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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

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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
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
Dates:
DateEvent
September 2018Published
24 July 2018Available
10 July 2018Accepted
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
RIOXX Funder/Project Grant:
Project/Grant IDRIOXX Funder NameFunder ID
UNSPECIFIEDUniversity of Warwickhttp://dx.doi.org/10.13039/501100000741
UNSPECIFIEDSocial Sciences and Humanities Research Council of Canadahttp://dx.doi.org/10.13039/501100000155
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