The augmented neoclassical growth model with an inclusion of human capital

The augmented neoclassical growth model with an

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The augmented neoclassical growth model (with an inclusion of human capital, especially health) and new endogenous growth model (with endogenous technology) increase the plausibility of numbers in recent empirical estimates of sources of growth. Today economists are more ambivalent about the benefits of aid. Our profession has improved monetary and fiscal instruments with a concomitant deceleration of inflation. Related to this, Bruno and Easterly (1998: 3-24) discovered no negative correlation between inflation and economic growth for inflation rates under 40 per cent annually. Population growth, although still rapid by half-century periods, has decelerated from 1960 to the present. 8 Recent empirical studies have established the negative impact of population growth on growth in GDP per capita (Barro 1997). In the last two decades, adjustment (macroeconomic stabilization, structural adjustment, and economic reform) 5 Addison (2003: 5); World Bank (1997: 2). 6 Nayyar (1997). 7 Bhalla (2002: 188). 8 Nafziger (2006: 275).
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3 has been universal for LDCs and transitional countries, a condition required for funding by the World Bank, the Group of Seven, and the lender of last resort, the IMF. The literature has discussed the implications of adjustment and reform for economic development. 2 Seers and Sen as critics Both men were critical of the development literature of their times. For Seers, neoclassical economics had a flawed paradigm and dependency theory a lack of policy realism. After the fall of state socialism in 1989-91, the ideological struggles among economists diminished. Neoclassicism’s Washington Consensus of the World Bank, IMF, and the USA government reigned (Williamson 1993: 1329-36; 1994: 26-8). Sen did not focus on ideological issues but, according to the Nobel Prize committee, ‘restored an ethical dimension to the discussion of economic problems’, such as development. 2.1 A sketch of Seers’ and Sen’s purposes of development According to Seers (1979) the purpose of development is to reduce poverty, inequality, and unemployment. For Sen (1999), development involves reducing deprivation or broadening choice. Deprivation represents a multidimensional view of poverty that includes hunger, illiteracy, illness and poor health, powerlessness, voicelessness, insecurity, humiliation, and a lack of access to basic infrastructure (Narayan et al. 2000: 4-5). 2.2 Seers on neoclassicism’s universal claims For Seers, neoclassical economics greatest error was its universalizing from the West’s experience. For him, ‘the abler the student has been in absorbing the current doctrine, the more difficult the process of adaptation’ to the developing world (Seers 1963: 77). Calling a book that analyses the United States and the United Kingdom ‘Economic Principles’ is analogous to calling a book dealing with horses ‘Animals’. For Seers, development economics, in analysing the 75-80 per cent of the world in developing countries and the past experience of industrialized economies, is closer to principles of economics (Ibid.: 79).
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  • Spring '11
  • Mohammad
  • Poverty, Amartya Sen

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