Variety, Competition, and Population in Economic Growth: Theory and Empirics
By considering the average density of sectors in a country’s product space, measured by the Lafay’s net export flows-based specialization index, as an indicator of the degree of complexity of the same country’s production structure (Hausmann and Klinger ), this is the first paper that provides aggregate macroeconomic evidence on how, in the long-run, a diverse degree of production-complexity may affect in a differential way not only economic growth, but also the relation between economic growth, population growth and the monopolistic (intermediate) markup. On average, for the countries included in the sample, we find that, following an increase in the number of horizontally-differentiated (intermediate) inputs entering the aggregate production function, the specialization effect is greater than the corresponding complexity effect. In this case, the impact of population growth on economic growth is definitely negative, whereas the influence of the monopolistic markup on the same variable is negative.
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