Igniting growth surges: Lessons from the past

Abstract

‘What exactly’ can countries do to initiate an episode of growth surge? I identify 132 episodes of growth surges occurring between 1980 and 2010 in 117 countries. I find that disproportionate improvements in macroeconomic stability and external factors and endowments favour a higher probability of growth surge. They are followed by structural reforms, investments, labour and productivity, trade diversification and quality and, lastly, by institutions. Countries can maximize the likelihood of igniting growth surges if they jointly achieve significant improvements in macroeconomic stability and external conditions and endowments. Also, macroeconomic stability and to some extent, external factors and endowments may be considered as dominant strategies to ignite a growth surge, as no improvements in these determinants, generally constraint the other determinants to have a smaller effect on growth surges. There is a notable difference between decades, regions and levels of development, which calls for careful tailoring of policies aiming at igniting growth surges to local conditions.