A Simple Time Series Test of Endogenous vs. Exogenous Growth Models: An Application to the United States

Narayana Kocherlakota and Kei-Mu Yi

The Review of Economics and Statistics, 1996, vol. 78, issue 1, 126-34

Abstract: This paper presents evidence supporting endogenous growth models that emphasize public structural capital. The authors apply a simple test of endogenous vs. exogenous growth models. In exogenous growth economies temporary innovations to policy variables lead only to temporary changes in GNP levels, while in endogenous growth economies the innovations can lead to permanent changes in GNP levels. Of the seven U.S. policy variables they examine, only non-military equipment capital and non-military structural capital have a statistically and economically significant effect upon long-run GNP levels. Further estimation suggests that the non-military equipment capital result is not robust and that several disaggregate components of structural capital contribute significantly. Copyright 1996 by MIT Press.

Date: 1996
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