Economic Growth and Development

(singke) #1

have been slower than in Western Europe, not that they have slowed to 5 per
cent in India in the last couple of years or been maintained at 7 per cent+ in

A combination of economic theory and history

Economists are generally good at measuring and comparing the impact of vari-
ous policies, such as considering the relative impacts of education and infrastruc-
ture on economic growth, and hence which a growth-enthusiast policy-maker
should prioritize for reform. Historians have had more success in uncovering
those long-run forces that lead to higher education or more infrastructure. For
example, several hundred years ago, various, then developing, countries were
dominated by large landowners. Landowners like cheap and pliable labour that
can work on their land for low wages and long hours, and dislike the education
that may enable their labourers to leave them for employment in a distant town.
Landowners are generally not very keen on democracy, when one landlord
would be at great risk of losing political power in an election against more
numerous of his labourers. There is some historical-statistical evidence to
support the argument that patterns of land ownership, even centuries ago, can
help explain contemporary progress in education and democracy and so, in
turn,economic growth (Sokoloff and Engerman, 2000).
This book attempts to integrate the economic and historical approaches into
a framework for thinking about growth, or in the terminology of economists,
an economic model. Economic modelling in pages of the leading economic
journals such as the American Economic Review or the Quarterly Journal of
Economicsis typically dense with mathematics, economic theory and statistics
and so is inaccessible to all but graduate economists. This book does engage
with such scholarship but attempts to make the effort readable and accessible.
Economists and historians may never end up best friends, but they have a lot to
learn from each other’s efforts to understand growth.

The distinction between ‘proximate determinants’ and ‘deeper
determinants’ of growth

The proximate determinants of economic growth are the efforts households,
firms or governments make to create new factors of production (land, labour
and capital) or to combine existing factors of production in more
efficient/productive ways to produce more output. These two processes are
influenced by the deeper determinants of economic growth: culture, openness,
geography, institutions and colonialism.
The basic model used in this book first relates growth to factors of produc-
tion and efficiency which are the proximate determinants of growth. The
factors of production are labour, capital and land (some economists also
include natural resources or energy). These are combined in various ways by
households and public or private sector enterprises to produce output.

Introduction 5
Free download pdf