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The Optimal Level and Impact of Internal Factors on Growth


  • Li, Kui-Wai


This paper empirically uses data from the world economy to show that performance of domestic factors are equally important to external factors when comes to growth. Various external and domestic factors are used to construct two separate indices and the principal component method is applied in the analysis. The empirical results show that given a different level of performance in the economy’s external factors, a higher performance in the internal factors will produce a higher growth rate. When the performance of an economy’s internal factors is extremely low, it would be appropriate for that economy first to improve its internal factors.

Suggested Citation

  • Li, Kui-Wai, 2011. "The Optimal Level and Impact of Internal Factors on Growth," MPRA Paper 36419, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36419

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    References listed on IDEAS

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    5. Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677 Elsevier.
    6. Carmen Fernandez & Eduardo Ley & Mark F. J. Steel, 2001. "Model uncertainty in cross-country growth regressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(5), pages 563-576.
    7. Harrison, Ann, 1996. "Openness and growth: A time-series, cross-country analysis for developing countries," Journal of Development Economics, Elsevier, vol. 48(2), pages 419-447, March.
    8. Emma Aisbett, 2007. "Why are the Critics So Convinced that Globalization is Bad for the Poor?," NBER Chapters,in: Globalization and Poverty, pages 33-86 National Bureau of Economic Research, Inc.
    9. Axel Dreher, 2002. "Does Globalization Affect Growth?," Development and Comp Systems 0210004, EconWPA, revised 16 Jun 2003.
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    12. Balassa, Bela, 1986. "Comparative Advantage in Manufactured Goods: A Reappraisal," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 315-319, May.
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    Cited by:

    1. Ioana Andrada Moldovan Gavril, 2015. "Does the Financial System Promote Sustainable Development? Evidence from Eastern European Countries," Central European Business Review, University of Economics, Prague, vol. 2015(2), pages 40-47.

    More about this item


    Growth; external factors; domestic factors;

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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