Market Potential and Global Growth over the Long Twentieth Century

Dennis Novy and David Jacks

No 11570, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine the evolution of market potential and its role in driving economic growth over the long twentieth century. Theoretically, we exploit a structural gravity model to derive a closed form solution for a widely-used measure of market potential. We are thus able to express market potential as a function of directly observable and easily estimated variables. Empirically, we collect a large dataset on aggregate and bilateral trade flows as well as output for 51 countries. We find that market potential exhibits an upward trend across all regions of the world from the early 1930s and that this trend significantly deviates from the evolution of world GDP. Finally, using exogenous variation in trade-related distances to world markets, we demonstrate a significant causal role of market potential in driving global income growth over this period.

Keywords: Economic geography; Market potential; Structural gravity; Trade costs (search for similar items in EconPapers)
JEL-codes: F1 N7 (search for similar items in EconPapers)
Date: 2016-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://cepr.org/publications/DP11570 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Market Potential and Global Growth over the Long Twentieth Century (2018)
Working Paper: Market potential and global growth over the long twentieth century (2018)
Working Paper: Market Potential and Global Growth over the Long Twentieth Century (2018)
Working Paper: Market potential and global growth over the long twentieth century (2018)
Working Paper: Market Potential and Global Growth over the Long Twentieth Century (2016)
Working Paper: Market Potential and Global Growth over the Long Twentieth Century (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11570

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP11570

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().