Institutions-Augmented Solow Model And Club Convergence
AbstractGrowth 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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 10386.
Date of creation: Aug 2008
Date of revision:
Solow Model; Institutions; Club Convergence; Poverty Traps;
Find related papers by JEL classification:
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
- I3 - Health, Education, and Welfare - - Welfare and Poverty
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