IDEAS home Printed from https://ideas.repec.org/a/oup/cambje/v26y2002i4p441-459.html
   My bibliography  Save this article

The endogeneity of the natural rate of growth

Author

Listed:
  • Miguel A. LeÛn-Ledesma
  • A. P. Thirlwall

Abstract

The aim of this paper is to estimate the sensitivity of the natural rate of growth to the actual rate of growth for 15 OECD countries over the period 1961--95, on the hypothesis that the natural rate of growth is not exogenously given. To do this, we estimate the natural rate of growth and, then, how it changes when the actual growth rate is different from the natural rate. As a side test of the endogeneity hypothesis, we also test for the direction of causality between national output and factor inputs for the same set of countries. Our results support the idea that the natural rate of growth is not independent of the actual rate of growth and bring to the fore the importance of focusing on demand as well as supply for an understanding of long-run growthrate differences between countries. Copyright 2002, Oxford University Press.

Suggested Citation

  • Miguel A. LeÛn-Ledesma & A. P. Thirlwall, 2002. "The endogeneity of the natural rate of growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 26(4), pages 441-459, July.
    • Handle: RePEc:oup:cambje:v:26:y:2002:i:4:p:441-459
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Pesaran, M.H. & Shin, Y., 1995. "An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis," Cambridge Working Papers in Economics 9514, Faculty of Economics, University of Cambridge.
    3. Granger, Clive W J, 1997. "On Modelling the Long Run in Applied Economics," Economic Journal, Royal Economic Society, vol. 107(440), pages 169-177, January.
    4. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    5. A. P. Thirlwall, 2015. "A Model of Regional Growth Rate Differences on Kaldorian Lines," Palgrave Studies in the History of Economic Thought, in: Essays on Keynesian and Kaldorian Economics, chapter 12, pages 286-301, Palgrave Macmillan.
    6. A. P. Thirlwall, 1989. "Development and Underdevelopment," Palgrave Macmillan Books, in: Growth and Development, edition 0, chapter 0, pages 3-64, Palgrave Macmillan.
    7. Young, Allyn A., 1928. "Increasing Returns and Economic Progress," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 38, pages 527-542.
    8. A. P. Thirlwall, 2015. "Keynes, Economic Development and the Developing Countries," Palgrave Studies in the History of Economic Thought, in: Essays on Keynesian and Kaldorian Economics, chapter 6, pages 149-177, Palgrave Macmillan.
    9. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    10. Perron, P, 1993. "Erratum [The Great Crash, the Oil Price Shock and the Unit Root Hypothesis]," Econometrica, Econometric Society, vol. 61(1), pages 248-249, January.
    11. Giorgio Rampa & Luciano Stella & A. P. Thirlwall (ed.), 1998. "Economic Dynamics, Trade and Growth," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-26931-0, November.
    12. Perron, Pierre, 1990. "Testing for a Unit Root in a Time Series with a Changing Mean," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 153-162, April.
    13. Setterfield, Mark, 1997. "'History versus Equilibrium' and the Theory of Economic Growth," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 21(3), pages 365-378, May.
    14. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    15. Targetti, Ferdinando & Foti, Alessandro, 1997. "Growth and Productivity: A Model of Cumulative Growth and Catching Up," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 21(1), pages 27-43, January.
    16. Pesaran, M Hashem, 1997. "The Role of Economic Theory in Modelling the Long Run," Economic Journal, Royal Economic Society, vol. 107(440), pages 178-191, January.
    17. Daniele Besomi, 1998. "Failing to Win Consent: Harrod’s Dynamics in the Eyes of His Readers," Palgrave Macmillan Books, in: Giorgio Rampa & Luciano Stella & A. P. Thirlwall (ed.), Economic Dynamics, Trade and Growth, chapter 2, pages 38-88, Palgrave Macmillan.
    18. Kaldor, Nicholas, 1970. "The Case for Regional Policies," Scottish Journal of Political Economy, Scottish Economic Society, vol. 17(3), pages 337-348, November.
    19. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
    20. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    21. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    22. Perron, Pierre & Vogelsang, Timothy J, 1992. "Testing for a Unit Root in a Time Series with a Changing Mean: Corrections and Extensions," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 467-470, October.
