How useful is Growth Literature for Policies in the Developing Countries?
AbstractThis paper examines the growing gap between the theoretical and empirical growth literature and the policy needs of the developing economies. Growth literature has focussed mainly on the long term growth outcomes, but policy makers of the developing economies need rapid improvements in the short to medium term growth rates; see Pritchett (2006). This paper argues that this gap can be reduced by distinguishing between the short to medium term dynamic effects of policies from their long run equilibrium effects. With data on Singapore, Malaysia and Thailand we show that an extended version of the Solow (1956) model is well suited for this purpose. This is despite the common belief that the Solow model has no use for policy and is not applicable to the developing countries. We find that the short to medium term growth effects of the investment ratio are quite significant and they may persist for up to 10 years.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 14573.
Date of creation: 10 Apr 2009
Date of revision:
Solow Growth Model; Endogenous Growth; Dynamic Growth Effects of Investment Ratio; Policies for Developing Countries;
Other versions of this item:
- B. Bhaskara Rao & Arusha Cooray, 2012. "How useful is growth literature for policies in the developing countries?," Applied Economics, Taylor & Francis Journals, vol. 44(6), pages 671-681, February.
- Cooray, Arusha & B. Bhaskara Rao, 2009. "How Useful is Growth Literature for Policies in the Developing Countries?," Economics Working Papers wp09-09, School of Economics, University of Wollongong, NSW, Australia.
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-04-18 (All new papers)
- NEP-DEV-2009-04-18 (Development)
- NEP-SEA-2009-04-18 (South East Asia)
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