Working Paper: CEPR ID: DP2537
Authors: Lucio Sarno
Abstract: This paper proposes an empirical growth model which is consistent with a stochastic steady-state labour productivity level varying over time and across countries, where the disequilibrium mechanism leading to long-run equilibrium follows a nonlinear equilibrium correction model. Using data for the G7 economies during the postwar period since 1950, the empirical analysis yields a long-run model which implies plausible estimates of the production function parameters. Postwar economic growth in each of the G7 countries appears to be well characterized by a nonlinear equilibrium correction model where the dynamic adjustment towards long-run equilibrium is governed by a logistic function, while also capturing spillover effects in growth dynamics.
Keywords: Economic Growth; Equilibrium Correction; Nonlinear Dynamics; Spillover
JEL Codes: C32; F43; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| technological levels (O33) | long-run equilibrium level of labor productivity (O49) |
| capital accumulation rates (E22) | long-run equilibrium level of labor productivity (O49) |
| labor force growth (J21) | long-run equilibrium level of labor productivity (O49) |
| initial conditions (C62) | speed of adjustment towards long-run equilibrium (D50) |
| equilibrium errors from one country (F32) | labor productivity dynamics in another country (O49) |