Growth and Productivity: A Model of Cumulative Growth and Catching Up

Individually, neither the cumulative growth approach of the post-Keynesian tradition nor the catching-up theory of neoclassical derivation are able to account for the chief stylized facts of comparative economic growth. A pooled, cross-section, econometric model that integrates these two approaches is developed and tested by the authors over the period 1950-88 for a group of nine OECD countries, for a group of nine Latin American countries and for a group of seven East Asian countries. Purchasing power parities for 1985 are employed to measure productivity levels. The growth record of the OECD countries is satisfactorily assessed by the model. The catching-up effect is found to be relevant in explaining productivity growth in the OECD area and in East Asia, but not in Latin America. This differential outcome finds explanation in terms of the relative strength of dynamic increasing returns. Copyright 1997 by Oxford University Press.