Abstract
Abstract The neoclassical growth model (Solow 1956) implies that, in equilibrium, output growth will equal population growth and the exogenously given rate of technological progress. Government policies and institutions can only affect growth temporarily in the transition from one equilibrium to the other. The neoclassical model also implies that if capital is mobile, cross-country convergence should occur over time with richer countries growing slower and poorer ones ‘catching up’. By postulating socially non-diminishing returns to some productive factor, endogenous growth models open up the possibility of policies and institutions having a longer-term or even permanent influence on economic growth.’ There is also the potential for persistent non-convergence due to cross-national policy differences. These models provide the intellectual foundation for the explosion of empirical work exploring the relationship between governance and growth.
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