How well the cumulative causation and export-led approaches predict actual growth of the EU (15) countries (original) (raw)

Abstract This paper uses the cumulative ,causation approach ,to predict ,actual growth ,in the EU(15) countries over the period 1981-2004. The cumulative ,causation principle underlines the importance ,of demand ,factors as the ,driving forces of growth ,and assumes,that productive factors are endogenous to the ,growth ,process. A special characteristic of the cumulative growth approach is the presence of increasing returns to scale properties that turn the process of growth,circular and self-sustained. In the same line of thought, an export-led growth approachis also employed to predict growth in the EU(15) countries which takes into account the balance of payments performance. In this framework, exports are the most potent element of demand that drive growth, and international trade elasticities are the key parameters determining ,the rate of growth. This model ,is extended ,to include ,the productivity gap ,as important factor in determining,export competitiveness. The ,empirical...