Why do growth rates differ? This paper surveys the recent empirical literature on economic growth, starting with a discussion of stylized facts, data problems, and statistical methods. Six research questions are emphasized, drawing on growth and convergence research. In answering these questions, the paper argues that efficiency has grown at different rates across countries, casting doubt on neoclassical models in which technology is a public good. The latter half of the paper rounds up a variety of findings before providing answers to all six questions, including a short summary of how differences in growth rates arise.

The New Growth Evidence

This paper reviews the empirical literature on growth and convergence that has addressed the importance of spatial factors. An important distinction in this literature is the one between absolute and relative location. The literature on absolute location predominantly uses non-spatial econometric techniques, and is strongly linked to the economic growth literature. In contrast, studies on relative location tend to be weakly linked to theory, but apply relatively sophisticated econometric techniques to account for spatial effects. Most studies of the latter type are regional in nature, although there is a growing interest in extending the analysis to a cross-country setting. Both regional and cross-country studies typically make use of so-called spatial process models. Rather than modelling the impediments of space and distance directly, spatial process models start from exogenously provided information about the spatial structure. Our review shows that the usage of simple spatial autoregressive lag and error models abounds in the spatial econometrics literature. We assess the appropriateness of such models, and identify areas of potential concern. The rather weak linkage between theory and operational models, the dominance of 'global' over 'local' spatial association patterns, and the implicit restrictions on spatial interaction induced by many of the habitual specifications of the spatial weights matrix concurrently constitute areas where improvements can be made.

/pdf/space-and-growth-a-survey-of-empirical-evidence-and-methods-wkzkcvv2fc.pdf

Space and Growth: A Survey of Empirical Evidence and Methods

This study investigates the role of the government in economic growth by extending the neoclassical production function to incorporate two dimensions of the government – the size and the quality dimensions. The government size- and quality-augmented model, where size is measured by government expenditure and quality by governance, is tested on a cross section of 71 economies. Estimation is also carried out on the sample by income distribution. The empirical results indicate that both the size and quality of the government are important for economic growth. It is argued that investing in the capacity for enhanced governance is a priority for the improved growth performance of the countries examined.

/pdf/government-expenditure-governance-and-economic-growth-309p31cefm.pdf

Government Expenditure, Governance and Economic Growth

https://hal-sciencespo.archives-ouvertes.fr/hal-01064263/document

Financial Stability and Economic Performance

https://link.springer.com/content/pdf/10.1057%2Fjibs.1988.45.pdf

Capital Flight and Third World Debt

In this paper we analyse regional growth in Central and Eastern Europe in the second half of the 1990s, a period in which pronounced disparities between a group of catching-up regions and another group of falling back regions appeared. We aim to identify the factors behind a dynamic growth performance and the weaknesses leading to poor growth and thus investigate the role of (foreign) investment, education and innovation as well as geographical factors in a model of economic growth. The key relationships proposed by this model are then estimated with empirical data for the period 1995-2000 using spatial econometric tools. We find that foreign direct investment was paramount for regional growth in that period. EU border regions and capital areas clearly outperformed others. Further, regional growth clusters have appeared. Surprisingly, the high level of secondary education in Eastern European regions played no role with growth. Higher education, in contrast served to facilitate technology transfer. (author's abstract)

https://www.econstor.eu/bitstream/10419/39510/1/368183327.pdf

What makes regions in Eastern Europe catching up? The role of foreign investment, human resources and geography

Contribution of financial market segments at different stages of development: Transition, cohesion and mature economies compared☆

We estimate the effects of foreign direct investment (FDI) inflows on exports in 12 Central and Eastern European (CEE) economies for the period between 1996 and 2004. We separate the effects of FDI into supply capacity-increasing effects and FDI-specific effects. The supply capacity-increasing effects arise when FDI inflows increase the host country's production capacity, which, in turn, increase export supply potential. The FDI-specific effects arise because the multinational company may have superior knowledge and technology, better information about export markets, or better contact to the supply chain of the parent firm than do local firms. Our empirical results indicate that, for all countries in our sample, FDI has increased domestic supply capacity and hence exports. However, FDI-specific effects on exports are observed only in the new member states of the European Union.

https://link.springer.com/content/pdf/10.1057%2Fpalgrave.ces.8100216.pdf

Foreign Direct Investment and Export Performance: Empirical Evidence

Izvoz hrvatske prerađivacke industrije uglavnom je stagnirao tijekom posljednjih desetak godina. U istom razdoblju zabilježen je relativno snažan priljev izravnih stranih ulaganja u industriju. Cilj ovog rada jest istražiti je li taj priljev imao utjecaja na izvoz uzimajuci u obzir i kretanja drugih potencijalno znacajnih varijabli. Koristeci se analizom panel-podataka za 21 prerađivacku industriju između 1996. i 2002. godine, pokazalo se da su izravna strana ulaganja pozitivno i statisticki znacajno utjecala na izvoz, ali je taj utjecaj bio relativno slab. Iz toga proizlazi da postoji potencijal za povecanje izvoza privlacenjem dodatnih stranih ulaganja u industriju. Nositelji gospodarske politike trebali bi pokusati povecati potencijalne pozitivne ucinke stranih ulaganja ciljajuci na izvozno orijentirane investicije u novoosnovana poduzeca i uz to primjenjujuci mjere koje mogu povecati potencijalne ucinke “ prelijevanja” .

/pdf/impact-of-foreign-direct-investment-on-croatian-2vgdtmuwtd.pdf

Impact of Foreign Direct Investment on Croatian Manufacturing Exports

We use a production function approach in investigating the relationship between financial development and economic growth in 9 EU accession - mostly transition countries. These findings are compared with the results for the group of 18 developed countries, and separately, with the results for a group of less developed EU countries - structural fund recipients. We use aggregate measures of financial development as well as measures for single segments of financial sectors. In context of transition countries, bond markets are, to our knowledge, taken explicitly into account for the first time. We find that domestic credit and bond markets together with real capital stock growth stimulate economic growth in transition. With progress in cohesion, educational attainment becomes the next important factor that contributes to economic growth followed by labor participation in mature market economies. For the developed countries, financial sector did not play any positive role for growth over the period under study. We conclude that transfer mechanisms for growth differ over the development cycle. This is important to growth theory, to the sequencing of economic reforms and to financial sector development priorities. (author's abstract)

Changing importance of financial sectors for growth from transition to cohesion and European integration

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