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Institutions-Augmented Solow Model And Club Convergence

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  • Tebaldi, Edinaldo
  • Mohan, Ramesh

Abstract

Growth economists still face challenges and limitations to incorporate institutions into the standard growth framework. This article develops a simple augmented Solow growth model that accounts for the interactions between institutions and factor-productivity and examine the impacts of the quality of institutions on levels and growth rates of output. The institutions augmented growth model shows that differences in the quality of institutions preclude convergence and determine both the level and the growth rate of output per worker. The model also shows that poor institutions induce poverty traps. Furthermore, the income gap between rich and poor countries will increase if poor countries’ institutions do not improve relative to their rich counterpart.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 10386.

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Date of creation: Aug 2008
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Handle: RePEc:pra:mprapa:10386

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Keywords: Solow Model; Institutions; Club Convergence; Poverty Traps;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Institutions as Capital?
    by Wayne Cain in econ trek on 2011-11-13 15:57:00

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