growth theory to growth policy: an emerging consensus
DESCRIPTION
Growth theory to growth policy: an emerging consensus. Darryl McLeod, Overview Lecture 2 Economic Growth & Development Econ 6470 Spring 2013. Only one growth strategy known to work always: aka East Asian miracle. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/1.jpg)
Growth theory to growth policy: an emerging consensus
Darryl McLeod, Overview Lecture 2Economic Growth & Development
Econ 6470 Spring 2013
![Page 2: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/2.jpg)
Only one growth strategy known to work always: aka East Asian miracle
1. Green revolution + land reform (small farmers) masses of $1/day poor live in rural areas.
2. Mass education, public or private, credit formal/informal, both 1 and 2 are crucial asset redistributions– before or during growth…
3. Light manufactures large domestic and/or export market… 1st step in ladder (Sachs, 2005, Chapter 1) Justin Lin’s Flying Geese pattern– Indonesia, Vietnam, Cambodia,
4. Migration works miracles: remittances, rural to urban or international– Kerala, India) see Lucas, 1993 Making a Miracle, McLeod and Mileva, 2011
![Page 3: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/3.jpg)
East Asian miracle dotted line (from Justin Lin’s 2012 Quest for Prosperity p.275 )
![Page 4: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/4.jpg)
Institutions lead to a logical cul de sac (see Dani Rodrik Growth Strategies)
1. Institutions are hard to change: war, French revolutions
2. Institutions are country specific: e.g., China used EPZs & the household responsibility system
3. Since very political, hard to change and country specific: nothing for economists to do…
4. Change trade and RER policy and hope for the best: knowing growth may not be sustained.
![Page 5: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/5.jpg)
Institutions lead to a logical cul de sac (see Rodrik Growth Strategies)
1. Institutions are hard to change: war, French revolutions
2. Institutions are country specific: e.g., China used EPZs & the household responsibility system
3. Since very political, hard to change and country specific: nothing for economists to do…
4. Change trade and exchange rate policy and hope for the best: stimulate growth knowing it may not be sustained.
![Page 6: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/6.jpg)
Institutions may be fundamental, but they are not essential…
Institutions are fundamental but • Country specific (Rodrik) hard to
change• May be endogenous to
geography– e.g. the Resource curse- a la Collier
• Correlation with Geography (Sachs- malaria, landlocked– Jared Diamond, guns, germs &)
• Parallel institutions are work- arounds: (Collier’s ISA, EPZs, charter cities)
• Asset redistribution shocks
not essential for growth as there are other levers for growth (Johnson et al.below)
• Trade- EPZs • Competition, open capital
markets • FDI- new technologies• Education• Political coalitions (Marshal
plan) • Black and white cats both
hunt mice… (China, HRS, etc.)
![Page 7: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/7.jpg)
Consensus growth strategies: post East Asian miracle with or w/o best institutions
Early Washington Consensus • Trade liberalization• Open capital account??• Macroeconomic stability• PrivatizationSachs-Warner Index:• Tariffs < 10%, quotas <40%• BMP < 20%• Non-socialist government• No export monopoly
Post EA miracle consensus• Weak RER • Macro stability• Exports and FDI• EPZ + socialism works tooAfrica w/poverty traps:• Levers for growth• Macro stability, weak RER• Aid OK, resource rents?• Aid can break poverty trap• Debt relief?
![Page 8: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/8.jpg)
Rodrik and Subramanian (2003)
![Page 9: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/9.jpg)
Rodrik and Subramanian (2003) F&D
![Page 10: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/10.jpg)
Levers for growth in Africa
![Page 11: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/11.jpg)
![Page 12: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/12.jpg)
Competitive RER
![Page 13: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/13.jpg)
13
Slide from Rodrik, Growth Strategies(Uganda too)
![Page 14: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/14.jpg)
2.1%
-3.3%
2.2%
-5.0%
2.6%
4.1% 4.4%3.5%
0.8%
1.7%
Source: IMF WEO April 2010 Database (population weight average GDP per capita) not including Liberia, Eriteria,
Figure 1 SSA Per capita GDP Growth rate
Average 1982-95 -1.4%
Average 1996-08 2.4%
![Page 15: Growth theory to growth policy: an emerging consensus](https://reader036.vdocuments.net/reader036/viewer/2022062501/56815c7d550346895dca91a4/html5/thumbnails/15.jpg)
References • Acemoglu, Daron, and Simon Johnson, 2005, "Unbundling Institutions," Journal of
Political Economy, Vol. 113 (October), pp. 949–95.• Berg, Andrew, Carlos Leite, Jonathan D. Ostry, and Jeromin Zettelmeyer, 2006, "What
Makes Growth Sustained?" manuscript (January) (IMF).• Hausmann, Ricardo, Lant Pritchett, and Dani Rodrik, 2004, "Growth Accelerations," NBER
Working Paper 10566 (Cambridge, Massachusetts: National Bureau of Economic Research).
• International Monetary Fund, 2003, World Economic Outlook, September (Washington).• Rodrik, Dani, Arvind Subramanian, and Francesco Trebbi, 2004, "Institutions Rule: The
Primacy of Institutions over Geography and Integration in Economic Development," Journal of Economic Growth, Vol. 9 (June), pp. 131–65.
• Sachs, Jeffrey, and Andrew Warner, 1995, "Economic Reform and the Process of Global Integration," Brooking Papers on Economic Activity, Vol. 1, pp. 1–118.
• World Bank, 1993, The East Asian Miracle: Economic Growth and Public Policy (Washington).