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Creator: Herrendorf, Berthold, Schmitz, James Andrew, and Teixeira, Arilton Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 425 Abstract:
We study the effects of large transportation costs on economic development. We argue that the Midwest and the Northeast of the U.S. is a natural case because starting from 1840 decent data is available showing that the two regions shared key characteristics with today’s developing countries and that transportation costs were large and then came way down. To disentangle the effects of the large reduction in transportation costs from those of other changes that happened during 1840–1860, we build a model that speaks to the distribution of people across regions and across the sectors of production. We find that the large reduction in transportation costs was a quantitatively important force behind the settlement of the Midwest and the regional specialization that concentrated agriculture in the Midwest and industry in the Northeast. Moreover, we find that it led to the convergence of the regional per capita incomes measured in current regional prices and that it increased real GDP per capita. However, the increase in real GDP per capita is considerably smaller than that resulting from the productivity growth in the nontransportation sectors.
Palabra clave: Settlement, Transportation costs, Regional income covergence, and Structural transformation Tema: O11 - Macroeconomic Analyses of Economic Development, O18 - Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure, and O41 - One, Two, and Multisector Growth Models
Creator: Atkeson, Andrew and Kehoe, Patrick J. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 256 Abstract:
We show that in a dynamic Heckscher-Ohlin model the timing of a country’s development relative to the rest of the world affects the path of the country’s development. A country that begins the development process later than most of the rest of the world—a late-bloomer—ends up with a permanently lower level of income than the early-blooming countries that developed earlier. This is true even though the late-bloomer has the same preferences, technology, and initial capital stock that the early-bloomers had when they started the process of development. This result stands in stark contrast to that of the standard one-sector growth model in which identical countries converge to a unique steady state, regardless of when they start to develop.
Palabra clave: Convergence Trade and Growth and Two Sector Growth Models Tema: O11 - Macroeconomic Analyses of Economic Development, F11 - Neoclassical Models of Trade, and O41 - One, Two, and Multisector Growth Models
Creator: McGrattan, Ellen R. and Schmitz, James Andrew Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 250 Abstract:
This chapter reviews the literature that tries to explain the disparity and variation of GDP per worker and GDP per capita across countries and across time. There are many potential explanations for the different patterns of development across countries, including differences in luck, raw materials, geography, preferences, and economic policies. We focus on differences in economic policies and ask to what extent can differences in policies across countries account for the observed variability in income levels and their growth rates. We review estimates for a wide range of policy variables. In many cases, the magnitude of the estimates is under debate. Estimates found by running cross-sectional growth regressions are sensitive to which variables are included as explanatory variables. Estimates found using quantitative theory depend in critical ways on values of parameters and measures of factor inputs for which there is little consensus. In this chapter, we review the ongoing debates of the literature and the progress that has been made thus far.
Palabra clave: Endogenous growth theory, Growth accounting, Cross-country income differences, and Growth regressions Tema: O11 - Macroeconomic Analyses of Economic Development, O47 - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence, E62 - Fiscal Policy, E65 - Studies of Particular Policy Episodes, and O41 - One, Two, and Multisector Growth Models
Creator: Parente, Stephen L. and Prescott, Edward C. Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 236 Abstract:
Our thesis is that poor countries are poor because they employ arrangements for which the equilibrium outcomes are characterized by inferior technologies being used, and being used inefficiently. In this paper, we analyze the consequences of one such arrangement. In each industry, the arrangement enables a coalition of factor suppliers to be the monopoly seller of its input services to all firms using a particular production process. We find that the inefficiencies associated with this monopoly arrangement can be large. Whereas other studies have found that inefficiencies induced by monopoly are at most a few percent of output, we find that eliminating this monopoly arrangement could well increase output by roughly a factor of 3 without any increase in inputs.
Tema: O11 - Macroeconomic Analyses of Economic Development, O41 - One, Two, and Multisector Growth Models, and D58 - Computable and Other Applied General Equilibrium Models