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Policy determinants of growth : survey of theory and evidence

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Author Info

  • Easterly, William R.
  • Wetzel, Deborah L.

Abstract

This paper explores the broad themes of the literature on economic growth. It makesthe following two broad conclusions. First, it notes that the efficiency of investment is as important as the level of investment in determining growth performance. Secondly, it states that keeping to a minimum the distortion of resource allocation by government policies makes saving and investment more efficient and promotes long-term economic growth. Policies that contribute to the efficiency of investment and that lower distortions in resource allocation will thus generally encourage growth. Policies that promote investment, liberalize trade restrictions and remove distortions in financial markets are likely to raise a country's long-run rate of growth. It is noted, however, that more research is needed to formulate structural models of growth that give clear guidance on the effect of various policy measures.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 343.

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Date of creation: 31 Dec 1989
Date of revision:
Handle: RePEc:wbk:wbrwps:343

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Related research

Keywords: Achieving Shared Growth; Economic Theory&Research; Environmental Economics&Policies; Economic Growth; Governance Indicators;

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Citations

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Cited by:
  1. Matthias Cinyabuguma & Bernardin Akitoby, 2004. "Sources of Growth in the Democratic Republic of the Congo," IMF Working Papers 04/114, International Monetary Fund.
  2. Ghani, Ejaz, 1992. "How financial markets affect long run growth : a cross country study," Policy Research Working Paper Series 843, The World Bank.
  3. Somik Lall, 2007. "Infrastructure and regional growth, growth dynamics and policy relevance for India," The Annals of Regional Science, Springer, vol. 41(3), pages 581-599, September.
  4. Easterly, William R., 1989. "Policy distortions, size of government, and growth," Policy Research Working Paper Series 344, The World Bank.
  5. Stephen Turnovsky & Pradip Chattopadhyay, 1998. "Volatility and Growth in Developing Economies: Some Numerical Results and Empirical Evidence," Discussion Papers in Economics at the University of Washington 0055, Department of Economics at the University of Washington.
  6. Levine, Ross & Renelt, David, 1991. "Cross-country studies of growth and policy : methodological, conceptual, and statistical problems," Policy Research Working Paper Series 608, The World Bank.
  7. Claessens, Stijn, 1991. "Alternative forms of external finance : a survey," Policy Research Working Paper Series 812, The World Bank.
  8. Faini, Riccardo & de Melo, Jaime, 1990. "Adjustment, investment, and the real exchange rate in developing countries," Policy Research Working Paper Series 473, The World Bank.
  9. Renelt, David, 1991. "Economic growth : a review of the theoretical and empirical literature," Policy Research Working Paper Series 678, The World Bank.
  10. Stefania Villa, 2005. "Determinants of growth in Italy. A time series analysis," Quaderni DSEMS 24-2005, Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia.

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