan ,"
Working Papers
01-1, Federal Reserve Bank of Boston.
[Downloadable!] Simon Gilchrist & John C. Williams, 2004.
"Transition dynamics in vintage capital models: explaining the postwar catch-up of Germany and Japan ,"
Working Papers in Applied Economic Theory
2004-14, Federal Reserve Bank of San Francisco.
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"Habit Formation, Dynastic Altruism, and Population Dynamics ,"
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