Growth and Productivity: A Model of Cumulative Growth and Catching Up
Author(s)
Targetti, Ferdinando; Foti, Alessandro
Abstract
Individually, neither the cumulative growth approach of the post-Keynesian tradition nor the catching-up theory of neoclassical derivation are able to account for the chief stylized facts of the comparative economic growth. A pooled, cross-section, econometric model that integrates these two approaches is developed and tested over the period 1950-1988 for a group of nine Organization for Economic Cooperation and Development (OECD) countries, for a group of nine Latin American countries and for a group of seven East Asian countries. To measure productivity levels, 1985 Purchasing Power parties are employed. The growth record of the OECD countries is satisfactorily assessed by the model. The catching-up effect is found to be relevant in explaining productivity growth in the OECD area and in East Asia, but not in Latin America. This differential outcome finds explanation in terms of the relative strength of dynamic increasing returns.
