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Takeoffs

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  • Joshua Aizenman
  • Mark Spiegel

Abstract

This paper identifies factors associated with takeoff -- a sustained period of high growth following a period of stagnation. We examine a panel of 241 "stagnation episodes" from 146 countries, 54 % of these episodes are followed by takeoffs. Countries that experience takeoffs average 2.3% annual growth following their stagnation episodes, while those that do not average 0% growth; 46% of the takeoffs are "sustained," i.e. lasting 8 years or longer. Using probit estimation, we find that de jure trade openness is positively and significantly associated with takeoffs. A one standard deviation increase in de jure trade openness is associated with a 55% increase in the probability of a takeoff in our default specification. We also find evidence that capital account openness encourages takeoff responses, although this channel is less robust. Measures of de facto trade openness, as well as a variety of other potential conditioning variables, are found to be poor predictors of takeoffs. We also examine the determinants of nations achieving sustained takeoffs. While we fail to find a significant role for openness in determining whether or not takeoffs are sustained, we do find a role for output composition: Takeoffs in countries with more commodity-intensive output bundles are less likely to be sustained, while takeoffs in countries that are more service-intensive are more likely to be sustained. This suggests that adverse terms of trade shocks prevalent among commodity exports may play a role in ending long-term high growth episodes.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13084.

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Date of creation: May 2007
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Publication status: published as Joshua Aizenman & Mark M. Spiegel, 2010. "Takeoffs," Review of Development Economics, Blackwell Publishing, vol. 14(2), pages 177-196, 05.
Handle: RePEc:nbr:nberwo:13084

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  1. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, Elsevier, vol. 81(1), pages 163-192, October.
  2. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 114(493), pages F22-F49, 02.
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  6. Jess Benhabib & Mark Spiegel, 2002. "Human capital and technology diffusion," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Nov.
  7. Parente, Stephen L. & Prescott, Edward C., 2005. "A Unified Theory of the Evolution of International Income Levels," Handbook of Economic Growth, Elsevier, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 21, pages 1371-1416 Elsevier.
  8. David N. Weil, 1996. "Appropriate Technology and Growth," Working Papers 96-24, Brown University, Department of Economics.
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  11. William Easterly, 2005. "Reliving the '50s: The Big Push, Poverty Traps, and Takeoffs in Economic Development," Working Papers, Center for Global Development 65, Center for Global Development.
  12. Dani Rodrik, 1998. "Where Did All The Growth Go? External Shocks, Social Conflict, and Growth Collapses," NBER Working Papers 6350, National Bureau of Economic Research, Inc.
  13. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 22(1), pages 3-42, July.
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Cited by:
  1. Wim Naudé, 2010. "Peace, Prosperity, and Pro-Growth Entrepreneurship," Working Papers id:3001, eSocialSciences.
  2. Charalambos G. Tsangarides, 2012. "Determinants of Growth Spells," IMF Working Papers 12/227, International Monetary Fund.

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