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Takeoffs

  • Joshua Aizenman
  • Mark M. Spiegel

This paper identifies factors associated with takeoff--a sustained period of high growth following a period of stagnation. We examine a panel of 241 "stagnation episodes" from 146 countries, 54% of these episodes are followed by takeoffs. Countries that experience takeoffs average 2.3% annual growth following their stagnation episodes, while those that do not average 0% growth; 46% of the takeoffs are "sustained," i.e. lasting 8 years or longer. Using probit estimation, we find that de jure trade openness is positively and significantly associated with takeoffs. A one standard deviation increase in de jure trade openness is associated with a 55% increase in the probability of a takeoff in our default specification. We also find evidence that capital account openness encourages takeoff responses, although this channel is less robust. Measures of de facto trade openness, as well as a variety of other potential conditioning variables, are found to be poor predictors of takeoffs. We also examine the determinants of nations achieving sustained takeoffs. While we fail to find a significant role for openness in determining whether or not takeoffs are sustained, we do find a role for output composition: Takeoffs in countries with more commodity-intensive output bundles are less likely to be sustained, while takeoffs in countries that are more service-intensive are more likely to be sustained. This suggests that adverse terms of trade shocks prevalent among commodity exports may play a role in ending long-term high growth episodes.

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Paper provided by Federal Reserve Bank of San Francisco in its series Working Paper Series with number 2008-02.

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Date of creation: 2007
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Handle: RePEc:fip:fedfwp:2008-02
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  1. Jess Benhabib & Mark Spiegel, 2002. "Human capital and technology diffusion," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
  2. Robert J. Barro & Jong-Wha Lee, 1993. "International Comparisons of Educational Attainment," NBER Working Papers 4349, National Bureau of Economic Research, Inc.
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  9. Rodrik, Dani, 1999. " Where Did All the Growth Go? External Shocks, Social Conflict, and Growth Collapses," Journal of Economic Growth, Springer, vol. 4(4), pages 385-412, December.
  10. Jeffrey Sachs & Andrew M. Warner, 1995. "Economic Convergence and Economic Policies," CASE Network Studies and Analyses 0035, CASE-Center for Social and Economic Research.
  11. William Easterly, 2005. "Reliving the '50s: The Big Push, Poverty Traps, and Takeoffs in Economic Development," Working Papers 65, Center for Global Development.
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