chapter  8
27 Pages

Endogenous growth theories and new strategies for development

Near the end of Chapter 4, the Solow neoclassical growth theory was introduced. It has been interpreted as predicting that the per capita incomes of economies will tend to converge to the same level over time as lower income nations grow faster than higher income nations, assuming they all have access to the same technology and share similar savings and investment rates.1 Solow’s theoretical structure lent credence to and validated the policy recommendations of many of the early developmentalist economists and their policy-oriented theories, like the “big push,” “balanced growth” and “unbalanced growth” strategies considered in Chapter 5. You will remember that these were strategies that focused on the expansion of the industrial capital stock and the rate of savings as the means to promote economic growth and higher income per capita.