Academic journal article International Advances in Economic Research

Macroeconomic Competitiveness in the Europe of the Twelve: An Application to 1969-93

Academic journal article International Advances in Economic Research

Macroeconomic Competitiveness in the Europe of the Twelve: An Application to 1969-93

Article excerpt


This study offers an integrated view of the relationships between technology, trade, and economic growth. Inspired by the most recent neo-Schumpeterian and post-Keynesian proposals, an empirical model is constructed to analyze how technology affects trade, how trade determines the evolution of gross domestic product, and how this economic growth can increase the technological capacity of nations, reinitiating the virtuous circle of growth. The model is estimated using the new technique of simultaneous equations with panel data. The results provide great support for the technological gap trade theory and for the existence of Kaldorian cumulative causation processes in the Europe of the Twelve during the period 1969 to 1993. (JEL C33, F10, 033, 040)


Interest in studying the relationships that link technology, trade, and economic growth has recently undergone a revival within the framework of the most modem neotechnological and post-Keynesian proposals. The ultimate objective of these theoretical developments is to investigate the determinants of what has been described as macroeconomic competitiveness, following the now classical definition by Fagerberg [19881. This is understood as the capacity of one country to grow without incurring a balance of payments constraint or, put another way, as the capacity of a country to increase foreign market share without losing it in its domestic market and without simultaneously reducing the capacity to increase its levels of income. The concept of macroeconomic competitiveness raises three fundamental questions: What determines the capacity of countries to compete in foreign and domestic markets? What is the relationship between this competitive capacity and the growth possibilities of an economy? What are the mech anisms, if any exist, which guarantee and permit the consolidation and continuity of these competitive capacities?

Quite apart from the abundant theoretical literature, which is capable of offering individual replies to each of these questions, a number of theoretical developments have appeared during the last few years in which the existence of the technology-trade-growth nexus is proposed and analyzed in a joint and integrated manner. However, the same cannot be said of the empirical literature. In this case, although the papers that individually analyze the existence of causal relationships between two of the three economic phenomena are abundant, those that simultaneously study the entire nexus are very scarce (see Fagerberg [1988], Verspagen [1993], and for the Spanish case, Alonso [19961). [1] In light of this, the objective of this paper is to offer new empirical evidence on the relations that link technology, trade, and economic growth in a way that is not isolated but rather takes into account the simultaneous nature of these nexus.

To that end, this paper is organized as follows. In the second section, we summarize the main theoretical proposals that have been made with respect to the relationship between technology, trade, and growth. In the third section, we employ these theoretical developments to construct a simultaneous equations model which reflects these relationships. This model is then tested empirically with respect to the economies of the Europe of the Twelve during the period 1969 to 1994. The fourth section presents a review of the main conclusions.

Technology, Trade, and Growth: The State of the Question

The formal study of macroeconomic competitiveness takes a concrete form in the works of Fagerberg [1988], Dosi et al. [1990], Cimoli and Soete [1992], Cimoli [1988, 1994], Amable [1992, 1993], and Verspagen [1993]. These authors present complete models, capable of offering a formal explanation of the technology-trade-economic growth nexus, which are no more than the result of integrating theoretical proposals, which make individual reference to some of these links. …

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