Endogenous growth and economic capacity: Theory and empirical evidence for the NAFTA countries

Ignacio Perrotini-Hernàndez, Juan Alberto Vàzquez-Munoz

Abstract


The paper sheds light on the relevance of economic capacity utilisation, capital accumulation and effective demand for the endogeneity of the natural growth rate with respect to normal, depressive and expansive growth regimes. Apart from contributing to fill this theoretical gap, a new model is developed for estimating the elasticity of the natural growth rate, with a specific focus on Canada, Mexico and the United States, throughout the pre-NAFTA and post-NAFTA periods. It is shown that growth regimes are related to the utilisation of economic capacity, while the elasticities of the expansive and depressive natural rates of growth vis-à-vis the normal rate are related to effective demand. It is also found that the normal, depressive and expansive natural rates of growth decreased since the inception of NAFTA, due to the concomitant decline in the growth rate of economic capacity.

 

 

JEL Classification: O47, O51, O54


Keywords


endogenous growth, empirical studies of economic growth, economic capacity

Full Text:

PDF

References


Berlemann M., Wesselhöft J.-E. (2012), “Estimating Aggregate Capital Stocks Using the Perpetual Inventory Method: New Empirical Evidence for 103 Countries”, HSU Discussion Paper, n. 125, Hamburg: Helmut-Schmidt-Universität. Available at https://www.econstor.eu/bitstream/10419/71091/1/73983858X.pdf.

Bernard A., Usalcas J. (2014), “The Labour Market in Canada and the United States since the Last Recession”, Economic Insights, n. 36, Ottawa: Statistics Canada – Statistique Canada. Available at http://www.statcan.gc.ca/access_acces/alternative_alternatif.action?l=eng&loc=/pub/11-626-x/11-626-x2014036-eng.pdf.

Blanchard O.J. (2008), “The State of Macro”, NBER Working Paper, n. 14259, Cambridge (MA): National Bureau of Economic Research. Available at http://www.nber.org/papers/w14259.pdf.

Boggio L. (2012), “On the Endogeneity of the Natural Rate of Growth”, DISCE – Quaderni dell’Istituto di Teoria Economica e Metodi Quantitativi, n. 1261, Milan: Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

Boggio L., Seravalli G. (2002), “Is the Natural Rate of Growth Exogenous? A Comment”, Banca Nazionale del Lavoro Quarterly Review, vol. 55 n. 221, pp. 219-227.

Ciriaci D. (2007), “Tasso di crescita naturale e crescita cumulativa nelle regioni italiane”, Moneta e Credito, vol. 60 n. 239, pp. 287-310. Available at http://www.rspi.uniroma1.it/index.php/monetaecredito/article/download/10407/10294.

Dray M., Thirlwall A.P. (2011), “The Endogeneity of the Natural Rate of Growth for a Selection of Asian Countries”, Journal of Post Keynesian Economics, vol. 33 n. 3, pp. 451-468. Available at http://doi.org/10.2753/PKE0160-3477330303.

Dutt A.K. (1984), “Stagnation, Income Distribution and Monopoly Power”, Cambridge Journal of Economics, vol. 8 n. 1, pp. 25-40.

Dutt A.K. (1997), “Equilibrium, Path Dependence and Hysteresis in Post-Keynesian Models”, in Arestis P., Palma J.G., Sawyer M. (eds.), Markets, Unemployment and Economic Policy: Essays in Honour of Geoffrey Harcourt, vol. 2, pp. 238-253, London and New York: Routledge.

Harrod R.F. (1939), “An Essay in Dynamic Theory”, The Economic Journal, vol. 49 n. 193, pp. 14-33. Available at http://doi.org/10.2307/2225181.

Hein E., Lavoie M., van Treeck T. (2011), “Some Instability Puzzles in Kaleckian Models of Growth and Distribution: A Critical Survey”, Cambridge Journal of Economics, vol. 35 n. 3, pp. 587-612. Available at http://doi.org/10.1093/cje /beq026.

Lanzafame M. (2009), “Is Regional Growth in Italy Endogenous?”, Regional Studies, vol. 43 n. 8, pp. 1001-1013. Available at http://doi.org/10.1080 /00343400802093847.

Lanzafame M. (2010), “The Endogeneity of the Natural Rate of Growth in the Regions of Italy”, International Review of Applied Economics, vol. 24 n. 5, pp. 533-552. Available at http://doi.org/10.1080/02692170903426039.

Lanzafame M. (2014), “The Balance of Payments-Constrained Growth Rate and the Natural Rate of Growth: New Empirical Evidence”, Cambridge Journal of Economics, vol. 38 n. 4, pp. 817-838. Available at http://doi.org/10.1093 /cje/bet058.

León-Ledesma M.A. (2006), “Cycles, Aggregate Demand and Growth”, in Arestis P., McCombie J.S.L., Vickerman R. (eds.), Growth and Economic Development: Essays in Honour of A.P. Thirlwall, pp. 82-95, Cheltenham and Northampton (MA): Edward Elgar.

