1. Determinants of Economic Growth: Empirical Analysis of the EU
Michele Kvistad
University of Wisconsin-Superior

2. Introduction Objective:
Identify the macroeconomic determinants of economic growth in the European Union
EU background

3. Theories of Economic Growth
Solow (1956):
Capital accumulation as a factor behind economic growth
Model predictions:
Convergence in income levels and growth rate
Romer (1986):
Technological progress as the key driver of economic growth
No convergence due to endogenous growth

4. Empirical Studies Empirical determinants of economic growth:
Capital Accumulation (Solow)
Technology (Romer)
Labor force and human capital (Jones)
Institutions (North)
Education (Barro)
Geographical economics/agglomeration effects (Krugman)

5. Empirical Study: Panel Data
Data Source: PWT
variable name
variable description
Variable Type
rgdppc_growth
Real GDP Per Capita growth, chained 2005US$ PPP
Dependent
empl_growth
Growth in number of employed
Independent hc
Human capital index, based on years of schooling (Barro/Lee, 2010) and returns
ctfp
TFP level at current PPPs (USA=1)
laglnrgdppc
One-year lag of ln(Real GDP Per Capita)
k_growth
Growth rate of capital stock
memb_dur
Duration of membership in the EU (in years)
eu_member
Dummy=1 if EU member, 0 otherwise

6. Empirical Model and Hypothesis
Hypothesis: Members of the EU grow faster than non-members:
dgrowth/dEU membership dummy>0
dgrowth/dEU membership duration>0

7. Regression 1: EU membership duration

8. Regression 2: EU dummy

9. Regression 3: TFP & EU membership duration

10. Regression 4: TFP & EU dummy

11. Conclusion
EU member-countries tend to grow faster than non-member countries
EU economic growth benefits accrue over time
Empirical evidence supports the research hypothesis