Institutions-Augmented Solow Model And Club Convergence

Edinaldo Tebaldi and Ramesh Mohan (rmohan@bryant.edu)

MPRA Paper from University Library of Munich, Germany

Abstract: Growth economists still face challenges and limitations to incorporate institutions into the standard growth framework. This article develops a simple augmented Solow growth model that accounts for the interactions between institutions and factor-productivity and examine the impacts of the quality of institutions on levels and growth rates of output. The institutions augmented growth model shows that differences in the quality of institutions preclude convergence and determine both the level and the growth rate of output per worker. The model also shows that poor institutions induce poverty traps. Furthermore, the income gap between rich and poor countries will increase if poor countries’ institutions do not improve relative to their rich counterpart.

Keywords: Solow Model; Institutions; Club Convergence; Poverty Traps (search for similar items in EconPapers)
JEL-codes: I3 O43 (search for similar items in EconPapers)
Date: 2008-08
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:10386

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