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Scale Externalities of the G7 Countries

Scale effects in per capita production are an outcome of many theoretical economic models like second generation growth models, models of the new trade theory or the new economic geography. The prediction is that larger economies should have a higher per capita production than smaller economies. However, in an open economy context the scale of the economy is less important because countries can participate in the scale of other countries through trade. This paper develops an open economy growth model of the second generation type which shows the relevance of the scale of the trading partners in technology goods for per capita production. This model is empirically tested using a cross section of 88 countries for the year 2000. The scale of these economies is measured by a weighted sum of scales of the G7 countries, since these are the countries spending most on R&D and are thus the main origin of technology. The results show that there is a significant effect of this scale variable on per capita production.

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File URL: http://www.wiwi.uni-augsburg.de/vwl/institut/paper/280.pdf
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Paper provided by Universitaet Augsburg, Institute for Economics in its series Discussion Paper Series with number 280.

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Length: pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:aug:augsbe:0280
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  1. Keller, Wolfgang, 1997. "How trade patterns and technology flows affect productivity growth," Policy Research Working Paper Series 1831, The World Bank.
  2. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
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  4. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  5. Backus, David K. & Kehoe, Patrick J. & Kehoe, Timothy J., 1992. "In search of scale effects in trade and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 377-409, December.
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  7. Frank Lichtenberg & Bruno van Pottelsberghe de la Potterie, 1996. "International R&D Spillovers: A Re-Examination," NBER Working Papers 5668, National Bureau of Economic Research, Inc.
  8. Wolfgang Keller, 2001. "International Technology Diffusion," NBER Working Papers 8573, National Bureau of Economic Research, Inc.
  9. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  10. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
  11. repec:rus:hseeco:71039 is not listed on IDEAS
  12. Wolfgang Keller, 1996. "Trade and the Transmission of Technology," Development and Comp Systems 9609001, EconWPA.
  13. Keller, Wolfgang, 2001. "Knowledge Spillovers at the World's Technology Frontier," CEPR Discussion Papers 2815, C.E.P.R. Discussion Papers.
  14. Enrico Spolaore & Romain Wacziarg, 2002. "Borders and Growth," NBER Working Papers 9223, National Bureau of Economic Research, Inc.
  15. Xavier Sala-i-Martin, 1997. "I just ran four million regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra.
  16. Bin Xu & Jianmao Wang, 1999. "Capital Goods Trade and R&D Spillovers in the OECD," Canadian Journal of Economics, Canadian Economics Association, vol. 32(5), pages 1258-1274, November.
  17. 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.
  18. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  19. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  20. Jones, Charles I, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 495-525, May.
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