An analysis on economic opportunity

Abstract

Although economic opportunity is considered as a latent variable, it can serve as another factor in promoting growth and development. Through the construction of an economic opportunity index, this article identifies the extensity and intensity channels through which economic opportunity is created. Data on 24 variables for 184 world economies for the period 2000 to 2010 are collected for the empirical analysis. The methodology involves the use of principal component analysis in constructing three indices for the parametric and nonparametric regression analyses. The country sample is divided into OECD and non-OECD economies so as to examine their different performances. Extensity seems to be the more important channel to all economies, but for non-OECD economies, a higher performance in intensity can enrich the effect of extensity on economic opportunity.

Keywords:

• economic opportunity
• extensity
• intensity
• world economy

JEL Classification:

• C8
• O11

Acknowledgements

The author is grateful to the comments from the referees and participants in three presentations (University of Geneva and Vilnius University in December 2013 and APEC Study Center Consortium Conference in May 2014) and Elena Sarti, Siyang Ye and Jin Yao for research assistance. The author is solely responsible for errors found in the article.