IDEAS home Printed from https://ideas.repec.org/p/fip/fedbwp/99-9.html
   My bibliography  Save this paper

Is the U.S. economy characterized by endogenous growth?: a time-series test of two stochastic growth models

Author

Listed:
  • Daniel G. Swaine

Abstract

In this paper, I conduct a structural change test that casts doubt on the validity of exogenous growth assumptions. Cross-sectional empirical support for non-stochastic convergence in the neoclassical growth model is the reason that the literature rejects endogenous growth. But, in a stochastic world, both neoclassical and endogenous growth models exhibit disequilibrium adjustment dynamics, thus convergence is not sufficient to reject endogenous growth. After testing for cointegration in regional per-capita incomes, I extract a single common trend to control for non-stationarity in regressions including both linear and stochastic trends. Structural change tests demonstrate that the data contain segmented linear trends, which is inconsistent with an exogenous growth assumption, but is consistent with endogenous growth.

Suggested Citation

  • Daniel G. Swaine, 1999. "Is the U.S. economy characterized by endogenous growth?: a time-series test of two stochastic growth models," Working Papers 99-9, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:99-9
    as

    Download full text from publisher

    File URL: http://www.bostonfed.org/economic/wp/wp1999/wp99_9.htm
    Download Restriction: no
    File URL: http://www.bostonfed.org/economic/wp/wp1999/wp99_9.pdf
    Download Restriction: no
    ---><---

    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. Barro, Robert J & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1995. "Capital Mobility in Neoclassical Models of Growth," American Economic Review, American Economic Association, vol. 85(1), pages 103-115, March.
    3. Evans, Paul, 1997. "Government Consumption and Growth," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 209-217, April.
    4. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    5. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    6. Kocherlakota, Narayana R & Yi, Kei-Mu, 1996. "A Simple Time Series Test of Endogenous vs. Exogenous Growth Models: An Application to the United States," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 126-134, February.
    7. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    8. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-351, March.
    9. William A. Brock & Leonard J. Mirman, 2001. "Optimal Economic Growth And Uncertainty: The Discounted Case," Chapters, in: W. D. Dechert (ed.), Growth Theory, Nonlinear Dynamics and Economic Modelling, chapter 1, pages 3-37, Edward Elgar Publishing.
    10. Jushan Bai, 1997. "Estimation Of A Change Point In Multiple Regression Models," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 551-563, November.
    11. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    12. Larry E. Jones & Rodolfo Manuelli, 1990. "A Convex Model of Equilibrium Growth," NBER Working Papers 3241, National Bureau of Economic Research, Inc.
    13. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 407-437.
    14. Jones, Larry E & Manuelli, Rodolfo E, 1990. "A Convex Model of Equilibrium Growth: Theory and Policy Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1008-1038, October.
    15. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    16. Charles I. Jones, 1995. "Time Series Tests of Endogenous Growth Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 495-525.
    17. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
    18. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
    19. David Cass, 1965. "Optimum Growth in an Aggregative Model of Capital Accumulation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 32(3), pages 233-240.
    20. Hansen, Bruce E, 2002. "Tests for Parameter Instability in Regressions with I(1) Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 45-59, January.
    21. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    22. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232.
    23. Lau, Sau-Him Paul, 1997. "Using stochastic growth models to understand unit roots and breaking trends," Journal of Economic Dynamics and Control, Elsevier, vol. 21(10), pages 1645-1667, August.
    24. Georgios Karras, 1999. "Taxes And Growth: Testing The Neoclassical And Endogenous Growth Models," Contemporary Economic Policy, Western Economic Association International, vol. 17(2), pages 177-188, April.
    25. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-251, April.
    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. 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.
    2. repec:ebl:ecbull:v:2:y:2002:i:1:p:1-15 is not listed on IDEAS
    3. Diego Romero-Ávila, 2013. "Is Physical Investment The Key To China'S Growth Miracle?," Economic Inquiry, Western Economic Association International, vol. 51(4), pages 1948-1971, October.
    4. Capolupo, Rosa, 2009. "The New Growth Theories and Their Empirics after Twenty Years," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 3, pages 1-72.
    5. Jones, Larry E. & Manuelli, Rodolfo E., 1997. "Endogenous growth theory: An introduction," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 1-22, January.
    6. Aykut Kibritçioglu, 2002. "On the Smithian origins of "new" trade and growth theories," Economics Bulletin, AccessEcon, vol. 2(1), pages 1-15.
    7. Patrizia Margani & Roberto Ricciuti, 2001. "Further Evidence on Convergence across Italian Regions," ERSA conference papers ersa01p104, European Regional Science Association.
    8. Klenow, Peter J. & Rodriguez-Clare, Andres, 1997. "Economic growth: A review essay," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 597-617, December.
    9. Bennett T. McCallum, 1996. "Neoclassical vs. endogenous growth analysis: an overview," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 41-71.
    10. Paul Evans, 1998. "Income Dynamics in Regions and Countries," Working Papers 98-09, Ohio State University, Department of Economics.
    11. Nazrul Islam, 2003. "What have We Learnt from the Convergence Debate?," Journal of Economic Surveys, Wiley Blackwell, vol. 17(3), pages 309-362, July.
    12. Pozzolo, Alberto Franco, 2004. "Endogenous Growth in Open Economies - A Survey of Major Results," Economics & Statistics Discussion Papers esdp04020, University of Molise, Department of Economics.
    13. Turnovsky, S., 2000. "Growth in an Open Economy: some Recent Developments," Papers 5, Warwick - Development Economics Research Centre.
    14. Xavier Sala-i-Martin, 1990. "Lecture Notes on Economic Growth(I): Introduction to the Literature and Neoclassical Models," NBER Working Papers 3563, National Bureau of Economic Research, Inc.
    15. Georgios Karras, 1999. "Taxes And Growth: Testing The Neoclassical And Endogenous Growth Models," Contemporary Economic Policy, Western Economic Association International, vol. 17(2), pages 177-188, April.
    16. Nowak-Lehmann D., Felicitas, 2000. "Was there endogenous growth in Chile (1960 - 1998)? A test of the AK-model," University of Göttingen Working Papers in Economics 7, University of Goettingen, Department of Economics.
    17. Voosholz, Frauke, 2014. "A survey on modeling economic growth. With special interest on natural resource use," CAWM Discussion Papers 69, University of Münster, Münster Center for Economic Policy (MEP).
    18. Long, N.V. & Wong, K.Y., 1996. "Endogenous Growth and International Trade: A Survey," Working Papers 96-07, University of Washington, Department of Economics.
    19. Galimberti, Jaqueson K., 2009. "Conditioned Export-Led Growth Hypothesis: A Panel Threshold Regressions Approach," MPRA Paper 13417, University Library of Munich, Germany.
    20. Andrew Bernard & Márcio Gomes Pinto Garcia, 1997. "Public and private provision of infrastructure and economic development," Textos para discussão 375, Department of Economics PUC-Rio (Brazil).
    21. Patrick Artus, 1993. "Croissance endogène : revue des modèles et tentatives de synthèse," Revue Économique, Programme National Persée, vol. 44(2), pages 189-228.

    More about this item

    Keywords

    Economic development;

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:fip:fedbwp:99-9. 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: Catherine Spozio (email available below). General contact details of provider: https://edirc.repec.org/data/frbbous.html .

    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.