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Growth, Income and Regulation: a Non-Linear Approach

Author

Listed:
  • Tue Gørgens

    (Department of Economics, University of Copenhagen)

  • Martin Paldam

    (Department of Economics, University of Aarhus)

  • Allan H. Würtz

    (Department of Economics, University of Copenhagen)

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.

Suggested Citation

  • Tue Gørgens & Martin Paldam & Allan H. Würtz, 2005. "Growth, Income and Regulation: a Non-Linear Approach," CAM Working Papers 2005-12, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    • Handle: RePEc:kud:kuieca:2005_12
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    File URL: http://www.econ.ku.dk/cam/wp0910/wp0406/2005-12.pdf/
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    References listed on IDEAS

    as
    1. Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005. "Growth Econometrics," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.),Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677, Elsevier.
    2. de Haan, Jakob & Sturm, Jan-Egbert, 2000. "On the relationship between economic freedom and economic growth," European Journal of Political Economy, Elsevier, vol. 16(2), pages 215-241, June.
    3. Easton, Stephen T & Walker, Michael A, 1997. "Income, Growth, and Economic Freedom," American Economic Review, American Economic Association, vol. 87(2), pages 328-332, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Kosuliev, Aleksandar, 2009. "Институционална Среда, Дерегулация И Естественото Равнище На Транзакционни Разходи [Institutional Environment, Deregulation and the Natural Rate of Transaction Costs]," MPRA Paper 92264, University Library of Munich, Germany.
    2. Luis Costa & Miguel St. Aubyn, 2012. "The Macroeconomic Effects of Legal- Simplification Programmes," Working Papers Department of Economics 2012/12, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    3. Niclas Berggren & Christian Bjørnskov, 2019. "Regulation and government debt," Public Choice, Springer, vol. 178(1), pages 153-178, January.

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    More about this item

    Keywords

    catch-up growth; economic freedom; fixed effects; GMM; specification tests;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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