Presentation on theme: "Historic Growth and Contemporary Development"— Presentation transcript:
1 Historic Growth and Contemporary Development Lessons and Controversies
2 Outline: Economics of Growth Kuznet’s six characteristics of economic growthConclusions on interdependence of growthAppropriate technology and employment generation (pp )Chenery’s Patterns of developmentCase study: East Asian miracle/crisis
3 The Growth GameGrowth rates of national income are followed closely by policy-makersIn order to better understand contemporary growth prospects, it is useful to examine historical growth patterns
4 The Economics of Growth: Capital, Labor, and Technology Three factors/ components of economic growthCapital accumulation results from an increase in capital stock and improved human resourcesPopulation and eventually labor force growth- shifts in PPFTechnological progress - L/K augmenting
5 The Economics of Growth: Capital, Labor, and Technology Capital accumulationPhysical capital stockInfrastructureHuman capitalPopulation and labor force growthEffect of increases in physical and human resources on PPFResource growth is not a necessary condition for SR growth
6 The Economics of Growth: Capital, Labor, and Technology Technological progressNeutralSavingLabor savingCapital savingAugmentingLabor- augmentingCapital- augmenting
7 The Historical Record: Kuznet’s Six Characteristics of Modern Economic Growth Based on the analysis of historical growth of national incomes in developed countries, Prof. Simon Kuznets has identified three principal components for a country’s economic growth:Sustained rise in national outputTechnological advancement is a necessary but not sufficient condition for continuous economic growthTechnological innovation and social innovation are concomitant
8 The Historical Record: Kuznet’s Six Characteristics of Modern Economic Growth Six features present in the growth process of every developed nation are:High rates of per capita output and population growthHigh rates of total factor productivity increaseHigh rates of economic structural transformationHigh rates of social, political, and ideological transformationInternational economic outreach for markets and raw materialsLimited international spread of this economic growth to 1/3 of the world’s population
9 High rates of per capita output and TFP On average, between 1770 and 2000, countries thatare now industrialized hadreal GNP growth 3% per yearpopulation growth 1% per yearper capita output 2% per yearTFP:It is the output per unit of all inputs and measures the efficiency with which all inputs are usedIt represents technology and accounts for about 50 t0 75% of historical growth per capita in industrialized economies
10 Factor Accumulation Accounts for Only a Fraction of Growth
11 Social and ideological transformation “Modernization Ideals” includeRationalityEconomic planningSocial and economic equalizationImproved institutions and attitudes
12 Interdependence of growth characteristics Rising TFP High per capita outputHigh per capita income & consumptionStructural changes in production and laborEconomic growth + technological changesInternational outreachSelf-generating economic growth
13 Chenery’s Patterns of Development Chenery and colleagues examined patterns of development for developing countries at different percapita income levels during the post-war period.Major hypothesis is that development is an identifiable process of growth and change whose main features are similar in all countries.The empirical studies identified several characteristic features of economic development:Shift from agriculture to industrial productionSteady accumulation of physical and human capitalChange in consumer demandsIncreased urbanizationDecline in family sizeDemographic transition
14 Chenery’s Patterns of Development The model recognizes that differences in development occur among countries due to :Resource endowment and sizeGovernment policies and objectivesAvailability of external capital and technologyInternational trade environmentA correct mix of policies based on observed patterns occurring in all countries during the development process can generate growthEmphasis on patterns rather than theory may lead the countries to draw wrong conclusions (reverse causality??).
15 The Limited Value of the Historical Growth Experience: Differing Initial Conditions Physical and human resource endowmentsDeveloping countries have poor endowments of bothDeveloping countries are faced with technology and ingenuity gapsRelative levels of per capita income and GNPLDCs have lower living standards than historical living standards in present developed nationsClimatic differencesTropical vs temperatePopulation size, distribution, and growthHistorical role of international migrationInternational trade benefitsR and D capabilitiesInstitutional stability and flexibility
16 The Limited Value of the Historical Growth Experience: Differing Initial Conditions Population size, distribution, and growthExceed the historical growth rates of developed countries (2% per annum)Historical role of international migrationIllegal immigration of unskilled workersBrain drainInternational trade benefitsDeteriorating terms of trade for developing countriesExistence of barriers to tradeR and D capabilitiesEconomic dualism
17 The Limited Value of the Historical Growth Experience: Differing Initial Conditions Institutional stability and flexibilityRecent political independenceTransitional economies
19 Economic convergence?Reasons to expect convergence of incomes between developed and developing nations:Technology transfer to developing countriesRapid factor accumulation in developing countriesAdvantages of backwardnessIncomes would tend to equalize conditional on key variables such as population growthNo evidence of unconditional convergence but there is evidence of convergence among OECD countries
28 Case Study: Asia’s Miracle: Readings Taiwan - Inside the Miracle: A Development Success Story at"Growth in East Asia: What We Can and What We Cannot Infer" provides a succinct overview of the debate about East Asia's rapid growth before the debt crisis of 1997at The diagrams on slides #27 and 28 are sourced from this article.
Your consent to our cookies if you continue to use this website.