Diego Romero-Ávila

FINANCIAL DEVELOPMENT AND THE SOURCES OF GROWTH AND CONVERGENCE

We extend the deterministic, nonparametric production frontier framework by incorporating financial development. Our analysis convincingly shows that (1) failure to account for financial development overstates the role of physical capital accumulation in labor productivity growth, (2) most of this overstated contribution stems from the efficiency‐enhancing role of well‐functioning financial institutions, (3) international polarization is solely driven by efficiency changes, and (4) increased distributional dispersion of productivity is primarily driven by technological change. Model’s extensions to account for the growth effect of changes in the institutional environment only add to the argument about the overstated role of physical capital.

The Distribution of Legal Traditions around the World: A Contribution to the Legal-Origins Theory

The distribution of the common law was conditioned by a colonial strategy sensitive to the colonies’ level of endowments, exhibiting a more effective implantation of the legal system in initially sparsely populated territories with a temperate climate. This translates into a negative relationship of precolonial population density and settler mortality with legal outcomes for common-law countries. By contrast, the implantation of the French civil law was not systematically influenced by initial conditions, which is reflected in the lack of such a relationship for this legal family. The common law does not generally lead to legal outcomes superior to those provided by the French civil law when precolonial population density and/or settler mortality are high. The form of colonial rule in British colonies is found to mediate between precolonial endowments and postcolonial legal outcomes.

A confirmatory analysis of the unit root hypothesis for OECD consumption-income ratios

This article investigates the existence of a unit root in the consumption-income ratio for a sample of 23 OECD countries over the period 1960 to 2005. For that purpose, we first use recently developed unit root tests with good size and power. Second, we employ the more powerful panel unit root tests of Pesaran (2003) and Smith et al . (2004) that take the null of nonstationarity and a bootstrap version of the test of Hadri (2000) that takes stationarity as the null hypothesis. Overall, our confirmatory analysis renders clear-cut evidence that OECD consumption-income ratios contain a unit root.

Can the AK Model Be Rescued? New Evidence from Unit Root Tests with Good Size and Power

In this paper we revisit the work of Jones (1995a) which provided strong evidence against the empirical validity of AK-type models that predict increasing output growth rates as a result of permanent movements in the physical investment rate. For that purpose, we employ recently developed unit root tests with good size and power which are also able to accommodate the existence of a structural break in the data for 26 OECD countries over the period 1950-1992. Overall, the analysis of deterministic and stochastic trends in output growth and investment rates (in total physical investment, and in producer durables and total structures) do not render broad support for the empirical validity of AK models. This result appears to be confirmed by the estimation of autoregressive distributed lag growth models which consistently render insignificant long-run coefficients on the investment rates.

The Convergence Hypothesis For Oecd Countries Reconsidered: Panel Data Evidence With Multiple Breaks, 1870-2003

In this paper we investigate the existence of stochastic convergence of per capita real output in 19 OECD countries over 1870–2003. For that purpose, we employ panel techniques which incorporate an unknown number of structural breaks along with cross-dependence. Overall, our analysis provides strong evidence of stochastic convergence over the 20th century. In addition, the examination of time-series β-convergence within the different regimes identified renders evidence supporting catching-up for 16 countries. This implies that, despite a narrowing of the income gap, the convergence process has yet to be completed. Evidence of long-run convergence is further provided for Finland, France and the USA.

Productivity Growth across Spanish Regions and Industries: A Production-Frontier Approach

Badunenko O. and Romero-Ávila D. Productivity growth across Spanish regions and industries: a production-frontier approach, Regional Studies. This paper decomposes labour productivity growth into components attributable to technological change, technological catch-up, capital deepening and human capital accumulation. This is done through a production-frontier approach applied to Spanish data disaggregated along regional and sectoral dimensions. It is shown that capital deepening is the primary contributor to productivity growth, closely followed by human capital and technological change; widespread efficiency losses substantially impede productivity growth; productivity convergence is driven by higher efficiency losses exhibited by rich regions; analysis of sectoral data shows marked differences in productivity performance; and aggregate productivity growth is driven by intra-sectoral productivity dynamics rather than by structural change.

Disaggregate evidence on Spanish inflation persistence

This article investigates the degree of persistence of different inflation rates for the Spanish economy using the Consumer Price Index (CPI) for the aggregate as well as for the regions, provinces and eight groups of goods and services, in addition to the Producer Price Index (PPI) for the aggregate and 24 industrial sectors. For that purpose, we employ: (1) the unit-root tests with good size and power of Ng and Perron (2001) with the small-sample bias correction developed by Perron and Qu (2007); (2) the nonlinear Exponential Smooth Transition Autoregressive (ESTAR) unit-root test proposed by Kapetanios et al. (2003); (3) median-unbiased estimations of the persistence parameter and the respective confidence intervals through the grid-bootstrap method proposed by Hansen (1999) and (4) median-unbiased estimations of the half-life of a shock in addition to the associated confidence intervals through the method based on impulse-response functions proposed by Gospodinov (2004). The results from the application of these techniques indicate that most of the CPI-based inflation rate series clearly contain a unit root. As regards the results for the PPI-based inflation rate series, we have provided evidence that the aggregate series appears to contain a unit root, while at the industry level the inflation rate series are found to be nonlinear stationary in 13 sectors. On the basis of this robust evidence of high persistence in inflation, policymakers should pay more attention to any shock hitting inflation, since the effects are expected to be long-lasting, particularly for consumer prices. Along these lines, it is essential to implement correcting reforms with the aim of raising price adjustment flexibility if one wants to avoid having to intervene actively in the markets to reach the inflation target.

Productive physical investment and growth: testing the validity of the AK model from a panel perspective

In this article, we analyse the relationship between productive physical investment and economic growth from a panel perspective for a sample of 61 countries spanning the period 1950 to 1992. The analysis can be thought of as two-fold. First, we test the empirical validity of AK models following the logic by Jones (1995). For that purpose, we determine the degree of persistence of physical investment rates and growth by employing recently developed panel unit-root tests that enable us to make more reliable inferences about the existence of stochastic trends in the series. Second, we estimate the long-run effect of physical investment on growth by using panel data techniques rather than cross-section regressions. Overall, our findings cast doubts on the rejection of the empirical validity of the AK model, as suggested by Jones’ analysis.

Unit root tests and persistence of unemployment: Spain vs. the United States

In this article, we investigate the existence of infrequent shocks and the degree of persistence of unemployment in the US and Spain over the period 1976–2004. We first apply the minimum Lagrange Multiplier unit root test with up to two endogenous changes in level. The evidence gives support to the hysteresis hypothesis for Spain and to regime-wise stationarity for the US. The computation of median unbiased estimates of half-lives directly from the impulse-response function indicates a much higher degree of persistence of unemployment in Spain than in the US. Our results thus give an indication that aggregate demand policies may have different effects in these two countries.

FISCAL POLICIES AND OUTPUT IN THE LONG RUN: A PANEL COINTEGRATION APPROACH APPLIED TO THE OECD*

This paper investigates the long-run link between levels of output and fiscal policies from a neoclassical perspective for a sample of 19 OECD countries over the period 1970-98. As a departure from previous studies, we take explicit note of the time-series properties of the output, inputs and fiscal policy series. The use of new techniques in the field of nonstationary panels enables us to make reliable inferences about the existence of stochastic trends and cointegration among the series. We also estimate error correction growth models in order to gauge the growth effects of government size. Overall, we hold the view that fiscal policies play a crucial role in shaping steady-state levels of per capita income as well as economic growth rates along the transitional path. Copyright