entrepreneurs, local amenities and growth: a research proposal
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Entrepreneurs, Local Amenities and Growth: A research proposal. Rodrigo Wagner December 1 st , 2008. (De)motivating evidence about negative “growth”. One out of five countries had their peak GDP per capita before 1985. Below the historical peak…. - PowerPoint PPT PresentationTRANSCRIPT
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Entrepreneurs, Local Amenities and Growth:
A research proposal
Rodrigo Wagner
December 1st , 2008
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(De)motivating evidence about negative “growth”
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One out of five countries had their peak GDP per capita before 1985
0.2
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1960 1970 1980 1990 2000Year of peak GDP per capita
Source: Calculated from WDI, using
Total countries = 191Year of peak output per capita for countries
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SENKWT
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Yea
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DP
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ita
6 7 8 9 10 11Ln of GDP per capita PPP (2000)
Source: Calculated from WDI, using LCU
Year of peak GDP per capita by country's income
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Below the historical peak…
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SEN-61
KWT-62
NER-65
ZMB-65
MDG-71
GHA-71 JAM-72
ZAR-74
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NGA-77
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NIC-77
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SLV-78
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HND-79NAM-80
GTM-80
AGO-80TGO-80
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ZAF-81
PRY-81PER-81
SLE-82
RWA-83
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VUT-84
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6 7 8 9 10Ln of GDP per capita PPP in 2000
(*) Year of peak GDP pc in parenthesis.Source: Calculated from WDI, using LCU
Only countries with peak before 1985 Gap between income in 2000 and peak GDP
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10% of the world live in countries that “forgot” their TFP
• 600 million people live in countries – where GDP today (2000) is below its 1984 peak.– This isn’t small potatoes
• Questions– Why some countries are poorer today than 20 years ago ?– How can this happen in a world where technology is growing ?– Why some countries take so much time to recover from collapses ?
• Unlike Germany after WWII
• Approach:– Look at the role of entrepreneurial talent leaving the country
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Some usual suspects ?
Y = A f(k,h)• A in the world in higher
• Barriers to k
• Overall investment in h is higher.
• Infrastructure can be rebuilt…– And then pay the cost
• If shadow price of capital (physical or human) is high One may import it…
• In general, true for any (tradable) input
• Conflict ends… but GDP crisis does notThere seems to be a permanent loss in TFP
- hysteresis
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ARE
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0 20 40 60Secondary Enrollment 1990
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This channel…
1) Crisis induces reduction in amenities
– Public security, for example
2) Entrepreneurs exit the country (or the area):V(stay local, w) < V(live in “Miami”, w - Cost of moving)
3) Conflict stops, but “coordinators” are not there…– It takes a while to build a new pool of entrepreneurs
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Some micro evidence• Kidnapping of businessmen reduced investment in
Colombian provinces.• Pshisva and Suarez (2006)
• Russian cities disproportionally hit by the Holocaust grew less.
• Acemoglu, Hassan and Robinson (2008)
• Entrepreneurship is (very) imperfectly tradable– Many local entrepreneurs in Italy
• Olmo & Michelacci (2004, REStat)
• African migration … (and return ?) – Anecdotal evidence of recent return(article in EL PAIS)
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Macro perspective
• Talent and allocation of talent• Lucas (1978) ; Murphy Shleifer & Vishny (1991).• But talent is implicitly tradable
• Entrepreneurs demand educated people.• Dias & McDermontt (2006).
• Talent and tolerance for delayed gratification emerge from the middle class
• Acemoglu & Zilibotti (1997)
• Endogenous migration and growth– But here human capital does not depreciate when you leave
• Braun (1993)
• Familiarity with foreign economy• Goodfriend and McDermontt (1998)
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Central claims
• Location decisions of entrepreneurs impact the set of available projects.
• Outward migration of the “entrepreneurial class” reduce long term growth.– Why ? Less projects less spillovers…
• Restoring amenities for entrepreneurs may attract people able to run businesses.
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Towards a Model
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Conclusions
• Some countries are poorer than before
• In a world of technological improvement.
• Did they loose their ability to do business ?
• Evidence supporting imperfect substitution between local and foreign entrepreneur…
• How to model ?
• How relevant ?