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Jonathan R.W. Temple's
Scholarly Papers
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Jonathan R.W. Temple University of Bristol - Department of Economics
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26 Jul 99
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26 Jul 99
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492 (14,612)
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48
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Abstract:
In this paper I discuss three econometric problems that are rarely given adequate discussion in textbooks: model uncertainty, parameter heterogeneity, and outliers. I show how Leamer's extreme bounds analysis can be adapted to address all three problems simultaneously, and present two examples based on an influential cross-country growth paper by Levine and Renelt.
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2.
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Jonathan R.W. Temple University of Bristol - Department of Economics
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19 May 99
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19 May 99
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279 (29,808)
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Abstract:
This paper uses the Harris-Todaro model of rural-urban migration to explore how inequality is likely to evolve during the course of various kinds of economic development. It is shown that development in agriculture is likely to be reduce inequality. The paper also shows that the Kuznets curve is unlikely to be a general result, and clarifies the reasons for the observed link between dualism and inequality.
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3.
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Dualism and Cross-Country Growth Regressions
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Jonathan R.W. Temple University of Bristol - Department of Economics Ludger Woessmann Ifo Institute for Economic Research
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22 Oct 04
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27 Jul 06
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Jonathan R.W. Temple University of Bristol - Department of Economics Ludger Woessmann Ifo Institute for Economic Research
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27 Jul 06
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27 Jul 06
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This paper develops empirical growth models suitable for dual economies, and studies the relationship between structural change and economic growth. Structural change matters because, if the marginal product of labour varies across sectors, changes in the structure of employment can raise aggregate productivity. The models in the paper incorporate this effect in a more flexible way than previous work. Estimates of the models imply sizeable marginal product differentials, and indicate that the reallocation of labour makes a significant contribution to the international variation in productivity growth.
Structural change, dualism, wage differentials, TFP growth
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Ludger Woessmann Ifo Institute for Economic Research Jonathan R.W. Temple University of Bristol - Department of Economics
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22 Oct 04
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22 Oct 04
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This paper examines whether growth regressions should incorporate dualism and structural change. If there is a differential across sectors in the marginal product of labour, changes in the structure of employment can raise aggregate total factor productivity. The paper develops empirical growth models that allow for this effect in a more flexible way than previous work. Estimates of the models imply sizeable marginal product differentials, and reveal that the reallocation of labour can explain a significant fraction of the international variation in TFP growth.
growth, convergence, structural change
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4.
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Rich Nations, Poor Nations: How Much can Multiple Equilibria Explain?
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Bryan S. Graham University of California, Berkeley - Department of Economics Jonathan R.W. Temple University of Bristol - Department of Economics
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27 Nov 01
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03 Jun 05
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68 (101,719) |
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Bryan S. Graham University of California, Berkeley - Department of Economics Jonathan R.W. Temple University of Bristol - Department of Economics
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03 Jun 05
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03 Jun 05
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This paper asks whether the income gap between rich and poor nations can be explained by multiple equilibria. We explore the quantitative implications of a simple two sector general equilibrium model that gives rise to multiplicity, and calibrate the model for a large number of countries. Under the assumptions of the model, around a quarter of the world's economies are found to be in a low output equilibrium. The output gains associated with an equilibrium switch are sizeable, but well short of the vast income disparity observed in the data.
Poverty traps, multiple equilibria, TFP differences, calibration
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Bryan S. Graham University of California, Berkeley - Department of Economics Jonathan R.W. Temple University of Bristol - Department of Economics
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27 Nov 01
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03 Jun 05
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The idea that income differences between rich and poor nations arise through multiple equilibria or 'poverty traps' is as intuitive as it is difficult to verify. In this Paper, we explore the empirical relevance of such models. We calibrate a simple two-sector model for 127 countries, and use the results to analyse the international prevalence of poverty traps and their consequences for productivity. We also examine the possible effects of multiplicity on the world distribution of income, and identify events in the data that may correspond to equilibrium switching.
Multiple equilibria, poverty traps, world income distribution
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5.
