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Following Solow (1956) we can decompose the growth in income
per-capita into these components.
But as North and Thomas (1973, p. 2) put it: “the factors we have
listed (innovation, economies of scale, education, capital accumulation
etc.) are not causes of growth; they are growth.” (italics in original). James A. Robinson (Harvard) The Emergence of Modern Economic Growth: A Comparative and2, 2009
September Historical Analysis
10 / 19 Proximate and Fundamental
The distinction between proximate and fundamental is rhetorical, but
it is an attempt to focus on more satisfactory sources of variation and
Saying that one country is more prosperous than another because it
has more capital or higher TFP may be correct, but it also may not
be very insightful. Why do some countries save more; invest more
resources in educational systems; or have better technology? Perhaps
central planning of the economy was not good for the e¢ cient
allocation of resources (low TFP), but then why did things get done
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This document was uploaded on 02/28/2014 for the course ECON 2328 at Harvard.
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