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What Can Growth Rates Tell Us? A Short-Run Decomposition Method

Author

Listed:
  • Steven Lim

    () (University of Waikato)

  • Jason Le Vaillant

    () (Ministry of Economic Development)

  • Harry X. Wu

    () (Hitotsubashi University)

Abstract

Consider time series output data for two sectors, industry and agriculture. By examining just the output data themselves, what can we say about the relative impact of institutional/policy factors, intrasectoral competition for resources, and intersectoral linkages on each sector’s growth? Currently the answer might be very little. Our aim is to fill this gap: First, we explain how institutional/policy and other factors can be formally derived from a growth rate term. Second, we offer an empirical illustration of the derivation, such that just the time series output data of the two sectors by themselves contain enough information to make inferences regarding the relative impacts of the institutional/policy and other factors. Thus we provide the formal decomposition of a growth rate term, allowing the relative impacts of key explanatory variables to be estimated from a highly parsimonious data set. For countries that publish limited data sets, our method extends the ability of researchers to make inferences about the impact of institutions and so on, even when data on institutions are unavailable.

Suggested Citation

  • Steven Lim & Jason Le Vaillant & Harry X. Wu, 2012. "What Can Growth Rates Tell Us? A Short-Run Decomposition Method," Working Papers in Economics 12/14, University of Waikato.
  • Handle: RePEc:wai:econwp:12/14
    as

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    File URL: ftp://wms-webprod1.mngt.waikato.ac.nz/RePEc/wai/econwp/1214.pdf
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    References listed on IDEAS

    as
    1. Benjamin F. Jones & Benjamin A. Olken, 2008. "The Anatomy of Start-Stop Growth," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 582-587, August.
    2. Aoki, Masanao & Yoshikawa, Hiroshi, 2002. "Demand saturation-creation and economic growth," Journal of Economic Behavior & Organization, Elsevier, vol. 48(2), pages 127-154, June.
    3. Benjamin F. Jones & Benjamin A. Olken, 2005. "Do Leaders Matter? National Leadership and Growth Since World War II," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 835-864.
    4. Kwan, Yum K. & Chow, Gregory C., 1996. "Estimating Economic Effects of Political Movements in China," Journal of Comparative Economics, Elsevier, vol. 23(2), pages 192-208, October.
    5. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," American Economic Review, American Economic Association, vol. 92(2), pages 160-164, May.
    6. Jerzmanowski, Michal, 2006. "Empirics of hills, plateaus, mountains and plains: A Markov-switching approach to growth," Journal of Development Economics, Elsevier, vol. 81(2), pages 357-385, December.
    7. Ahmed Mushfiq Mobarak, 2005. "Democracy, Volatility, and Economic Development," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 348-361, May.
    8. Day, Richard H, 1982. "Irregular Growth Cycles," American Economic Review, American Economic Association, vol. 72(3), pages 406-414, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    short-run growth; growth decomposition; institutions and policies; China;

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • P30 - Economic Systems - - Socialist Institutions and Their Transitions - - - General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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