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What Can Growth Rates Tell Us? A Short-Run Decomposition Method

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Author Info

  • Steven Lim

    ()
    (University of Waikato)

  • Jason Le Vaillant

    ()
    (Ministry of Economic Development)

  • Harry X. Wu

    ()
    (Hitotsubashi University)

Abstract

Consider time series output data for two sectors, industry and agriculture. By examining just the output data themselves, what can we say about the relative impact of institutional/policy factors, intrasectoral competition for resources, and intersectoral linkages on each sector’s growth? Currently the answer might be very little. Our aim is to fill this gap: First, we explain how institutional/policy and other factors can be formally derived from a growth rate term. Second, we offer an empirical illustration of the derivation, such that just the time series output data of the two sectors by themselves contain enough information to make inferences regarding the relative impacts of the institutional/policy and other factors. Thus we provide the formal decomposition of a growth rate term, allowing the relative impacts of key explanatory variables to be estimated from a highly parsimonious data set. For countries that publish limited data sets, our method extends the ability of researchers to make inferences about the impact of institutions and so on, even when data on institutions are unavailable.

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File URL: ftp://mngt.waikato.ac.nz/RePEc/wai/econwp/1214.pdf
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Bibliographic Info

Paper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 12/14.

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Length: 18 pages
Date of creation: 10 Dec 2012
Date of revision:
Handle: RePEc:wai:econwp:12/14

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Keywords: short-run growth; growth decomposition; institutions and policies; China;

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  1. Aoki, Masanao & Yoshikawa, Hiroshi, 2002. "Demand saturation-creation and economic growth," Journal of Economic Behavior & Organization, Elsevier, vol. 48(2), pages 127-154, June.
  2. Ahmed Mushfiq Mobarak, 2005. "Democracy, Volatility, and Economic Development," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 348-361, May.
  3. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," Department of Economics Working Papers 2002-09, Department of Economics, Williams College.
  4. Kwan, Yum K. & Chow, Gregory C., 1996. "Estimating Economic Effects of Political Movements in China," Journal of Comparative Economics, Elsevier, vol. 23(2), pages 192-208, October.
  5. Benjamin F. Jones & Benjamin A. Olken, 2005. "Do Leaders Matter? National Leadership and Growth Since World War II," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 835-864, August.
  6. Benjamin F. Jones & Benjamin A. Olken, 2005. "The Anatomy of Start-Stop Growth," NBER Working Papers 11528, National Bureau of Economic Research, Inc.
  7. Jerzmanowski, Michal, 2006. "Empirics of hills, plateaus, mountains and plains: A Markov-switching approach to growth," Journal of Development Economics, Elsevier, vol. 81(2), pages 357-385, December.
  8. Day, Richard H, 1982. "Irregular Growth Cycles," American Economic Review, American Economic Association, vol. 72(3), pages 406-14, June.
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