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How useful is the theoretical and empirical growth literature for policies in the developing countries?

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  • Rao, B. Bhaskara
  • Cooray, Arusha

Abstract

This paper, a revised version of an earlier paper, examines a recent view of Pritchett (2006) that there is a wide gap between the theoretical and empirical growth literature and the policy needs of the developing countries. Growth literature has focussed on the long term growth outcomes but policy makers of the developing countries need rapid improvements in the growth rate in the short to medium terms. We think that this gap can be reduced if attention is given to the dynamic effects of policies. With data on Singapore, Malaysia and Thailand we show that an extended version of the Solow (1956) model is well suited for this purpose. We found that the short to medium term growth effects of investment ratio are much higher than its long run effects and persist. Dynamic simulations for Singapore showed that these short and medium run growth effects are significantly higher than the steady state growth rate for up to 10 years.

Suggested Citation

  • Rao, B. Bhaskara & Cooray, Arusha, 2008. "How useful is the theoretical and empirical growth literature for policies in the developing countries?," MPRA Paper 11481, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:11481
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    Cited by:

    1. Mohamed Omar Fargani & Girijasankar Mallik, 2020. "Testing Growth Theory Using Existing Growth Models for MENA Countries," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 12(11), pages 151-151, November.

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    More about this item

    Keywords

    Solow Growth Model; Endogenous Growth; Dynamic Growth Effects of Investment Rate; Policies for Developing Countries;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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