Entrepreneurs, Local Amenities and Growth: A research proposal
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Transcript of Entrepreneurs, Local Amenities and Growth: A research proposal
Entrepreneurs, Local Amenities and Growth:
A research proposal
Rodrigo Wagner
December 1st , 2008
(De)motivating evidence about negative “growth”
One out of five countries had their peak GDP per capita before 1985
0.2
.4.6
.81
Cu
mul
ativ
e d
istr
ibut
ion
of c
oun
trie
s
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
SENKWT
ZMBNER
MDG GHAJAM
ZWEZAR
GABIRNBOL VENNICNGA CAF SAU
SLVCIVHND
GTMHTIAGO NAMTGOPRY ZAFPER
SLERWA
COM VUTGMBCOGGEO DZA
JORCMRDJI ROM
TJKRUSUZBMNG BHSUKRMDA
KEN KGZ MKDAZENCLBDI
PNG
SLBERI COLGNB IDN
ARGURYSYR KNAMWI LCA
GRDDMA ISRMLTBRB PYFSYCCHEPRT NLDOMNNPL PRI
GIN DOM MACBHRMLIYEM
BEN MAR BLZ NORNZLVCTWSM POLSVKIND CYPEGY DNKESP IRLTONBFA CRICPVKHM GNQMYSTUN FINTURFJILSO HUNMUSCHN BIHTCD HKGBGD USALVALAO BWABLRTZA ATGPAN JPNISLBELAUTESTTHASWZKAZPAKMRT CZE SWEDEUALB GBRAUSFRALKA SGPECUTKM ITAVNMETH KOR LUXUGA PHL TTO SVNBRA CANHRV GRCBGR MEXLBNARM LTUMOZ GUYSDN CHL
1960
1970
1980
1990
2000
Yea
r o
f pe
ak G
DP
per
cap
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
Below the historical peak…
SEN-61
KWT-62
NER-65
ZMB-65
MDG-71
GHA-71 JAM-72
ZAR-74
ZWE-74
GAB-76
IRN-76
NGA-77
CAF-77VEN-77
BOL-77
NIC-77
SAU-77
SLV-78
CIV-78
HND-79NAM-80
GTM-80
AGO-80TGO-80
HTI-80
ZAF-81
PRY-81PER-81
SLE-82
RWA-83
COG-84
VUT-84
COM-84
GMB-84
0.2
.4.6
.8G
ap
in G
DP
pe
r ca
pita
[1-G
DP
(t)/
GD
Pm
ax]
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
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
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
ARE
BOL
JAM
NER
PRY
SAU
020
4060
80S
eco
ndar
y en
rollm
ent
200
0
0 20 40 60Secondary Enrollment 1990
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
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)
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)
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.
Towards a Model
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 ?