National Policies and Economic Growth: A Reappraisal

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National Policies and Economic Growth: A Reappraisal

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William Easterly ()

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William Easterly

Abstract

National economic policies’ effects on growth were over-emphasized in the early literature on endogenous economic growth. Most of the early theoretical models of the new growth literature (and even their new neoclassical counterparts) predicted large policy effects, which was followed by empirical work showing large effects. A reappraisal finds that the alleged association between growth and policies does not explain many stylized facts of the postwar era, depends on the extreme policy observations, that the association is not robust to different estimation methods (pooled vs. fixed effects vs. cross-section), does not show up as expected in event studies of trade openings and inflation stabilizations, and is driven out by institutional variables in levels regressions.

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Paper provided by Center for Global Development in its series Working Papers with number 27.

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Length: 63 pages
Date of creation: May 2003
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Handle: RePEc:cgd:wpaper:27

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Chapter
- Easterly, William, 2005. "National Policies and Economic Growth: A Reappraisal," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 15, pages 1015-1059 Elsevier. [Downloadable!] (restricted)

Find related papers by JEL classification:
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
O21 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy

This paper has been announced in the following NEP Reports:

NEP-ALL-2006-09-03 (All new papers)

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