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Development (Paradigm) Failures

Over time the international development community has advocated various development paradigms, but countries following these paradigms have often performed poorly. I provide an explanation for this poor performance. In my model the political leader of a developing country chooses a policy and whether to implement it in an honest or corrupt manner. These choices affect domestic production and aid inflows. Production is high when productive capacity is high, and when the policy is appropriate in the country-specific circumstances and implemented honestly. Aid inflows are high when the policy is close to the paradigm. In equilibrium countries with low productive capacity and high corruption resulting from weak political institutions follow the paradigm more closely. Hence my model suggests that development paradigms have a tendency to fail because they are primarily followed by countries that would fail anyway.

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Paper provided by Swiss National Bank, Study Center Gerzensee in its series Working Papers with number 11.01.

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Length: 20 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:szg:worpap:1101
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  17. David L. Lindauer & Lant. Pritchett, 2002. "What's the Big Idea? The Third Generation of Policies for Economic Growth," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
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  26. Felicitas Nowak-Lehmann & Axel Dreher & Dierk Herzer & Stephan Klasen & Inmaculada Martínez-Zarzoso, 2012. "Does foreign aid really raise per capita income? A time series perspective," Canadian Journal of Economics, Canadian Economics Association, vol. 45(1), pages 288-313, February.
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