    23. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
    24. Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Miguel A. León-Ledesma, 2002. "Cumulative Growth and the Catching-Up Debate From a Disequilibrium Standpoint," Palgrave Macmillan Books, in: John McCombie & Maurizio Pugno & Bruno Soro (ed.), Productivity Growth and Economic Performance, chapter 8, pages 197-218, Palgrave Macmillan.
    2. Utku Utkulu & Durmus Özdemir, 2005. "Does Trade Liberalization Cause a Long Run Economic Growth in Turkey," Economic Change and Restructuring, Springer, vol. 37(3), pages 245-266, September.
    3. Lena Vogel, 2009. "The endogeneity of the natural rate of growth - an empirical study for Latin-American countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 23(1), pages 41-53.
    4. Carton, Christine, 2007. "Un modèle de croissance cumulative étendu á l’éducation: une validation empirique pour la région asiatique [A model of cumulative growth extended to education: an empirical assessment for the Asian," MPRA Paper 20549, University Library of Munich, Germany.
    5. repec:rza:wpaper:029 is not listed on IDEAS
    6. Dakpogan, Arnaud & Smit, Eon, 2018. "The effect of electricity losses on GDP in Benin," MPRA Paper 89545, University Library of Munich, Germany.
    7. Abo-Zaid Salem M, 2011. "The Trade-Growth Relationship in Israel Revisited: Evidence from Annual Data, 1960-2004," Review of Middle East Economics and Finance, De Gruyter, vol. 6(3), pages 63-93, February.
    8. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308, Elsevier.
    9. Chang, Tsangyao & Nieh, Chien-Chung, 2004. "A note on testing the causal link between construction activity and economic growth in Taiwan," Journal of Asian Economics, Elsevier, vol. 15(3), pages 591-598, June.
    10. Johannes W. Fedderke & Yang Liu, 2017. "Schumpeterian and semi-endogenous productivity growth explanations," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 25(1), pages 111-137, January.
    11. Fulvio Castellacci, 2002. "Technology Gap and Cumulative Growth: Models and outcomes," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(3), pages 333-346.
    12. Audi, Marc & Ali, Amjad, 2017. "Socio-Economic Development, Demographic Changes And Total Labor Productivity In Pakistan: A Co-Integrational and Decomposition Analysis," MPRA Paper 82435, University Library of Munich, Germany, revised Jun 2017.
    13. Kevin S. Nell, 1999. "The Relation Between Money, Income and Prices in South Africa," Studies in Economics 9909, School of Economics, University of Kent.
    14. Johannes Fedderke & John Luiz & Raphael Kadt, 2008. "Using fractionalization indexes: deriving methodological principles for growth studies from time series evidence," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 85(2), pages 257-278, January.
    15. P Pegkas & C Tsamadias, 2016. "How important are foreign and domestic investments, exports and human capital for Greece's economic growth?," Economic Issues Journal Articles, Economic Issues, vol. 21(1), pages 23-45, March.
    16. Miguel A. LeÛn-Ledesma, 2002. "Accumulation, innovation and catching-up: an extended cumulative growth model," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 26(2), pages 201-216, March.
    17. Loesse Esso, 2012. "Re-examining the saving-investment nexus: threshold cointegration and causality evidence from the ECOWAS," Economic Change and Restructuring, Springer, vol. 45(3), pages 193-220, August.
    18. Massa, Ricardo & Rosellón, Juan, 2020. "Linear and nonlinear Granger causality between electricity production and economic performance in Mexico," Energy Policy, Elsevier, vol. 142(C).
    19. Panagiotis Pegkas & Constantinos Tsamadias, 2014. "Does Higher Education Affect Economic Growth? The Case of Greece," International Economic Journal, Taylor & Francis Journals, vol. 28(3), pages 425-444, September.
    20. repec:dgr:rugsom:98c44 is not listed on IDEAS
    21. Miguel Lebre de Freitas, 2006. "Portugal–EU Convergence Revisited: Evidence for the Period 1960–2003," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 12(3), pages 408-418, August.
    22. William Darity & Lewis S. Davis, 2005. "Growth, trade and uneven development," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 29(1), pages 141-170, January.

    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:cambje:v:26:y:2002:i:4:p:441-459. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/cje .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.