Seminar in Economics | Jonas Gathen
Welcome to this seminar in economics organized by the Department of Economics, SSE. The seminar speaker is Jonas Gathen, Toulouse School of Economics.
Abstract
What explains growth miracles? We argue that growth miracles are driven by a fundamental race: as the economy tries to catch-up to its steady state, changes in the economic environment move the steady state itself and provide new potential for catch-up growth. We quantify this race over the course of development using 40 years of plant-level manufacturing panel data from Indonesia and a structural model of plant dynamics. We estimate the model on the micro data along the observed growth path without assuming that the economy is ever at a steady state. While catch-up growth starting from initial conditions in 1975 accounts for 42% of Indonesia’s subsequent industrialization, new changes in the economy induce new catch-up growth. In the end, the economy never catches up.