The Great Wars, The Great Crash, and the Unit Root Hypothesis: Some New Evidence About an Old Stylized Fact

For decades, the prevailing sentiment among economists was that growth rates remain constant over the long run. Kaldor considered this to be one of the six important 'stylized facts' that theory should address, and until the emergence of endogenous growth models, this was a fundamental feature of growth theory. This paper uses an endogenous trend break model to investigate the unit root hypothesis for 16 countries, using annual GDP data spanning up to 130 years. Rejection of the unit root, which is facilitated by the inclusion of a trend break, introduces the possibility of examining the long run behavior of growth rates. We find that most countries exhibited fairly steady growth for a period lasting several decades. The termination of this period was usually characterized by a significant, and sudden, drop in GDP levels. But rather than simply returning to their previous steady state path, as predicted by the standard neoclassical growth model, most countries continued to grow at roughly double their prebreak rates for many decades, even after their original growth path had been surpassed.

Trade and the Rate of Income Convergence

To the extent that trade policy affects trade flows between countries, the ramifications can be far-reaching from an economic growth perspective. This paper examines one aspect of these ramifications, namely the impact of changes in the extent of trade between countries on changes in the rate of reduction in the size of the income gap that exists between them. Export and import data are used as the criteria for determining bilateral trade between major trade partners, resulting in the creation of 127 pairs of countries on the basis of export data and 134 pairs on the basis of import data. An increase in trade between major trade partners - and in particular, increased exports by poorer countries to their wealthier partners - is shown to be related to an increase in the rate of convergence between the countries.

Mixture-of-Parents Maximum Entropy Markov Models

We present the mixture-of-parents maximum entropy Markov model (MoP-MEMM), a class of directed graphical models extending MEMMs. The MoP-MEMM allows tractable incorporation of long-range dependencies be- tween nodes by restricting the conditional distribution of each node to be a mixture of distributions given the parents. We show how to efficiently compute the exact marginal posterior node distributions, regardless of the range of the dependencies. This enables us to model non-sequential correlations present within text documents, as well as between in- terconnected documents, such as hyperlinked web pages. We apply the MoP-MEMM to a named entity recognition task and a web page classification task. In each, our model shows significant improvement over the basic MEMM, and is competitive with other long- range sequence models that use approximate inference. 1 Introductio

Convergence Clubs and Subsistence Economies

This paper focuses on one possible explanation for the empirical evidence of (a) income convergence among the world's poorest countries and among its wealthiest countries, and (b) income divergence among most of the remaining countries. The model incorporates the assumption of subsistence consumption into the neoclassical exogenous growth model- yielding outcomes that are consistent with the convergence-divergence empirical evidence. While subsistence consumption can lead to negative saving and disaccumulation of capital, it can also coincide with positive saving and accumulation of capital. The model predicts that the poorer the country, the lower its saving rate, a result that also appears to be borne out by the evidence provided here.

Equalizing Exchange: A Study of the Effects of Trade Liberalization

It has been quite broadly documented that, historically, there has not been widespread convergence in levels of income across countries. This paper addresses the question of whether the behavior of cross-country income differentials over time, within a specified group of countries, might be affected by the removal of trade barriers. The analysis focuses on the evolutionary period of the European Economic Community, which is characterized by a specific timetable for the removal of trade barriers. This liberalization is shown to be strongly related to a significant income convergence that took place between the members of the Community. The evidence indicates that, until their trade became more liberalized, the income differentials between the countries of the EEC behaved very much like the income differentials between the industrialized countries today. After the onset of freer trade, the EEC countries achieved a reduction in income disparity that exhibited a marked similarity to the income convergence that occurred between the states of the U.S. This came about despite the fact that inter-state migration is considerably more widespread and unrestricted than are labor movements within the European Community.

International Trade and Structural Change

In light of the substantial movement towards trade liberalization during the postwar period, this paper attempts to determine if, and when, countries experienced statistically significant changes in the paths of their export-GDP and import-GDP ratios. We find that: (1) most trade ratios exhibited a" structural break in their time paths; (2) postbreak trade exceeded prebreak trade for the majority of countries; (3) the coincidence in timing between the import and export breaks does not appear to be particularly strong, and; (4) there is little relation between the extent of changes in imports and the extent of changes in exports for most countries.