Posted Content•
Do Old Fallacies Ever Die
01 Jan 1992-Journal of Economic Literature (American Economic Association)-Vol. 30, Iss: 4, pp 2129-2132
About: This article is published in Journal of Economic Literature.The article was published on 1992-01-01 and is currently open access. It has received 855 citations till now.
Citations
More filters
TL;DR: Using a dynamic version of Galton's fallacy, the authors showed that coefficients of arbitrary signs in such regressions are consistent with an unchanging cross-section distribution of incomes, and that there is a tendency for divergence rather than convergence of cross-country incomes.
Abstract: Recent tests for the convergence hypothesis derive from regressing average growth rates on initial levels: a negative initial coefficient is interpreted as convergence. These tests turn out to be plagued by Galton's classical fallacy of regression towards the mean. Using a dynamic version of Galton's fallacy, I establish that coefficients of arbitrary signs in such regressions are consistent with an unchanging cross-section distribution of incomes. Alternative, more direct empirics used here show a tendency for divergence, rather than convergence, of cross-country incomes.
1,711 citations
TL;DR: The convergence hypothesis has generated a huge empirical literature: this paper critically reviews some of the earlier key findings, clarifies their implications, and relates them to more recent results.
1,477 citations
TL;DR: In this article, the authors used data from the Census Bureau's Business Dynamics Statistics and Longitudinal Business Database to explore the many issues at the core of this ongoing debate and find that the relationship between firm size and employment growth is sensitive to these issues.
Abstract: The view that small businesses create the most jobs remains appealing to policymakers and small business advocates. Using data from the Census Bureau's Business Dynamics Statistics and Longitudinal Business Database, we explore the many issues at the core of this ongoing debate. We find that the relationship between firm size and employment growth is sensitive to these issues. However, our main finding is that once we control for firm age, there is no systematic relationship between firm size and growth. Our findings highlight the important role of business start-ups and young businesses in U.S. job creation.
1,430 citations
Cites background from "Do Old Fallacies Ever Die"
...Obviously, whether the size or age class contributes positively or negatively depends on whether that class has a positive or negative net growth rate....
[...]
...Friedman (1992) states that this type of regression fallacy ‘‘is the most common fallacy in the statistical analysis of economic data.’’...
[...]
TL;DR: In this article, the authors extend the empirical evidence on regional growth and convergence across the United States, Japan, and five European nations, and confirm that the estimated speeds of convergence are surprisingly similar across data sets: regions tend to converge at a speed of approximately two percent per year.
1,421 citations
TL;DR: In this paper, the authors describe an alternative body of research that overcomes this shortcoming in the traditional approach, and suggest the relevance of a class of theoretical ideas, dierent from those surrounding the production function accounting traditionally favored.
Abstract: Convergence concerns poor economies catching up with rich ones. At is- sue is what happens to the cross sectional distribution of economies, not whether a single economy tends towards its own steady state. It is the latter, however, that has preoccupied the traditional approach to con- vergence analysis. This paper describes an alternative body of research that overcomes this shortcoming in the traditional approach. The new findings on persistence and stratification; on the formation of conver- gence clubs; and on the distribution polarizing into twin peaks of rich and poor|suggest the relevance of a class of theoretical ideas, dierent from those surrounding the production-function accounting traditionally favored.
1,316 citations
References
More filters
Posted Content•
TL;DR: Friedman as mentioned in this paper proposed a new theory of the consumption function, tested it against extensive statistical J material and suggests some of its significant implications, including the sharp distinction between two concepts of income, measured income, or that which is recorded for a particular period, and permanent income, a longer-period concept in terms of which consumers decide how much to spend and how much they save.
Abstract: What is the exact nature of the consumption function? Can this term be defined so that it will be consistent with empirical evidence and a valid instrument in the hands of future economic researchers and policy makers? In this volume a distinguished American economist presents a new theory of the consumption function, tests it against extensive statistical J material and suggests some of its significant implications.Central to the new theory is its sharp distinction between two concepts of income, measured income, or that which is recorded for a particular period, and permanent income, a longer-period concept in terms of which consumers decide how much to spend and how much to save. Milton Friedman suggests that the total amount spent on consumption is on the average the same fraction of permanent income, regardless of the size of permanent income. The magnitude of the fraction depends on variables such as interest rate, degree of uncertainty relating to occupation, ratio of wealth to income, family size, and so on.The hypothesis is shown to be consistent with budget studies and time series data, and some of its far-reaching implications are explored in the final chapter.
2,804 citations
Posted Content•
TL;DR: Baumol, Blackman, and Wolff as mentioned in this paper have shown that the U.S. experience with the productivity slowdown since the 1960s cannot be adequately understood without placing that experience in the perspective of a century of productivity growth.
Abstract: WHILE THE U. S. PRODUCTIVITY slowdown wasn't first discovered by economists in 1980, it certainly began to get big play in that year. The American Economic Association devoted a session to the "current retardation in U.S. productivity growth" and the first in a series of major articles on the slowdown appeared in this journal. The latter was a review by Richard Stone (1980) of Edward Denison's Accounting for Slower Economic Growth: The United States in the 1970s (1979). Denison documented a substantial drop in the growth of labor productivity between 1948-73 and 197376, showing that the lion's share of that slowdown could be attributed to what had come to be known as the residual, or to what others have called total factor productivity growth. Stone's review of Denison was followed by contributions by Richard Nelson (1981), Roger D. Norton (1986), and Angus Maddison (1987). The citations to literature on the slowdown had ballooned from dozens to hundreds by the appearance of Maddison's article, and it had become everyday fare in our morning newspapers. In the midst of this surge of concern with the U.S. productivity slowdown, William Baumol was asked by the president of the Committee for Economic Development to prepare a statement on productivity policy for the United States. With disarming modesty, Baumol reports the CED was looking for someone "whose ignorance of the subject ensured that the statement would not merely recapitulate the accepted shibboleths" (p. ix). Baumol accepted the challenge in 1983 and with the appearance of Productivity and American Leadership seven years later he and his collaborators (Sue Anne Batey Blackman and Edward N. Wolff) have produced at least four books and nine articles. A productive collaboration indeed. Why another publication on the slowdown? In 1979, Denison regarded the slowdown as a mystery, and Stone concluded his review with a wistful sigh-"If Denison is stumped who can expect to do better?" (Stone 1980, p. 1539). A decade later, Baumol, Blackman, and Wolff (hereafter BBW) have shown that we can do a lot better. The book has four important virtues. First, it reveals an appreciation for history. If there ever was a topic for which an understanding of the long run mattered, productivity performance is surely it. United States experience with the productivity slowdown since the 1960s cannot be adequately understood without placing that experience in the perspective of a century of productivity growth, nor can it be * William J. Baumol, Sue Anne Batey Blackman, and Edward N. Wolff. Productivity and American Leadership: The Long View. Cambridge and London: The MIT Press, 1989. Pp. x, 395. $29.95. ISBN 0-262-02293-1.
66 citations