León-Ledesma M.A., Thirlwall A.P. (1998), “The Endogeneity of the Natural Rate of Growth”, Department of Economics Discussion Paper, n. 9821, Canterbury: University of Kent. Available at https://www.econstor.eu/bitstream /10419/105525/1/9821.pdf.

León-Ledesma M.A., Thirlwall A.P. (2000), “Is the Natural Rate of Growth Exogenous?”, Banca Nazionale del Lavoro Quarterly Review, vol. 53 n. 215, pp. 433-445. Available at https://ideas.repec.org/a/psl/bnlaqr/200043.html.

León-Ledesma M.A., Thirlwall A.P. (2002), “Is the Natural Rate of Growth Exogenous? A Reply”, Banca Nazionale del Lavoro Quarterly Review, vol. 55 n. 221, pp. 229-232. Available at http://ojs.uniroma1.it/index.php/PSLQuarterlyReview /article/view/9910/9792.

Lewis W.A. (1954), “Economic Development with Unlimited Supplies of Labour”, The Manchester School, vol. 22 n. 2, pp. 139-191. Available at http://doi.org/10.1111/j.1467-9957.1954.tb00021.x.

Libânio G.A. (2009), “Aggregate Demand and the Endogeneity of the Natural Rate of Growth: Evidence from Latin American Economies”, Cambridge Journal of Economics, vol. 33 n. 5, pp. 967-984. Available at http://doi.org/10.1093 /cje/ben059.

Molerés-Regalado E., Perrotini-Hernández I. (2013), “On Harrod’s Natural Rate of Growth and the Role of Demand: An Empirical Assessment”, Panorama Económico, vol. VIII n. 16, pp. 29-49.

Nurkse R. (1953), Problems of Capital Formation in Underdeveloped Countries, New York: Oxford University Press.

OECD (2015), “Is the United States still the Land of Opportunities for Migrants?”, Migration Policy Debates, n. 5, Paris: Organization for Economic Co-operation and Development. Available at http://www.oecd.org/els/mig/Is-the-United-States-still-the-land-of-opportunities-for-migrants.pdf.

Okun A.M. (1962), “Potential GNP: Its Measurement and Significance”, in American Statistical Association (ed.), 1962 Proceedings ot the Business and Economic Statistics Section, pp. 89-104, Washington (DC): American Statistical Association.

Oreiro J.L., Nabakashi L., Costa da Silva G.J., Guimarães, Souza G.J. (2012), “The Economics of Demand Led-Growth Theory and Evidence for Brazil”, CEPAL Review, n. 106, pp. 151–168. Available at http://repositorio.cepal.org /bitstream/handle/11362/11588/106151168I_en.pdf?sequence=1&isAllowed=y.

Patriarca F., Sardoni C. (2014), “Growth with Unused Capacity and Endogenous Capital Depreciation”, Metroeconomica, vol. 65 n. 4, pp. 646-670. Available at http://doi.org/10.1111/meca.12053.

Perrotini-Hernández I., Tlatelpa D. (2003), “Crecimiento endógeno y demanda en las economías de América del Norte”, Momento Económico, n. 128, pp. 10-15.

Pesaran M.H., Shin Y., Smith R.J. (2001), “Bounds Testing Approaches to the Analysis of Level Relationships”, Journal of Applied Econometrics, vol. 16 n. 3, pp. 289-326. Available at http://doi.org/10.1002/jae.616.

Prebisch R. (1970), Transformación y desarrollo: la gran tarea de América Latina, México: Fondo de Cultura Económica (FCE).

Ros J. (2004), La teoría del desarrollo y la economía del crecimiento, México: Fondo de Cultura Económica – Centro de Investigación y Docencia Económicas.

Ros J. (2013), Rethinking Economic Development, Growth, and Institutions, Oxford: Oxford University Press.

Shaikh A.M. (2016), Capitalism: Competition, Conflict, Crises, New York: Oxford Universty Press.

Shaikh A.M., Moudud J.K. (2004), “Measuring Capacity Utilization in OECD Countries”, Levy Economics Institute Working Paper, n. 415, Annandale-on-Hudson (NY): Levy Economics Institute of Bard College.

Villarreal A. (2014), “Explaining the Decline in Mexico-U.S. Migration: The Effect of the Great Recession”, Demography, vol. 51 n. 6, pp. 2203–2228. Available at http://doi.org/10.1007/s13524-014-0351-4.

Vogel L. (2009), “The Endogeneity of the Natural Rate of Growth: An Empirical Study for Latin-American Countries”, International Review of Applied Economics, vol. 23 n. 1, pp. 41-53. Available at http://doi.org/10.1080/02692170802496869.




DOI: http://dx.doi.org/10.13133/2037-3643_70.282_2

Refbacks

  • There are currently no refbacks.

Comments on this article

View all comments


Copyright (c) 2017 Ignacio HERNÁNDEZ Perrotini-Hernàndez, Juan Alberto Vàzquez-Munoz

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

 

 

Sponsored by   


ISSN 2037-3643


Reg. Tribunale di Roma n.377/2009 del 19/11/2009