Openness, Human Development, and Fiscal Policies: Effectson Economic Growth and Speed of Adjustment

Author/Editor:

Delano Villanueva

Publication Date:

July 1, 1993

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The model developed here postulates that learning through experience plays a critical role in raising labor productivity over time, with three major consequences. First, the steady-state growth rate (of output) becomes endogenous and is influenced by government policies. Second, the speed of adjustment to steady-state growth is faster, and enhanced learning further reduces adjustment time. Third, both steady-state growth and the optimal net rate of return to capital are higher than the sum of exogenous rates of technical change and population growth. Simulation results confirm the model’s faster speed of adjustment, while regression analysis explains a large part of divergent growth patterns across countries in terms of the extent of openness and human development and of the quality of fiscal policies.

Series:

Working Paper No. 1993/059

Subject:

Notes:

Also published in Staff Papers, Vol. 41, No. 1, March 1994.

English

Publication Date:

July 1, 1993

ISBN/ISSN:

9781451965780/1018-5941

Stock No:

WPIEA0591993

Pages:

36

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