Some Sensitivity Tests for a "Constant-Market-Shares" Analysis of Export Growth

Abstract

An alternative procedure would be to apply some knowledge of economic history to the problem and see if changes in the financial factors affecting adjustment speeds can explain the changes in investment expenditures by themselves. If so, and my results reported in the original article indicate it is so, then a test for the relative significance of changes in financial factors compared to changes in the gaps between desired and actual capital stocks would be to see which model produces the most stable coefficients for subperiods. One of the things I noted in my article was the stability of the coefficients of the financial variables (the effective yield on railroad bonds and the level of retained earnings), whether estimated for the entire period 1897-1914 or the subperiod 1897-1907. I had no more luck than Morgan, however, in finding stable coefficients for any version of the accelerator model. The net effect of Morgan's work is to give independent support to my original argument that the accelerator model in any form is inappropriate for explaining investment behavior of American railroads during this period of volatile financial changes. lished Ph.D. dissertation Growth, Stability and Financial Innovation in the American Economy, 1897-1914. University of California, Berkeley, 1968.