Institutions, Economic Performance and the Visible Hand
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Institutions, Economic Performance and the Visible Hand

Theory and Evidence

Ashok Chakravarti

The book challenges the conventional wisdom on the determinants of economic performance and provides an alternative vision of the functioning of an economic system. The author provides a structured survey which critically evaluates the theory and evidence of neoclassical approaches to growth and development. He then skillfully integrates insights from the old and new institutional economics into an original and comprehensive vision of the relationship between institutions, growth and economic development.
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Chapter 4: Development Strategies and Performance: An Overview

Ashok Chakravarti


This chapter provides an overview of the performance of all developing countries and also considers whether the few developing countries that have achieved high levels of growth in the past 25 years or so have done so on the basis of neoclassically determined strategies or not. The purpose is to assess whether variables associated with mainstream growth theory, or the insights that emerge out of the institutional economics literature – and in particular, the role of institution-related factors – can provide a better explanation for the variable performance that has been observed. In this context the development strategies being proposed by the major international financial institutions, and the East-Asian model of development, will also be discussed. The table below gives the per capita GDP growth rates of major economies and regions between 1950 and 2001. As can be seen, between 1950 and 1973, the period after the end of the Second World War and up to the oil shock of the early 1970s, there was similarity in the growth rates amongst developing countries, and between these and that of the United States. The African region had some relative under-performance compared to other regions, while there were much higher growth rates in Western Europe. Post-1973, however, the average world growth rates collapsed by around 50 per cent, with African growth declining to almost zero. The only region which showed an increase in growth rates compared with the Table 4.1: Per capita GDP growth rates 1950–2001 1950–73 1973–2001 1.88 1.86 3.56...

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