Title

The growth empirics of the scope of the production scale, time, and trade: Both cross-country and panel studies

Date of Award

1996

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

Advisor(s)

J. David Richardson

Keywords

scale economies, steady-state, economics

Subject Categories

Growth and Development

Abstract

The objective of this dissertation is to provide, theoretically and empirically, an interpretation for observed co-movements between the scale of an economy and its growth rate. Scale economies are associated with three modern theories of growth, featuring learning-by-doing, human capital, and specialized inputs to production processes. We pay special attention to the international trade environment by emphasizing the spillover effects of trade intensity on growth.

Chapter two develops and tests three models of the stylized facts of growth between 1976 and 1990 using cross-country data for the overall economy and the manufacturing sector. In all these models, international trade plays an important role in increasing the production scale and providing a fast growth rate for countries. Opening to trade generally increases the size of markets for producers, thus leading to greater specialization and a higher average scale of production. Specifically, we focus on endogenously determined technology and relate differences in growth rates across countries to differences in the scale of production and factor inputs.

Chapter three investigates the scale contribution to growth using a rich panel data set for 62 countries for their overall economy over 15 years, and 33 countries for their manufacturing sector over 10 years. The primary focus of this chapter has been to understand the implications of these models' performances in a panel data environment, if each year was an observation in steady-state growth equilibrium. The power of the scale of human capital increased in explaining the growth process. The other scale factors remain strong with statistically significant outcomes. The international trade environment seem to enhance productivity and growth again through expanded scale.

Chapter four proposes a new approach to the estimation technique. We estimate the system's parameters in and out of steady-state equilibrium using a nonlinear least squares estimation technique. The central point in this chapter is to study the empirics of the convergence to steady-state growth. We derive transitional dynamics of economies towards their balanced growth paths, and relate differences in the levels of technology to the cross-country growth differences, emphasizing national and international scale factors. The estimated values of parameters provide support for the view that these factors (once again) have positive and significant influences on economic growth, whether transitional or steady-state. Given the time required for economies to move halfway to their balanced growth path, this study suggests that one should also pay attention to the transitional dynamics as well because it may provide better explanation than the models that investigate the scale effects on the balanced growth path.

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