The Anatomy of Start-Stop Growth

44 Pages Posted: 16 Sep 2005 Last revised: 3 Jul 2010

See all articles by Benjamin F. Jones

Benjamin F. Jones

Northwestern University; National Bureau of Economic Research (NBER)

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Society of Fellows

Date Written: August 2005

Abstract

This paper investigates the remarkable extremes of growth experiences within countries and examines the changes that occur when growth starts and stops. We find three main results. First, all but the very richest countries experience both growth miracles and failures over substantial periods. Second, growth accounting reveals that physical capital accumulation plays a negligible role in growth take-offs and a larger but still modest role in growth collapses. The implied role of productivity in these shifts is also directly reflected in employment reallocations and changes in trade. Third, growth accelerations and collapses are asymmetric phenomena. Collapses typically feature reduced manufacturing and investment amidst increasing price instability, whereas growth takeoffs are primarily associated with large and steady expansions in international trade. This asymmetry suggests that the roads into and out of rapid growth expansions may not be the same. The results stand in contrast to much growth theory and conventional wisdom: despite much talk of poverty traps, even very poor countries regularly grow rapidly, and the role of aggregate investment in growth accelerations is negligible.

Suggested Citation

Jones, Benjamin F. and Olken, Benjamin A., The Anatomy of Start-Stop Growth (August 2005). NBER Working Paper No. w11528. Available at SSRN: https://ssrn.com/abstract=776016

Benjamin F. Jones (Contact Author)

Northwestern University ( email )

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Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Harvard University - Society of Fellows

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United States

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