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National Policies and Economic Growth: A Reappraisal

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  • William Easterly

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Abstract

National economic policies’ effects on growth were over-emphasized in the early literature on endogenous economic growth. Most of the early theoretical models of the new growth literature (and even their new neoclassical counterparts) predicted large policy effects, which was followed by empirical work showing large effects. A reappraisal finds that the alleged association between growth and policies does not explain many stylized facts of the postwar era, depends on the extreme policy observations, that the association is not robust to different estimation methods (pooled vs. fixed effects vs. cross-section), does not show up as expected in event studies of trade openings and inflation stabilizations, and is driven out by institutional variables in levels regressions.

Suggested Citation

  • William Easterly, 2003. "National Policies and Economic Growth: A Reappraisal," Working Papers 27, Center for Global Development.
  • Handle: RePEc:cgd:wpaper:27
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    File URL: http://www.cgdev.org/content/publications/detail/2763
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    Keywords

    economic policy; economic growth;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy

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