Market potential and global growth over the long twentieth century

David Jacks and Dennis Novy

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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: 2018-07
New Economics Papers: this item is included in nep-his and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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http://eprints.lse.ac.uk/91681/ Open access version. (application/pdf)

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 (2016)
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)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:91681

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