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Inside the Black box: Policies for Economic Growth


  • Procter, Roger

    () (Ministry of Economic Development, New Zealand)


Growth in income per capita is or should be a central objective of economic policy. This paper explores how the economy generates economic growth and what is actually going on in an economy when it does so. It describes economic growth as a fine-grained path-dependent process driven by entrepreneurs and involving transformation of the productive structure and the generation of new knowledge and capabilities. It concludes that, while the market is essential for organising economic activity, government intervention is necessary for markets to work effectively, and especially for them to work effectively in generating economic growth. The question then becomes not whether but how the government should intervene. The paper explores the nature of possible government interventions. It concludes that both broad-based policies (often thought of as framework or regulatory policies) and fine-grained policies (often thought of as facilitative or industry policies) have their place and that there is scope for action on both to improve New Zealand's economic performance.

Suggested Citation

  • Procter, Roger, 2008. "Inside the Black box: Policies for Economic Growth," Occasional Papers 08/8, Ministry of Economic Development, New Zealand.
  • Handle: RePEc:ris:nzmedo:2008_008

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    References listed on IDEAS

    1. John McMillan, 2004. "Quantifying creative destruction: Entrepreneurship and productivity in New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 38(2), pages 153-173.
    2. Glenn Boyle, 2007. "Academic salaries: where angels fear to tread," Competition & Regulation Times 375800, New Zealand Institute for the Study of Competition and Regulation.
    3. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, vol. 72(2), pages 603-633, December.
    4. World Bank, 2005. "Economic Growth in the 1990s : Learning from a Decade of Reform," World Bank Publications, The World Bank, number 7370, June.
    5. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 701-728.
    6. Brian Loasby, 2005. "Entrepreneurship, Evolution and the Human Mind," Papers on Economics and Evolution 2005-13, Philipps University Marburg, Department of Geography.
    7. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    8. Daron Acemoglu & Simon Johnson & James A. Robinson, 2002. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1231-1294.
    9. Lipsey, Richard G. & Carlaw, Kenneth I. & Bekar, Clifford T., 2005. "Economic Transformations: General Purpose Technologies and Long-Term Economic Growth," OUP Catalogue, Oxford University Press, number 9780199290895.
    10. C. A. Hidalgo & B. Klinger & A. -L. Barabasi & R. Hausmann, 2007. "The Product Space Conditions the Development of Nations," Papers 0708.2090,
    11. Davis, Nick, 2006. "Business R&D, Innovation and Economic Growth: An Evidence-Based Synthesis of the Policy Issues," Occasional Papers 06/8, Ministry of Economic Development, New Zealand.
    12. Philip McCann, 2003. "Geography, Trade and Growth: Problems and Possibilities for the New Zealand Economy," Treasury Working Paper Series 03/03, New Zealand Treasury.
    13. Smith, Keith, 2006. "Public Policy Framework for the New Zealand Innovation System," Occasional Papers 06/6, Ministry of Economic Development, New Zealand.
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    More about this item


    Economic development; productivity; innovation; policy; industry policy;

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy


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