Notes on "Rethinking Economic Development, Growth, &Institutions"(Jaime Ros)

Rethinking Economic Development, Growth, &Institutions

Jaime Ros

Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY10016, United States of America

“Immediate determinants” of output level and growth rates characteristics that relate to the deeper determinants

Income per capita = income per worker *(workers/population)

 workers/population: activity ratio

higher efficiency ->better allocation of given resources

per capita income differences are clearly related to wide labor productivity gaps.

The natural resource endowment plays a very minor role as a determinant of income difference compared to other factor endowments (human and capital resources)

Even before the industrial revolution, differences in natural resource endowment may have led to differences in population more than in per capita income.

3 efficiency variables:

1. the employment share of industrial activities, for gains from resource allocation towards sectors with increasing returns.
2. the trade share (X<M) for allocative and technical efficiency gains resulting from specialization in international trade.
3. the economy’s size (GDP) to capture efficiency gains resulting from pure scale effects.

The accumulation of capital per worker appears as a major systematic influence on the growth of per capita and per worker GDP

 (characteristic of the transition towards an industrialized economy)

ð  growth acceleration tends to occur at middle-income levels a tangency towards divergence away middle and low-income counties and a tangency towards convergence away middle and high-income countries.

The transition from immaturity to maturity is much less smooth.

The world’s distribution of per capita resources

• Bimodal of “twin-peaked” distribution supporting the existence of development and multiple “club convergence”

The Solow-Swan model, the AK model with aggregate increasing returns to capital.

Differences between wealth(1), growth(2)

(1):

• different steady state values of output per worker
• disequilibrium difference in capital-labor ratio

(2):

• differences in growth rate of output per worker should reflect differences in the exogenous rate of labor productivity growth and in the position relative to the steady state (the component of growth due to transitional dynamics)

It is not necessary that poor economics should grow faster than rich economics.

The nature of technology: non-rival good with limited excludability.

The growth rate is the sum of the rate of growth of the labor force and the rate of technical progress, and is thus independent of the saving rate.

In the steady state, the real wage and output per worker grow at the same rate as the rate of labor-augmenting technical progress.

Models used in the book:

Neoclassical, Solow, the AK, Endogenous Growth Model, New Growth Model, Schumpeterian Models of Endogenous Innovation and Creative Destruction, the Lewis Model, Classical Development model, Kalecki’s Dual Economy and Structuralist Growth Models.

This book uses regressions and other econometrics tools to evaluate the data collected.

All arguments are based on the existed models and theories.