Template-Type: ReDIF-Paper 1.0
Author-Name:  Luciano Boggio
Author-X-Name-First: Luciano
Author-X-Name-Last: Boggio
Author-Email: luciano.boggio@unicatt.it
Author-Workplace-Name: DISCE,Università Cattolica
Title: On the endogeneity of the natural rate of growth
Abstract: We discuss the case when the sum of the growth rate of productivity and that of the labour force is an increasing function f of the actual growth rate of income y. We show that a natural rate of growth is a solution of the equation y =f(y); hence its endogeneity to y requires the unlikely case that more than one solution exists, the shift within the set of solutions being determined by y. Léon-Ledesma and Thirlwall (2000a and b), attempting to investigate empirically the endogeneity of the natural rate, set up a procedure by which their OLS estimate of the natural rate produce two levels, the higher corresponding to the group of observations with higher y. But we prove their (widely replicated) procedure is seriously flawed, because an important  variable is not statistically exogenous and most probably , according to our simulations, its coefficient is close to zero.
Length: 23 pages
Creation-Date: 2012-02
Publication-Status: none
File-URL: http://istituti.unicatt.it/teoria_economica_metodi_quantitativi_itemq1261.pdf
File-Format: Application/pdf
File-Function: First version, 2012
Number: itemq1261
Classification-JEL: O20; C49
Keywords: Natural growth rate; dummies endogeneity; simulations
Handle: RePEc:ctc:serie6:itemq1261