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Stephen R. Bond Nuffield College Anke Hoeffler University of Oxford - Centre for the Study of African Economies (CSAE) Jonathan R.W. Temple University of Bristol - Department of Economics
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21 Nov 01
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27 Nov 01
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61 (108,025)
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This Paper highlights a problem in using the first-differenced GMM panel data estimator to estimate cross-country growth regressions. When the time series are persistent, the first-differenced GMM estimator can be poorly behaved, since lagged levels of the series provide only weak instruments for subsequent first-differences. Revisiting the work of Caselli, Esquivel and Lefort (1996), we show that this problem may be serious in practice. We suggest using a more efficient GMM estimator that exploits stationarity restrictions and this approach is shown to give more reasonable results than first-differenced GMM in our estimation of an empirical growth model.
Convergence, growth, generalized method of moments, weak instruments
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Jonathan R.W. Temple University of Bristol - Department of Economics
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01 Aug 01
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01 Aug 01
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This paper surveys the empirical literature on the growth effects of education and social capital. The main focus is on the cross-country evidence for the OECD countries, but the paper also briefly reviews evidence from labour economics, to clarify where empirical work on education using macro data may be relatively useful. It is argued that on balance, the recent cross-country evidence points to productivity benefits of education that are at least as large as those identified by labour economists. The paper also discusses the implications of this finding. Finally, the paper reviews the emerging literature on the benefits of social capital. Since this literature is still in its early days, policy conclusions are accordingly harder to find.
Education, human capital, social capital, economic growth
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Jonathan R.W. Temple University of Bristol - Department of Economics
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22 Nov 02
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22 Nov 02
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30 (143,957)
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The remarkable economic success of the United States in the 1990s led many observers to talk about a 'New Economy'. This Paper provides an overview of the main issues, including faster productivity growth, the stability of inflation despite very low unemployment, the greater overall economic stability of the 1990s, the role of monetary policy, and the boom in the stock market. The Paper also considers whether or not the acceleration in productivity growth can be sustained, and the possible implications for the rest of the world.
New Economy, productivity growth
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Jonathan R.W. Temple University of Bristol - Department of Economics
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02 Apr 05
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06 May 05
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Who benefits from economic growth? This paper analyses the distributional impact of different types of growth within a two-sector model. The paper first presents necessary and sufficient conditions for unambiguous changes in wage inequality in a dual economy, based on analysis of the entire Lorenz curve. These conditions are then applied to the Harris-Todaro model with an urban non-agricultural sector and rural agriculture. It is shown that capital accumulation or technical progress in agriculture can shift the Lorenz curve inwards and reduce wage inequality, while the effects of development in non-agriculture are typically ambiguous.
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Jonathan R.W. Temple University of Bristol - Department of Economics Adeel Malik University of Oxford - Queen Elizabeth House
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06 Jun 06
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06 Jun 06
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26 (151,483)
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This paper examines the structural determinants of output volatility in developing countries, and especially the roles of geography and institutions. We investigate the volatility effects of market access, climate variability, the geographic predisposition to trade, and various measures of institutional quality. We find an especially important role for market access: remote countries are more likely to have undiversified exports and to experience greater volatility in output growth. Our results are based on Bayesian methods that allow us to address formally the problem of model uncertainty and to examine robustness across a wide range of specifications.
Volatility, geography, institutions, Bayesian model averaging
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Jonathan R.W. Temple University of Bristol - Department of Economics
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30 Aug 01
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04 Sep 01
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26 (151,483)
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This paper analyses the remarkable growth experience of Indonesia since 1966. Over a thirty-year period, GDP per capita rose more than fourfold, despite unfavourable initial conditions, some weak institutions, and flawed microeconomic policies. The paper attributes this strong performance to a mutually reinforcing combination of political stability, competent macroeconomic policy, and some important instances of good fortune. It explores the origins of good policy and analyses three of the main external shocks. The paper also argues that rapid growth interacted with weak institutions in a way that contributed to the severity of the crisis of 1997-98.
