Explaining growth: a global research project. Edited by Gary McMahon and Lyn Squire (New York: Palgrave Macmillan, 2003, pp. 263)

✍ Scribed by Daniel M'Amanja

• Book ID: 102353476
• Publisher: John Wiley and Sons
• Year: 2007
• Tongue: English
• Weight: 30 KB
• Volume: 19
• Category: Article
• ISSN: 0954-1748
• DOI: 10.1002/jid.1274

✦ Synopsis

There exists a vast amount of theoretical and empirical literature on the determinants of long run economic growth and its variation among countries. Yet, the topic remains as puzzling today as it was when first raised decades ago. Neither the neoclassical nor the so-called endogenous growth theories have been able to provide a concrete framework through which reliable prediction of economic growth can be made. Although cross-country regressions, which currently dominate the growth literature, have shed some useful light on some of the most important factors for growth, doubts still persist as to their appropriateness in providing policy advice to policy makers. This book revisits the issue with a different perspective. It highlights weaknesses associated with existing crosscountry studies and offers country specific studies as the future direction for research on economic growth.

By going beyond the cross-country studies and focusing on individual countries, the global project provides progress towards a better understanding of the actual determinants of growth in specific countries or regions. The current volume compiles reports from studies conducted to analyse and evaluate similarities and differences in growth experiences within the five regions -Sub-Saharan Africa (SSA), Middle East and North Africa (MENA), East Asia, Latin America, and Transition economies. To enable comparisons across the regions, the studies were predicated on four common themes: sources of growth, microeconomic agents and growth, markets and growth, and political economy of growth. An overview of the main findings is given by McMahon and Squire in chapter one.

Conventional aggregate growth accounting and reasons for low factor accumulation, productivity and investment are presented in chapter 2 by Soludo and Kim. The chapter gives a critical evaluation of the main factors covered in most cross-country studies including: initial conditions, exogenous shocks, policy and institutions and human resources, and points at some of the conceptual and methodological constraints which reduce their power to explain differential growth across countries. One conclusion is that, 'we know as much as we don't in terms of what determines the differences in cross-national growth performances' (p66). The current empirical results have been of limited use to the policy maker, since what he gets from them is a shopping list of factors that are potentially important for growth but without any prioritisation or sequencing. These factors vary from country/ region to country/region and over time, a feature largely ignored by most cross-country studies. The chapter ends by stressing the need for better and direct measures of some of the determinants (e.g. trade openness and education attainment) used in growth accounting.

Most empirical growth studies focus on aggregate measures or the macroeconomy with little, if any, reference to the behaviour, decision-making and constraints facing microeconomic agents. This is the focus of chapter 3 by Guriev and Salehi-Isfahani. It delves into factors that influence saving, investment and growth from the perspective of households and firms, considering constraints facing household saving, investment in human capital and supply of labour to firms, and how firms utilise available labour and other factors to supply goods and services. On the basis of findings from the regional studies, the authors categorise growth experiences or 'scenarios' as successful development, muddling through, and lagging behind (e.g. SSA & MENA).

The working and constraints facing financial, labour, natural resource and product markets and their effect on growth is the subject of chapter 4 by Jurajda and Mitchell. For each of the markets, the authors examine three growth dimensions namely infrastructure, price wedges, and market participants and their effects on resource allocation efficiency and growth. In chapter 5, Castanheira and Salehi Esfahani provide a stimulating discussion on the political economy of growth, pointing