Global Growth experiences

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Presentation transcript:

Global Growth experiences

“Why is Africa so poor?” by D. Mile & A. Scott (2005) Africa scores low on many key determinants of the steady state. What are they? Low investment low educational achievement low scores on social infrastructure

The ethno-linguistic diversity explanation Many African countries are made up of many large cultural groups. Outcomes tendency towards poor government policy due to competitiveness among groups. research finds a positive correlation between high levels of ethnic diversity and informal markets, underdeveloped financial system, low level of infrastructure, and low education levels. civil war – further damage to economy tmosphere of mistrust reduces social capital

Geographic explanation It is not situated well to benefit from trade Landlocked…higher trading costs Tropical climate Less productive agriculture Many innovations in agriculture aredesigned for more temporate climates malaria Spread of AIDS Highest incidence in working age population

“The Asian Miracle” by Mile & Scott (2005) The Asian growth experience is a study of capital accumulation. Who are the Asian Tigers? South Korea, Taiwan, Singapore and Hong Kong

Investment rates are quite high compared to OECD countries. Employment growth is also high

The case of Singapore Government played a huge role. Compulsory saving Targeted specific industries for investment Industrial structure changed from textiles to financial services and more recently to IT & communications.

What is the significance of the Asian growth experience? Trade-offs are required for these countries to achieve high rates of growth Singapore enjoys high levels of capital stock today because of high investment rates in the past. In previous decades consumption was reduced in order to increase savings and thus increase investment that has brought about a high standard of living.

The Asian countries did not experience diminishing marginal product of capital, but are expected to in the future (or it may have already started to decrease). When marginal product of capital declines, these economies will have to focus on technological change in order to continue healthy economic growth rates. Singapore has started to take action.