Testing Capital Accumulation-Driven Growth Models in a Multiple-Regime Framework: Evidence from South Africa

Kevin Nell and Maria M. De Mello ()
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Maria M. De Mello: Center for Economics and Finance, University of Porto

CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: This paper proposes two types of AK-style endogenous growth models to test the physical capital accumulation hypothesis in a ‘typical’ developing country with multiple regimes: a strong version, in which technological progress is fully endogenous to capital accumulation, and a weaker version, where technological progress and capital accumulation are complementary factors in the growth process. The empirical application supports the relevance of the weaker version across South Africa’s ‘faster-growing’ regime (1952-1976) and ‘slower-growing’ regime (1977-2012). To improve the economy’s post-2012 growth performance on a sustainable basis, the simulation exercise suggests a refined set of policies that simultaneously attracts foreign direct investment and raises the domestic saving/investment rate. Thus, to re-ignite the complementary relationship between technological progress and capital accumulation in the South African economy, both sources of growth should feature prominently in the initial decision-making process of policymakers.

Keywords: AK model; multiple regimes, growth transitions, physical capital accumulation; technological progress; foreign direct investment; South Africa; time-series econometrics (search for similar items in EconPapers)
JEL-codes: C22 O11 O41 O47 O55 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2015-04
New Economics Papers: this item is included in nep-gro
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