{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter7 Growth - de Janvry and Sadoulet Chapter 7...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
de Janvry and Sadoulet 1 9/21/10 Chapter 7 Explaining economic growth: The macro level September 21, 2010 1. The growth puzzle We have seen that economic growth is the cornerstone on which economic development is built (Chapter 1). We have also seen that growth performances across nations have been highly unequal, with some developing countries converging in per capita income with the industrialized countries while others have been lagging behind, leading to the concept of conditional convergence (Chapter 2). And we have seen that how to catch up with the more industrialized countries has been a primary objective in the long history of thought in development economics (Chapter 3). Yet, our ability to explain economic growth, the central purpose of economics, is highly deficient, leaving us with what have been called the “mystery of economic growth” (Helpman, 2004) and the “elusive quest for growth” (Easterly, 2002). What we know is that growth basically depends on factor accumulation (labor, capital, materials, land) and on gains in productivity in the way factors are used to produce (the production function). However, what drives factor accumulation and gains in factor productivity remain highly contentious. Different models offer different explanations with different policy implications as to what to do to accelerate growth. The truth is that each of these models offers particular insights into the growth process. For that reason, there are lessons to be derived from each of the main models that have been proposed to explain growth. Again here, we are interested in both the positive analysis of growth (what explains economic growth?) and the normative analysis (what can be done to accelerate growth?). To answer these questions, economists use of economic models. 2. Modeling in economics An economic model is a simplification of reality that captures a complex process that can explain the outcome of interest, here economic growth. Because it has to be a Take home messages for chapter 7 1. GDP growth is the cornerstone of development, yet it is one of the most difficult economic outcomes to explain and predict, with many competing theories, but also many different effective recipes. 2. The Harrod-Domar model stresses the role of savings and capital accumulation as the engine of growth. By contrast, the Solow model focuses on the relative roles of technological change and factor deepening in explaining growth, leaving technology as the main determinant of long term growth in per capita income, yet unexplained by the model. 3. Dual economy models give importance to productivity growth in agriculture for successful industrialization. In this role, agriculture is seen as either the source of labor for industrial employment, or of cheap food and correspondingly low nominal wages, favoring sustained industrial growth.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern