Catch-up and Convergence: Mechanism Design for Economic Development

Hans W Gottinger

doi:10.14738/abr.91.9550

Abstract

   A globalization process can be conceived as an evolving distributed algorithmic mechanism design (DAMD) that induces technology racing with natural catch-up processes of regional or country-wide competition. We describe the architecture of DAMD as the basis for development economics that lead to natural ongoing shifts in industrial performance and catch-up development. The link between implementation of DAMD and a dynamic system of country-wide industrial evolution is essential for understanding the diverse pattern of inter-country or inter-regional competition. By selectively reviewing a cross section of the catch-up literature on economic growth it is shown which essential elements of long-run sustainable growth dominate to achieve superior performance and why informationally efficient mechanism design of the Hayek-Hurwicz type is a superior vehicle for industry based economic growth in a globalized economy.  

Highlights

What are the major factors for economies to succeed on catching-up in terms of GDP or GDP per capita as an indicator of prosperity? As has been broadly covered in the economic growth and development literature (Gottinger & Goosen, 2012), there have been convergence theories on advanced economies that have been partially verified for some OECD economies, Hans Gottinger Catch-up and Convergence: Mechanism Design for Economic Development but there have been observations of divergence among some developed and developing economies that appear to show a growing gap
It is more likely that an economic mechanism design generating more information, choices, economic freedom and market transparency supported by democratic institutions, will have a better economic performance record, in a sustainably long run, than any other that fails on the information distribution and strategic incentive side, which would coincide with various types of socialist systems
Economic growth over the long-run can only be achieved in the course of a real, sustainable value-creating process through industrial performance and open markets in which technology and innovation are the key facilitators

Summary

INTRODUCTION

What are the major factors for economies to succeed on catching-up in terms of GDP or GDP per capita (of purchasing power parity PPP) as an indicator of prosperity? As has been broadly covered in the economic growth and development literature (Gottinger & Goosen, 2012), there have been convergence theories on advanced (developed) economies that have been partially verified for some OECD economies, Hans Gottinger Catch-up and Convergence: Mechanism Design for Economic Development but there have been observations of divergence among some developed and developing (transitional) economies that appear to show a growing gap. The paper shows that catch-up processes should be primarily understood as technological races, establishing new industries that allow free flow of information through entrepreneurial activity and innovation Under these circumstances, it is more likely that an economic mechanism design generating more information, choices, economic freedom and market transparency supported by democratic institutions, will have a better economic performance record, in a sustainably long run, than any other that fails on the information distribution and strategic incentive side, which would coincide with various types of socialist systems. It shows some rules of technological race behaviour resulting in statistical indicators. Conclusions follow and open problems are discussed in the last section

A BRIEF HISTORICAL REVIEW

A SIMPLE MECHANISM DESIGN FOR CATCH-UP AND DEVELOPMENT

Findings

CONCLUSION AND FURTHER DISCUSSION