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Growth, Income and Regulation: a Non-Linear Approach

Tue Gørgens, Martin Paldam and Allan Würtz
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Tue Gørgens: Department of Economics, University of Copenhagen

No 2005-12, CAM Working Papers from University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics

Abstract: This paper analyzes the effect on GDP growth of income (GDP per capita) and economic regulation. A simple theoretical framework presents two opposing views. We analyze the empirical relation using a non-linear dynamic panel data model with fixed effects. The result shows that the effect of regulation on growth depends on income. For low-income countries, there is little effect of changing regulation. For highly regulated middle-income countries, deregulation can increase growth. For high-income countries, deregulation leads to higher growth. Holding regulation constant, there is catch-up growth with a maximum at an intermediate income level.

Keywords: catch-up growth; economic freedom; fixed effects; GMM; specification tests (search for similar items in EconPapers)
JEL-codes: C23 D70 H11 O40 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2005-08
New Economics Papers: this item is included in nep-reg
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