Indonesia, growth, structural change
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Jonathan R.W. Temple University of Bristol - Department of Economics Vatcharin Sirimaneetham University of Bristol - Department of Economics
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19 Jul 06
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19 Jul 06
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24 (156,183)
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We examine the view that high-quality macroeconomic policy is a necessary, but not sufficient, condition for economic growth. We first construct a new index of the quality of macroeconomic policy. We then directly compare growth rate distributions across countries with good and bad policies; use Bayesian methods to examine the partial correlation between policy and growth; and outline how growth and steady-state income levels might have differed, had all countries achieved good policy outcomes. One finding is that bad macroeconomic policies can be offset by other factors, but the fastest-growing countries in our sample all shared high-quality macroeconomic management.
Macroeconomic policy, economic growth, Washington Consensus, Bayesian Model Averaging, counterfactuals
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Clifford Attfield University of Bristol - Department of Economics Jonathan R.W. Temple University of Bristol - Department of Economics
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30 Mar 05
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30 Mar 05
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24 (156,183)
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Standard macroeconomic models suggest that the 'great ratios' of consumption to output and investment to output should be stationary. The joint behavior of consumption, investment and output can then be used to measure trend output. We adopt this approach for the USA and UK, and find support for stationarity of the great ratios when structural breaks are taken into account. From the estimated vector error correction models, we extract multivariate estimates of the permanent component in output, and comment on trend growth in the 1980s and the New Economy boom of the 1990s.
Trend output, great ratios, structural breaks, permanent components, new economy
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Jonathan R.W. Temple University of Bristol - Department of Economics
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29 Jun 01
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24 Jul 01
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24 (156,183)
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Most of the countries of Western Europe grew at unprecedented rates from the late 1940s until the early 1970s. Another feature of this period was dramatic structural change, as employment shifted from agriculture to manufacturing and services. This Paper uses growth accounting to measure the direct contribution of structural change to aggregate productivity growth. The conventional accounting framework is extended and then applied to Western Europe and the USA for the period 1950-90. The Paper quantifies the importance of structural change in explaining the Golden Age, the productivity slowdown, and the cross-country variation in post-war growth rates.
Structural change, labour reallocation, growth accounting
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Jonathan R.W. Temple University of Bristol - Department of Economics Mathan Satchi University of Kent, Canterbury - Department of Economics
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06 Jun 06
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06 Jun 06
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22 (161,510)
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In middle-income countries, the informal sector often accounts for a substantial fraction of urban employment. We develop a general equilibrium model with matching frictions in the urban labour market, the possibility of self-employment in the informal sector, and scope for rural-urban migration. We investigate the effects of different types of growth on wages and the informal sector, and the extent to which labour market institutions can influence aggregate productivity. We quantify these effects by calibrating the model to data for Mexico, a country with a sizeable informal sector and significant labour market rigidities.
Informal sector, urban unemployment, dual economies, matching frictions
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Jonathan R.W. Temple University of Bristol - Department of Economics
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13 Jul 05
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28 Jul 05
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21 (164,320)
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This paper argues that dual economy models deserve a central place in the analysis of growth in developing countries. The paper shows how these models can be used to analyse the output losses associated with factor misallocation, aggregate growth in the presence of factor market distortions, international differences in sectoral productivity and the potential role of increasing returns to scale. Above all, small-scale general equilibrium models can be used to investigate the interactions between growth and labour markets, to shed new light on the origins of pro-poor and labour-intensive growth, and to explore the role of the informal sector.
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Yongfu Huang University of Cambridge Jonathan R.W. Temple University of Bristol - Department of Economics
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17 Aug 05
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15 Nov 05
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19 (170,094)
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Several recent papers have argued that trade and financial development may be linked, either for political economy reasons, or because foreign competition and exposure to shocks lead to changes in the demand for external finance. In this paper, we use the cross-country and time-series variation in openness to study the relationship between trade and finance in more detail. Our results suggest that increases in goods market openness are typically followed by sustained increases in financial depth.
