Wednesday, April 11, 2007

On Growth Theory and Kaldor Facts

Among macroeconomics theories, Growth Theory is one of the most classic fields. Its popularity among economists is like roller-coaster. Once, economists lost appetite scrutinizing the theory. But it revives.

Here are some good suggestions of my prof for those working on economic growth: start from a simple model, then fit your model with Kaldor Facts. If the model is doing well, it is really a good model. The Kaldor facts are (based on the article by Nicholas Kaldor Capital Accumulation and Economic Growth 1961)

  1. Output per worker grows at a rate that does not diminish over time.
  2. Capital per worker grows over time.
  3. The rate of return to capital is constant.
  4. The ratio of capital to output is roughly constant.
  5. The share of labor and capital in national income are nearly constant.
  6. Growth rates differ across countries.

These facts truly portray growth patterns among countries except for many African countries. What has happened is the opposite of first two facts true in Africa. Yet, interestingly, neoclassical growth theory-one of economic growth models predicts that in the long run (hopefully not very long) African countries will enjoy high economic growth and catch those of rich countries. Why ?

2 comments:

Anonymous said...

I kinda have been expecting this in a way...
But I reali dun think da world is going to end...start a new era maybe but the world is not ending.
That's not gonna happen till a thousand years later! Ok, I'm not sure bout that either but that's not the point! The world's not gonna end! Full stop!
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