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Abstract:
Specializing in tourism is an option available to a number of less developed countries and regions. But is it a good option? To answer this question, we have compared the relative growth performance of 14 "tourism countries" within a sample of 143 countries, observed during the period 1980-95. Using standard OLS cross-country growth regressions, we have documented that the tourism countries grow significantly faster than all the other sub-groups considered in our analysis (OECD, Oil, LDC, Small). Moreover, we have shown that the reason why they are growing faster is neither that they are poorer than the average; nor that they have particularly high saving/investment propensities; nor that they are very open to trade. In other words, the positive performance of the tourism countries is not significantly accounted for by the traditional growth factors of the Mankiw, Romer and Weil type of models. Tourism specialization appears to be an independent determinant. A corollary of our findings is that the role played by the tourism sector should not be ignored by the debate about whether smallness is harmful for growth (e.g. Easterly and Kraay (2000), who conclude that there is no growth disadvantage in smallness). Half of the thirty countries classified as microstates in this literature are heavily dependent on tourism. Once this distinction is adopted, it is easy to see that the small tourism countries perform much better than the remaining small countries. In our findings, smallness per se can be bad for growth, while the opposite is true when smallness goes together with a specialization in tourism.

Economic growth, Convergence, Tourism specialization, Sustainable development

Abstract:
International tourism is today one of the most important tradable sectors, with expenditure on tourist goods and services representing some 8% of total world export receipts and 5% of world GDP. Cross-country data for 1985-95 on tourism specialisation and economic growth reveal the following regularities: (i) many tourism countries have grown faster compared to the other countries; and (ii) they are small. We use a two-sector endogenous growth model to obtain explanatory hypotheses about these two findings. In particular, we define the conditions required for small countries to specialise in tourism and to enter the faster growth path. Our suggestion is that what matters is a country's relative endowment of the natural resource, rather than its absolute size.

Abstract:
In this paper we study two closely related issues. First, the role of technology heterogeneity and diffusion in the convergence of GDP per worker observed across the European regions, in the absence of data on regional TFP. Second, the spatial pattern of the observed regional heterogeneity in technology and the relevance of this pattern for the econometric analysis of regional convergence in Europe. As for the first issue, our aim is to assess whether the convergence observed across European regions is due to convergence in technology as well as to convergence in capital-labour ratios. We first develop a growth model where technology accumulation in lagging regions depends on their own propensity to innovate and on technology diffusion from the leading region, and convergence in GDP per worker is due to both capital deepening and catch-up. We use data (1978-97) on 131 European regions. Propensities to innovate are computed by assigning each patent collected by the European Patent Office to its region of origin. Our findings are consistent with the hypothesis that technology differs across regions and that convergence is partly due to technological catch-up. As for the second empirical issue, we study to what extent each region's propensity to innovate is correlated with that of the surrounding regions. Our results show, first, that the performance of each region does depend on that of the surrounding areas. Second, that the intensity of such spillovers fades with distance. Taken together, these findings suggest the existence of significant localised spillovers of technological knowledge. Finally, we show that these spillovers are strong enough to play a role that cannot be ignored in the econometric analysis of the convergence process in Europe.

Convergence, growth, technology diffusion, spatial spillovers, Europe

Abstract:
We address the problem of measuring, in the absence of reliable indices of technology levels, how much of the convergence we observe is due to convergence in technology or in capital-labour ratios. We first develop a growth model where technology accumulation in lagging economies depends on their propensity to innovate and on technological spillovers, with convergence due both to capital-deepening and to technological diffusion. Then we study the transitional dynamics of the model to show how to discriminate empirically between the following three hypotheses: (i) convergence is due to capital-deepening with technology levels uniform across economies, as in Mankiw, Romer and Weil; (ii) convergence is due to capital-deepening with stationary differences in individual technologies, as in Islam; (iii) convergence is due to both technological catch-up and capital-deepening. Our main findings are as follows. First, we show that it may be difficult to distinguish between hypotheses (ii) and (iii) in cross-section or panel data. This problem has often been overlooked in the empirical literature on convergence. Second, we suggest how the problem can be overcome by noting that hypothesis (iii) does (and hypothesis (ii) does not) imply that the initial differences in technology levels may tend to decrease over time. A careful analysis of the fixed-effects estimates obtained by means of panel data methodology proposed in Islam should allow researchers to discriminate between the two competing hypotheses.

Abstract:
We address the problem of measuring, in the absence of reliable indexes of technology levels, how much of the convergence we observe is due to convergence in technology or in capital-labour ratios. We first develop a growth model where technology accumulation in lagging economies depends on their propensity to innovate and on technological spillovers, with convergence due both to capital-deepening and to technological diffusion. Then we study the transitional dynamics of the model to show how to discriminate empirically among the following three hypotheses: (i) convergence is due to capital-deepening with technology levels uniform across economies, as in Mankiw, Romer and Weil (1992); (ii) convergence is due to capital-deepening with stationary differences in individual technologies, as in Islam (1995); (iii) convergence is due to both technological catch-up and capital-deepening. Our main findings are as follows. First, we show that it may be difficult to distinguish between hypotheses (ii) and (iii) in cross-section or panel data. This problem has often been overlooked in the empirical literature on convergence. Second, we suggest how the problem can be overcome by noting that hypothesis (iii) does (and hypothesis (ii) does not) imply that the initial differences in technology levels may tend to decrease over time. A careful analysis of the fixed-effects estimates obtained by means of panel data methodology proposed in Islam (1995) should allow researchers to discriminate between the two competing hypothesis.

