High Path to Economic Growth and Development
Challenge: The Magazine of Economic Affairs, Vol. 41, pp. 91-104, 1998
Posted: 22 Jan 2010
Date Written: 1998
Conventional economic theory tends to support the view that there is only one sustainable path to economic development, and that economies are expected to converge in terms or real GDP per capita through the process of interregional and international trade and factor mobility. An economy's growth rate is determined by technological change which is assumed to flow between firms and across borders. Attempts to interfere with this process will result in economies and societies being worse off. However, with many economies adopting low wage regimes to economic growth and development, it is suggested that a alternative more socially beneficial way is available. Higher wages, improved standards, minimum wages, unemployment insurance and the bettering of working conditions, which are considered antithetical to growth by mainstream economic theory, can in fact increase productivity and therefore, increase economic growth.
Keywords: Growth, Economic development, GDP, Convergence, Factor mobility, Technological change, Wages
JEL Classification: O40
Suggested Citation: Suggested Citation