The Ghost of Financing Gap: How the Harrod-Domar Growth Model Still Haunts Development Economics

Abstract

No AccessPolicy Research Working Papers21 Jun 2013The Ghost of Financing Gap: How the Harrod-Domar Growth Model Still Haunts Development EconomicsAuthors/Editors: William EasterlyWilliam Easterlyhttps://doi.org/10.1596/1813-9450-1807SectionsAboutPDF (0.1 MB) ToolsAdd to favoritesDownload CitationsTrack Citations ShareFacebookTwitterLinked In Abstract:August 1997 The ghost of a long-dead growth model still haunts aid to developing countries. The Harrod-Domar growth model supposedly died long ago. But for more than 40 years, economists working on developing countries have applied- still apply- Harrod-Domar model to calculate short-run investment requirements for a target growth rate. They then calculate a financing gap between the required investment and available resources and often fill the financing gap with foreign aid. Easterly traces the intellectual history of how a long-dead model came to influence today's aid allocation to developing countries. He asks whether the model's surprising afterlife is attributable to consistency with the 40 years of data that have accumulated during its use. The answer is no. This paper-a product of the Development Research Group-is part of a larger effort in the group to study the determinants of economic growth. Previous bookNext book FiguresReferencesRecommendedDetailsCited ByExamining the interactive growth effect of development aid and institutional quality in Sub-Saharan AfricaJournal of Development Effectiveness, Vol.12, No.412 August 2020Public-Private Partnerships (PPP) on moulding state structures: The Non-Ergodic AfricaRisk Governance and Control: Financial Markets and Institutions, Vol.6, No.426 September 2016Public-Private Partnerships (PPP) on Moulding States: The Non-Ergodic AfricaSSRN Electronic JournalWho Gives Aid to Whom and When? Aid Accelerations, Shocks and PoliciesSSRN Electronic JournalThe Importance of Expectations in Economic DevelopmentSSRN Electronic JournalThe Prospects for Foreign Debt Sustainability in Post-Completion Point Countries: Implications of the HIPC-MDRI FrameworkSSRN Electronic JournalAn Analysis of Growth and Inequality in Sudan: Cointegration and Causality Evidence (1956-2003)SSRN Electronic JournalAspects of 'Quantifying the World: UN Ideas and Statistics'Forum for Development Studies, Vol.32, No.1 View Published: November 1999 Copyright & Permissions Related RegionsAfricaLatin America & CaribbeanRelated CountriesCongo, Republic ofCzech RepublicGuyanaZambiaNew ZealandRelated TopicsSocial Protections and LaborMacroeconomics and Economic GrowthPoverty ReductionPrivate Sector DevelopmentFinance and Financial Sector Development KeywordsAGGREGATE DEMANDBUSINESS CYCLESCAPITALDEVELOPMENTDEVELOPMENT ECONOMICSECONOMIC GROWTHECONOMIC HISTORYECONOMISTSGDPGDP PER CAPITAGOODSGROWTH RATEINDUSTRIALIZATIONINFLUENCEINVESTMENTPRODUCTIONPRODUCTION FUNCTIONSAVINGSSURPLUS LABORUNEMPLOYMENT PDF DownloadLoading ...

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