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Market potential and global growth over the long twentieth century
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Jacks, David and Novy, Dennis (2018) Market potential and global growth over the long twentieth century. Journal of International Economics, 114 . pp. 221-237. doi:10.1016/j.jinteco.2018.07.003
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Official URL: https://doi.org/10.1016/j.jinteco.2018.07.003
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.
| Item Type: | Journal Article | |||||||||
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| Subjects: | H Social Sciences > HB Economic Theory | |||||||||
| Divisions: | Faculty of Social Sciences > Economics | |||||||||
| Library of Congress Subject Headings (LCSH): | Economic development -- History -- 20th century -- Mathematical models | |||||||||
| Journal or Publication Title: | Journal of International Economics | |||||||||
| Publisher: | Elsevier BV | |||||||||
| ISSN: | 0022-1996 | |||||||||
| Official Date: | September 2018 | |||||||||
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| Date of first compliant deposit: | 16 July 2018 | |||||||||
| Volume: | 114 | |||||||||
| Page Range: | pp. 221-237 | |||||||||
| DOI: | 10.1016/j.jinteco.2018.07.003 | |||||||||
| Status: | Peer Reviewed | |||||||||
| Publication Status: | Published | |||||||||
| Access rights to Published version: | Restricted or Subscription Access | |||||||||
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