Convergence, Growth, Technology Diffusion

Abstract:
This paper proposes a fixed-effect panel methodology that enables us to simultaneously take into account both TFP convergence and the traditional neoclassical-type of convergence. We analyse a sample of Italian regions between 1963 and 1993 and find strong evidence that both mechanisms were at work during the process of aggregate regional convergence observed in Italy up to the mid-seventies. Finally, we find that our TFP estimates are highly positively correlated with standard human capital measures, where the latter is not statistically significant in growth regressions. This evidence confirms one of the hypotheses of the Nelson and Phelps approach, namely that human capital is the main determinant of technological catch-up. Our results are robust to the use of different estimation procedures such as simple LSDV, Kiviet-corrected LSDV, and GMM à la Arellano and Bond.

Abstract:
This paper proposes a fixed-effect panel methodology based on Islam (2000) to assess the existence of technology convergence across the Italian regions between 1963 and 1993. Our results find strong support to both the presence of TFP heterogeneity across Italian regions and to the hypothesis that TFP convergence has been a key factor in the process of aggregate regional convergence observed in Italy up to the midseventies. However, this period of TFP convergence has not generated a significant, persistent decrease in the degree of cross-region inequality in per capita income. Finally, our human capital measures has been found to be highly positively correlated with TFP levels. This evidence confirms one of the hypothesis of the Nelson and Phelps approach, namely that human capital is the main determinant of technological catch-up. Our results are robust to the use of different estimation procedure such as simple LSDV, Kiviet-corrected LSDV, and GMM a la Arellano and Bond (1991).

Economic growth, convergence, TFP, panel data

Abstract:
We analyze the empirical relationship between growth, country size and tourism specialization by using a dataset covering the period 1980-2003. We find that small tourism countries grow significantly faster than all the other sub-groups considered in our analysis. The reason for this is neither because they are poorer than the average, nor because they are very open to trade. In other words, Tourism appears to be an independent determining factor for growth. Another finding of our paper is that small states are fast growing especially when are highly specialized in tourism. In contrast with some previous conclusions in the literature, smallness per se is not good for growth.

Small states, growth, tourism, cross country comparisons

Abstract:
This paper aims at assessing whether dualistic mechanisms represent a significant component of the aggregate labor productivity convergence observed across the European regions in the 1980s. The potential of an explanation of convergence based in part, at least, on the existence of dualism in some of the initially poorer regions has been largely ignored by the literature. We use a dualistic model based on Dixit (1970) and on Mas-Colell and Razin (1973) to obtain hypotheses to be tested in cross-region growth regressions. In particular, we wish to test whether a high initial allocation of labor in agriculture in fact generates--in each sector as well as at the aggregate level--the specific impact on productivity growth (and therefore on convergence) implied by the theory of the dual economy. We use the database Regio-Eu set up by CRENoS, with aggregate and sectoral data for 109 territorial units from 1980 to 1990. Our cross-section results are consistent with the major predictions of the dualistic model. While part of the influence exerted by dualistic mechanisms is not easily distinguishable from the one exerted by other mechanisms such as technology diffusion, still the former appears to be a significant component of the whole process of convergence. Ignoring such components could lead to misleading interpretations of the relative roles played by each of the forces behind the process and to inexact assessments of what actions should be taken, if any, by the European regional policy to help the process become more pervasive.

Abstract:
This paper adopts a fixed-effect panel methodology that enables us to take into account both TFP and neoclassical convergence. We use a sample of 76 countries, 1960-2003 and estimate TFP values obtained by using different estimators such as LSDV, Kiviet-corrected LSDV, and GMM a la Arellano and Bond. In our estimates, cross-country TFP dynamics shows that most countries in the sample do not catch up with the USA. We also find conditional convergence in TFP levels and that human capital acts as a robust enhancing factor of technology adoption, as suggested by Nelson and Phelps in 1966. In contrast with previous evidence, in our results even very low level of human capital stocks allow a country to enter a "conditional TFP convergence club" - a result again consistent with the original version of the Nelson-Phelps hypothesis. Further, our results imply a plausible link between stages of development and returns to different levels of education. Finally, the positive influence of human capital on technology catch up is robust to the inclusion of controls for a country's institutional quality.

economic growth, TFP, human capita, dynamic panel data

Abstract:
We analyse a world economy composed of a continuum of small countries producing two final goods, the learning-by-doing potentials of which differ significantly. In autarchy, the knowledge accumulated in the high-learning sector spills over into the low-learning one. A steady-state equilibrium common to all countries exists, in which both goods are produced. The steady-state growth rate is the higher and larger the relative share of the leading sector in the economy. Trade leads to complete specialisation. In the absence of international spillovers, the growth rates of the trading countries diverge according to their comparative advantage. Both dynamic gains and losses from trade may be present. Further, we explore the possibility of international transmission of knowledge. The latter generates convergence of long-run growth rates across countries, with the duration of such a convergence being a decreasing function of the intensity of the international spillovers.