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What determines the rate of growth and technological change?

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  • Romer, Paul M.
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    Abstract

    There is substantial research about cross section and time series correlations between economic growth and various economic, social, demographic and political variables. After analyzing these correlations, the paper makes the following conclusions. Exogenous increases do not seem to cause increases in the rate of technological change, but instead seem to be associated with lower rates of return to capital. Increased openness to international trade speeds up growth and technological change as do an increase in scientists and engineers. Countries more open to trade have a higher level of investment and capital growth - which is not associated with a fall in the marginal product of capital. Countries that become more integrated with world markets seem to have a higher marginal product of capital. Increases in capital investment associated with a higher per capita GDP are associated with a fall in the marginal product of capital. Increases in capital investment associated with increases in trade are not. This suggests thatpolicies to encourage more open trading may be as important to growth as additional foreign lending - especially in their cumulative effects - and at the same time enhance the efficient use of foreign loans.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 279.

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    Date of creation: 30 Sep 1989
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    Handle: RePEc:wbk:wbrwps:279

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    Related research

    Keywords: Economic Theory&Research; Environmental Economics&Policies; Economic Growth; Achieving Shared Growth; Banks&Banking Reform;

    References

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    1. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
    2. Robert J. Barro, 1991. "A Cross-Country Study of Growth, Saving, and Government," NBER Chapters, in: National Saving and Economic Performance, pages 271-304 National Bureau of Economic Research, Inc.
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    Cited by:
    1. Gilroy, Bernard Michael & Gries, Thomas & Naudé, Willem & Schmidt, Karl-Heinz & Bauer, Norbert, 2001. "Multinational Enterprises in Africa - A Study of German Firms in South Africa," MPRA Paper 17868, University Library of Munich, Germany.
    2. Backus, David K. & Kehoe, Patrick J. & Kehoe, Timothy J., 1992. "In search of scale effects in trade and growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 377-409, December.
    3. Seyit, Kose & Moomaw, Ronald, 2002. "Knowledge spillovers and regional growth in Europe," ERSA conference papers ersa02p373, European Regional Science Association.
    4. Arslan, Ismail & van Wijnbergen, Sweder, 1990. "Turkey : export miracle or accounting trick?," Policy Research Working Paper Series 370, The World Bank.
    5. Dilip Dutta & Nasiruddin Ahmed, 2001. "Trade Liberalisation and Industrial Growth in Pakistan: A Cointegration Analysis," ASARC Working Papers 2001-01, The Australian National University, Australia South Asia Research Centre.
    6. De Long, J Bradford & Summers, Lawrence H, 1991. "Equipment Investment and Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 445-502, May.
    7. Foroutan, Faezeh, 1991. "Foreign trade and its relation to competition and productivity in Turkish industry," Policy Research Working Paper Series 604, The World Bank.
    8. N Bose & M E Haque & D R Osborn, 2003. "Public Expenditure and Growth in Developing Countries: Education is the Key," Centre for Growth and Business Cycle Research Discussion Paper Series 30, Economics, The Univeristy of Manchester.
    9. Nikolaos Dritsakis, 2004. "Exports, investments and economic development of pre-accession countries of the European Union: an empirical investigation of Bulgaria and Romania," Applied Economics, Taylor and Francis Journals, vol. 36(16), pages 1831-1838.
    10. Norman Gemmell & Richard Kneller, 2003. "Fiscal Policy, Growth and Convergence in Europe," Treasury Working Paper Series 03/14, New Zealand Treasury.
    11. Angela Lusigi & Jenifer Piesse & Colin Thirtle, 1998. "Convergence of per capita incomes and agricultural productivity in Africa," Journal of International Development, John Wiley & Sons, Ltd., vol. 10(1), pages 105-115.
    12. Nasiruddin Ahmed, 2003. "Trade liberalization and endogenous growth of manufacturing industries in Bangladesh: an empirical investigation," Applied Economics, Taylor and Francis Journals, vol. 35(3), pages 305-314.

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