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Long-term growth and persistence with obsolescence

Ilaski Barañano () and Diego Romero-Ávila ()

Economic Modelling, 2015, vol. 51, issue C, 328-339

Abstract: Previous research has shown a strong positive correlation between short-term persistence and long-term output growth as well as between depreciation rates and long-term output growth. This evidence, therefore, contradicts the standard predictions from traditional neoclassical or AK-type growth models with exogenous depreciation. In this paper, we first confirm these findings for a larger sample of 101 countries. We then study the dynamics of growth and persistence in a model that renders a positive link between embodied technological progress, depreciation and output growth. We find that the model's predictions appear consistent with the empirical evidence on persistence, long-term growth and depreciation rates. In addition, we provide evidence of a unit root in output with a large battery of second-generation panel unit root tests. This supports the general validity of the endogenous growth model proposed.

Keywords: Real business cycle models; Endogenous growth; Obsolescence; Embodiment; Persistence; Dynamic panel data models (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1016/j.econmod.2015.08.014

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