By Sibabrata Das, Alex Mourmouras, Peter C. Rangazas
Growth thought offers a wealthy and flexible analytical framework in which primary questions on monetary improvement should be tested. This booklet is an advent to the more recent beneficial properties of development thought which are quite necessary in studying the problems of financial improvement. Structural transformation, during which constructing nations transition from conventional creation in principally rural components to trendy construction in mostly city parts, is a crucial causal strength in developing early monetary progress, and as such, is made important during this procedure. in the direction of this finish, the authors increase the Solow version to incorporate endogenous theories of saving, fertility, human capital, institutional preparations, and coverage formation, making a unmarried two-sector version of structural transformation. in accordance with utilized learn and useful reviews in macroeconomic improvement, the version during this e-book provides a extra rigorous, quantifiable, and explicitly dynamic twin economic system method of improvement. universal microeconomic foundations and notation are used all through, with each one bankruptcy construction at the earlier fabric in a continuing movement. With its unmarried version and concentrate on information and coverage research, this article is meant for starting graduate scholars and coverage makers drawn to fiscal development.
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Extra info for Economic Growth and Development: A Dynamic Dual Economy Approach
Human capital investments increased dramatically over the twentieth century in the USA and many economists view human capital as an important source of economic growth that is ignored in the standard model. 2 presents two measures of human capital investment in children: real spending per child in primary and secondary school ðxt Þ and the fraction of the year spent in school by children ages 0–19 years ðet Þ. School spending per pupil expanded more than 25fold since 1870 and time spent in school expanded more than threefold.
The annualized values of predicted interest rates (solid line) and growth rates (dashed line) are displayed in Fig. 3. 38 2 Neoclassical Growth Theory Fig. 3 Simulated US interest rates and growth rates: 1870–2000. Notes The solid line gives the annualized rate of return to capital and the dashed line gives the annualized growth rate of labor productivity. The annualized growth rates over 30-year periods were plotted above the midpoint of the intervals between the periods The model predicts high interest rates (14 %) and growth rates (3 %) for the late nineteenth century and then a decline in both variables over the twentieth century.
The relatively low capital–labor ratio produces relatively high returns to capital. The fact that the capital–labor ratio is well below its steady-state value generates high and declining growth rates, as indicated qualitatively by the transition equation diagram in Fig. 2. 62 Notes The table gives annual growth rates in worker productivity over two centuries of US historical. See Mourmouras and Rangazas (2009) for sources Sensitivity analysis that allows for minor variations on the theme, such as declining population growth rates or setting σ < 1, helps a little but not enough to change the basic pattern in Fig.