Academic journal article Atlantic Economic Journal

Splines, Tigers, and Economic Growth

Academic journal article Atlantic Economic Journal

Splines, Tigers, and Economic Growth

Article excerpt

The empirical findings for a cross-section of about 100 countries strongly support Robert J. Barro's belief [Determinants of Economic Growth, 1998] that a higher (lower) starting level of per capita output implies a lower (higher) per capita growth rate. As Barro points out [p. 9], this effect corresponds to convergence to some steady-state level of per capita output.

A simple three-equation model of economic growth was fitted to 1995 data covering a cross-section of 96 countries [United Nations, Statistical Yearbook, 1997]. The variables used and the units in which they were measured are: gross domestic product per capita, GDP/N (in 1995 U.S. dollars); gross fixed capital formation as a percentage of gross domestic product, GCF/GDP; the dependency ratio, DPEN; and a three-year average rate of growth in real output per capita, r (in 1990 U.S. dollars), expressed as a percent per year. The estimated equations are as follows:

GCF/GDP = 20.9155 (24.58) - .009245 GDP/N (-3.03) + .009123 (GDP/N)D1 (3.01) + 15.66 TIGERS (6.96), (1)

DPEN = 47.219 (25.43) + 54,229 1(14.34) / [(GDP/N) + 950], (2)

and r = 3.182 (1.58) + .08684 GCF/GDP (1.64) -. 0512 DPEN (-2.65), (3)

where t-ratios are in parentheses and [R.sup.2] is .380, .686, and .137 in (1), (2), and (3), respectively. …

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