Is There Endogenous Long-Run Growth? Evidence Based on an Error Correction Model.

A major empirical interest in growth studies is whether a permanent change in economic fundamentals affects the long-run growth rate. However, a direct time series analysis of this hypothesis may not always be feasible because the permanence of many such changes is rather questionable. This paper explains why testing the long-run effect of a temporary change in investment share per capita output provides indirectly the answer regarding the effect of a (possibly hypothetical) permanent change in investments share, when output and investment are cointegrated.