Openness, trade, financial development
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Jonathan R.W. Temple University of Bristol - Department of Economics
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11 Jun 04
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11 Jun 04
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19 (170,094)
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This Paper shows how to calibrate a two-sector general equilibrium model of production using a small number of parameter assumptions and readily available data. The framework is then used to analyse the costs of labour market dualism. The Paper quantifies the effects of rural-urban wage differentials and urban unemployment on aggregate productivity, wages and returns to capital, factor shares, and sectoral structure. One of the main findings is that labour market rigidities can have a major impact on the extent of industrialization.
Dualism, productivity, wage differentials, minimum wages
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Pasquale Scaramozzino University of Rome II - Faculty of Economics Jonathan R.W. Temple University of Bristol - Department of Economics Nir Vulkan University of Oxford - Said Business School
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12 Sep 05
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15 Sep 05
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17 (175,776)
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The economic boom of the USA in the 1990s was remarkable in its duration, the sustained rise in equipment investment, the reduced volatility of productivity growth, and continued uncertainty about the trend growth rate. In this paper, we link these phenomena using an extension of the classic model of implementation cycles due to Shleifer (1986). The key idea is that uncertainty about the trend growth rate can lead firms to bring forward the implementation of innovations, temporarily eliminating expectations-driven business cycles, because delay is risky when beliefs are not common knowledge.
Implementation cycles, New Economy, multiple equilibria
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Jonathan R.W. Temple University of Bristol - Department of Economics
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22 Apr 99
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22 Apr 99
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0 (0)
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This paper reviews the stories that economists tell about the growth effects of inflation. Informal accounts of inflation's effects are common, but there are few models which get to grips with the effects that are probably central. Partly as a result of this, and partly as a result of many econometric problems, much of the empirical evidence remains unconvincing. The paper assesses the various contributions and suggests possible improvements.
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Jonathan R.W. Temple University of Bristol - Department of Economics
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26 Dec 98
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29 Apr 99
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This paper is motivated by the idea of "appropriate technology" and its implications for economic growth. Consistent with a simple model, some evidence is presented that efficiency growth rates are positively correlated with capital-labour ratios across countries. It is argued that this correlation can help explain international TFP differences and some other findings of previous researchers, including five puzzles that have emerged from the empirical growth literature.
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Jonathan R.W. Temple University of Bristol - Department of Economics Hans-Joachim Voth Universitat Pompeu Fabra - Faculty of Economic and Business Sciences
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20 Dec 98
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20 Dec 98
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This paper constructs simple models in which industrialization is driven by human capital accumulation. Industrialization can explain the robust correlation between equipment investment and growth in developing countries. We show that government intervention is justified within our stylized model, and indicate that a subsidy to equipment investment is likely to be dominated by other policies. In the final section of the paper, we examine the correlation between equipment investment and growth, and find that it is strongest in economies on the brink of industrialization. We also show that this result is not easily explained by diminishing returns.
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Jonathan R.W. Temple University of Bristol - Department of Economics
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06 Nov 98
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28 Dec 98
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Recent papers have documented a robust negative correlation between openness to trade and average inflation. The usual argument is that openness makes the Phillips curve steeper, leading to a lower rate of inflation in equilibrium. The relationship between openness and inflation is then seen as evidence in favor of time consistency theories of monetary policy. However, in this note I show that standard measures of the output-inflation trade-off are not correlated with openness. Hence the usual argument is almost certainly wrong, and the observed link between openness and inflation becomes an interesting puzzle.
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Jonathan R.W. Temple University of Bristol - Department of Economics Paul A. Johnson Vassar College
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11 Nov 96
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13 Feb 98
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This paper explores the role of "social capability" in growth and development. We present a wide variety of evidence to show that rates of growth, in per capita income and TFP, are strongly related to the extent of a country's initial social development. We also show that differences in social development can explain polarization taking place in the world income distribution. Not only are these results interesting in themselves, they lead us to reject the influential augmented Solow model in favor of the alternative view, in which technology is allowed to differ across countries and social factors play a role in the speed of catching up.
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