Economic stagnation, fixed factors, and policy thresholds

William Easterly

    Research output: Contribution to journalArticle

    Abstract

    An endogenous growth model with fixed factors predicts that countries will stagnate if policies pass a threshold; initial income does not affect whether a country stagnates. For growing countries, the model has transitional dynamics where growth first accelerates and then decelerates as income rises. The data confirm these predictions: a probit equation predicts well whether countries stagnate as a function of policies but not of income, a truncated regression for growing countries shows a 'hump-shaped' relation between initial income and subsequent growth and equality of coefficients on income and other variables between the stagnation and growth regimes is rejected.

    Original languageEnglish (US)
    Pages (from-to)525-557
    Number of pages33
    JournalJournal of Monetary Economics
    Volume33
    Issue number3
    DOIs
    StatePublished - Jun 1994

    Keywords

    • Economic development
    • Economic growth

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

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