多恩布什《宏观经济学》第十版英文原版i04revised

CHAPTER4GROWTHANDPOLICYCHAPTEROUTLINEENDOGENOUSGROWTHTHEORYCONSTANTANDINCREASINGRETURNSTOSCALEPRIVATEANDSOCIALRETURNSTOCAPITALABSOLUTEANDCONDITIONALCONVERGENCESTABLEANDUNSTABLEEQUILIBRIATHEPOVERTYTRAPGROWTHINASIATHEROLEOFHUMANCAPITALLIMITSTOGROWTHCHANGESFROMTHEPREVIOUSEDITIONCHAPTER4HASBEENUPDATED,INCLUDINGALLTABLESOLDBOX43ONTHEGOLDENRULEHASBEENMOVEDTOCHAPTER3ASBOX34NEWBOX43DEALSWITHTHEROLEOFHUMANCAPITALINTHEGROWTHOFINDIAANDCHINAINTRODUCTIONTOTHEMATERIALTHEREISNOEASYEXPLANATIONFORTHEFACTTHATDIFFERENTCOUNTRIESEXPERIENCEWIDEVARIATIONSINTHEIRECONOMICGROWTHRATESCHAPTER4SETSOUTTOEXPLAINWHATPOLICYOPTIONSCOUNTRIESHAVETOAFFECTTHEIRGROWTHINPERCAPITAINCOMEINDUSTRIALCOUNTRIESMAYFAREBESTIFTHEYDEVOTERESOURCESTORESEARCHANDDEVELOPMENTTHATWILLLEADTOTECHNOLOGICALIMPROVEMENTSDEVELOPINGCOUNTRIES,ONTHEOTHERHAND,MAYACHIEVEBETTERRESULTSBYINVESTINGINHUMANCAPITALANDGETTINGNEWTECHNOLOGYEITHERTHROUGHDIRECTFOREIGNINVESTMENTORBYBORROWINGFUNDSTOPAYFORNEWPHYSICALCAPITALPOORCOUNTRIESWITHAHIGHPOPULATIONGROWTHMAYALSOWANTTOCONSIDERPOPULATIONCONTROLPOLICIESINVESTMENTINHUMANCAPITALINTHEFORMOFEDUCATIONALSOPLAYSACRUCIALROLEHOWEVER,THISISALONGRUNSTRATEGYANDITTAKESAVERYLONGTIMETOREAPITSBENEFITSTHENEOCLASSICALTHEORYDISCUSSEDINCHAPTER3MAKESITCLEARTHATTECHNOLOGICALPROGRESSISESSENTIALFORLONGTERMGROWTHITDOESNOT,HOWEVER,CLARIFYWHICHFACTORSAFFECTTHATPROGRESSTHEREFORETHENEOCLASSICALGROWTHMODEL,WHICHTREATSTHEGROWTHRATEASEXOGENOUS,NEEDSTOBEEXPANDEDTOTAKEINTOCONSIDERATIONTHEWAYSINWHICHENDOGENOUSSELFSUSTAINEDGROWTHCANBEENHANCEDTHEENDOGENOUSGROWTHMODELUSESAFRAMEWORKTHATATTEMPTSTOEXPLAINHOWGOVERNMENTPOLICIESANDECONOMICBEHAVIORCANCONTRIBUTETOTECHNOLOGICALADVANCESINORDERTODOTHIS,THEMODELASSUMESTHATTHEPROPORTIONOFANECONOMYSRESOURCESTHATISDEVOTEDTORESEARCHANDDEVELOPMENTDETERMINESTHERATEOFTECHNOLOGICALPROGRESSANDTHATTHESTEADYSTATEGROWTHRATEISAFFECTEDBYTHERATEATWHICHTHEFACTORSOFPRODUCTIONAREACCUMULATEDTHEMAJORCONCLUSIONOFENDOGENOUSGROWTHTHEORYINCONTRASTTOTHATOFEXOGENOUSGROWTHTHEORYISTHATCOUNTRIESWITHDIFFERENTSAVINGSANDINVESTMENTRATESSHOULDHAVEPERSISTENTDIFFERENCESINTHEIRECONOMICGROWTHRATESSURPRISINGLY,HOWEVER,MOSTEMPIRICALEVIDENCESEEMSTOSUPPORTTHENOTIONTHATDIFFERENCESINTHESAVINGSANDINVESTMENTRATESAFFECTTHEGROWTHRATEOFOUTPUTPERCAPITAONLYFORATRANSITIONALPERIODAHIGHERLEVELOFINVESTMENTLEADSTOAHIGHERLEVELOFPERCAPITAINCOMEBUTNOTAHIGHERGROWTHRATEINPERCAPITAINCOMETHISISREFERREDTOASCONDITIONALCONVERGENCEASWEHAVESEENINCHAPTER3,NEOCLASSICALGROWTHTHEORYASSUMESAPRODUCTIONFUNCTIONWITHADIMINISHINGMARGINALPRODUCTOFCAPITALTHESAVINGSFUNCTIONSYSFKISCURVED,WHICHENSURESANINTERSECTIONWITHTHENDKLINETHEINVESTMENTREQUIREMENTLINEATASTABLESTEADYSTATEEQUILIBRIUMCONVERGENCETOASTEADYSTATESOLUTIONCANALWAYSTAKEPLACE,SINCETHECAPITALLABORRATIOKINCREASESDECREASESASSOONASSAVINGSYANDHENCEGROSSINVESTMENTBECOMESGREATERSMALLERTHANTHEINVESTMENTREQUIREMENTNDKHOWEVER,IFONEASSUMESACONSTANTMARGINALPRODUCTOFCAPITAL,THENANINTERSECTIONOFTHESETWOLINESISNOLONGERPOSSIBLESINCE,ASFIGURE41BSHOWS,BOTHSAVINGANDTHEINVESTMENTREQUIREMENTARENOWREPRESENTEDBYASTRAIGHTLINEONEOFTHEMAJORASSUMPTIONSINENDOGENOUSGROWTHMODELSISTHATMORENATIONALSAVINGALLOWSFORMOREINVESTMENTAND,ASABYPRODUCTOFMORECAPITALINVESTMENT,BETTERTECHNOLOGYINOTHERWORDS,NEWINVESTMENTDOESNOTSIMPLYPRODUCENEWMACHINESBUTALSONEWWAYSOFDOINGTHINGSSINCENEWIDEASANDMETHODSAREEASILYCOPIED,WEHAVETODISTINGUISHBETWEENPRIVATEINTERNALANDSOCIALEXTERNALRETURNSTOCAPITALANIDEAFIRSTADVANCEDBYPAULROMERTHEREFORE,INORDERTOEXPLAINLONGTERMGROWTH,ITISIMPORTANTTOUNDERSTANDTHEROLEOFRESEARCHANDDEVELOPMENTANDINVESTMENTINHUMANCAPITALBUTHOWCANWEEXPLAINTHEFACTTHATCOUNTRIESLIKEJAPAN,THEUS,TAIWAN,SOUTHKOREA,ANDOTHERSHAVEEXPERIENCEDHIGHGROWTH,WHILEGHANAEXPERIENCEDALMOSTNOGROWTHOVERALONGTIMEPERIODANEXPLANATIONCANBEGIVENWITHTHEHELPOFAPRODUCTIONFUNCTIONTHATSTARTSWITHACURVEDSECTIONASSUMINGADIMINISHINGMARGINALPRODUCTOFCAPITALANDENDSWITHASTRAIGHTSECTIONASSUMINGACONSTANTMARGINALPRODUCTOFCAPITALINTHISCASETHEREISASTEADYSTATEEQUILIBRIUMATALOWINCOMELEVELANDCAPITALLABORRATIOANDONGOINGGROWTHADISEQUILIBRIUMATAHIGHINCOMELEVELANDCAPITALLABORRATIOPOLICIESTHATCANBRINGABOUTFURTHERADVANCESINTECHNOLOGYMAYBEOFGREATIMPORTANCEFORHIGHLYDEVELOPEDCOUNTRIESHOWEVER,POORERCOUNTRIESMAYBEBETTEROFFFOCUSINGONPOLICIESTHATCANINFLUENCEPOPULATIONGROWTHIFPOPULATIONGROWTHCANBEINFLUENCEDBYGOVERNMENTPOLICIES,THENTHEINVESTMENTREQUIREMENTISNOLONGERASTRAIGHTLINEBUTACURVEDONESUCHASITUATIONOFENDOGENOUSPOPULATIONGROWTHISSHOWNINFIGURE43,ANDFROMTHISGRAPHTWOIMPLICATIONSCANBEDRAWNCOUNTRIESWITHLOWPERCAPITAINCOMEANDHIGHPOPULATIONGROWTHCANESCAPETHEPOVERTYTRAPBYINCREASINGTHENATIONALSAVINGSRATE,WHICHWILLHELPTORAISEINCOMETHROUGHANINCREASEININVESTMENTALTERNATIVELY,THEYCANSHIFTTHEINVESTMENTREQUIREMENTDOWNBYLOWERINGPOPULATIONGROWTHSINCEVERYPOORCOUNTRIESAREOFTENHARDPRESSEDTOINVESTINEITHERPHYSICALORHUMANCAPITAL,CONTROLLINGPOPULATIONGROWTHOFTENSEEMSTOBETHEONLYFEASIBLEOPTIONHOWEVER,AREDUCTIONINPOPULATIONGROWTHMAYBEDIFFICULTTOACHIEVE,SINCECHILDRENOFTENPROVIDEAFORMOF“SOCIALSECURITY”FORFAMILIESINPOORCOUNTRIESTOOBTAINFUNDSNEEDEDFORSUFFICIENTDOMESTICINVESTMENTINPHYSICALORHUMANCAPITAL,DEVELOPINGCOUNTRIESHAVETHREEOPTIONSTHEYCANSOLICITDIRECTFOREIGNINVESTMENT,THEYCANBORROWONWORLDCAPITALMARKETS,ORTHEYCANASKFORFOREIGNAIDOPERATINGINASTABLEECONOMICANDPOLITICALFRAMEWORKISIMPORTANTFORSUCHCOUNTRIESIFTHEYWANTTOATTRACTFOREIGNFUNDSBUTTHEPRODUCTIVITYOFTHERESULTINGINVESTMENTSOFTENVARIESWIDELYACROSSCOUNTRIES,SINCERESOURCESARENOTALWAYSUSEDEFFICIENTLYDEVELOPMENTSTRATEGIESSHOULDTHEREFOREALSOFOCUSONEFFECTIVERESOURCEUTILIZATIONMUCHCANBELEARNEDFROMTHEEXAMPLEOFTHEASIANTIGERSSOUTHKOREA,TAIWAN,HONGKONG,ANDSINGAPORE,WHICHHAVEMANAGEDTOSUBSTANTIALLYINCREASETHEIRPERCAPITAINCOMELEVELS,EFFECTIVELYLIFTINGTHEMFROMAMONGTHEPOORERNATIONSOFTHEWORLDTOAMONGTHERICHERINDUSTRIALNATIONSSIMILARLY,IFONELOOKSATTHEDIFFERENCEINYEARSOFSCHOOLINGBETWEENCHINAANDINDIAOVERTHELASTTHREEDECADESANDTHENCOMPARESTHERELATIVEGROWTHINGDPPERCAPITAINTHESETWOCOUNTRIES,ITAPPEARSCLEARTHATINVESTMENTINHUMANCAPITALHASBEENANIMPORTANTFACTORINENHANCINGECONOMICGROWTHASAREINSTITUTIONALFACTORSANDOPENNESSTOINTERNATIONALTRADESUGGESTIONSFORLECTURINGTHEMATERIALINCHAPTER4ISLIKELYTOCREATEMORESTUDENTPARTICIPATIONTHANTHEMATERIALINTHEPREVIOUSCHAPTER,SINCESTUDENTSAREMUCHMOREINTERESTEDINREALWORLDPROBLEMSTHANTHEORETICALMODELSINTERNATIONALCOMPARISONSINECONOMICPERFORMANCE,WAYSINWHICHPRODUCTIVITYGROWTHCANBEINCREASED,THEGROWTHINPERCAPITAGDPINCHINA,THELESSONSLEARNEDFROMTHEASIANTIGERS,ANDPOLICIESFORECONOMICDEVELOPMENTALLPROVIDEGOODOPPORTUNITIESFORLIVELYCLASSROOMDISCUSSIONSHOWEVER,WHENDISCUSSINGTHESUCCESSOFTHEASIANTIGERSFROM19661990,ITMAYBEAGOODIDEATOALSODEVOTESOMEATTENTIONTOTHEASIANCRISISIN199798WHILEITISIMPORTANTFORSTUDENTSTOBEATLEASTSOMEWHATFAMILIARWITHTHETHEORETICALFRAMEWORKOFTHEENDOGENOUSGROWTHMODELANDITSMAJORIMPLICATIONS,MOSTINSTRUCTORSWILLPROBABLYSHYAWAYFROMANINDEPTHDISCUSSIONOFTHESECTIONSMARKEDASOPTIONALHOWEVER,STUDENTSSHOULDBEFAMILIARWITHTHECONCEPTSOFDIMINISHING,CONSTANT,ANDINCREASINGRETURNSTOSCALEANDTHEIRIMPLICATIONSFORECONOMICGROWTHSIMILARLY,STUDENTSSHOULDBEFAMILIARWITHTHEADJUSTMENTPROCESSESTHATARISEASANECONOMYDEVIATESFROMASTABLEORFROMANUNSTABLEEQUILIBRIUMINCONTRASTTONEOCLASSICALGROWTHTHEORY,ENDOGENOUSGROWTHTHEORYPREDICTSTHATACOUNTRYWITHAHIGHERSAVINGSRATEWILLEXPERIENCEAHIGHERLONGTERMGROWTHRATETHISSUGGESTSTHATPOORCOUNTRIESCANSIGNIFICANTLYINCREASETHEIRRATEOFECONOMICGROWTHTHROUGHDELIBERATEINVESTMENTSTRATEGIESHOWEVER,ITISIMPOSSIBLETOPREDICTWITHCERTAINTYWHETHERLOWINCOMECOUNTRIESCANEVERSUCCEEDINCATCHINGUPWITHTHESTANDARDOFLIVINGOFHIGHINCOMECOUNTRIESEMPIRICALEVIDENCEPOINTSTOWARDSSLOWCONDITIONALCONVERGENCE,THATIS,THEPOSITIVEIMPACTOFAHIGHERLEVELOFSAVINGANDINVESTMENTISONLYTRANSITORY,LEADINGTOAHIGHERLEVELOFINCOMEPERCAPITABUTNOTAHIGHERECONOMICGROWTHRATECOUNTRIESWILLCONVERGETOSTEADYSTATES,DEPENDINGONTHERATIOOFINVESTMENTTOGDPANDTHERATEOFINVESTMENTINHUMANCAPITALHOWEVER,THEPROCESSOFCONVERGENCEISEXTREMELYSLOWONEOFTHEMOSTINTERESTINGASPECTSOFENDOGENOUSGROWTHTHEORYISTHEDIFFERENTIATIONBETWEENPRIVATEINTERNALRETURNSTOCAPITALANDSOCIALEXTERNALRETURNSTOCAPITALBYDEVOTINGMOREFUNDSTORESEARCHANDDEVELOPMENTOFTECHNOLOGY,BETTERWAYSOFDOINGTHINGSCANBEFOUNDANDNEWIDEASCANBECREATEDASARESULT,OUTPUTCANGROWMOREANDEVENMORECANBEINVESTEDINNEWCAPITALSUCHAVIRTUOUSCYCLECANBECREATEDFAIRLYEASILYBYHIGHLYINDUSTRIALIZEDCOUNTRIESHOWEVER,ITISAMUCHMOREDIFFICULTTASKFORTHEPOORESTCOUNTRIESOFTHEWORLD,WHICHOFTENBARELYHAVETHEMEANSTOFEEDENOUGHPEOPLETOBRINGINTHENEXTHARVESTPOORCOUNTRIESFINDTHEMSELVESINAPOVERTYTRAP,ANDSTUDENTSAREOFTENVERYINTERESTEDINDISCUSSINGBOTHTHISCONCEPTANDPOLICIESDESIGNEDTOOVERCOMETHESITUATIONMANYDEVELOPINGCOUNTRIESHAVEAHIGHPOPULATIONGROWTHANDINSUFFICIENTMEANSTOACHIEVETHETECHNOLOGICALPROGRESSTHATCOULDLEADTOASIGNIFICANTINCREASEINLIVINGSTANDARDSTHESECOUNTRIESOFTENHAVEDIFFICULTYFINDINGTHEMEANSTOINVESTINEITHERPHYSICALORHUMANCAPITALATTRACTINGDIRECTFOREIGNINVESTMENTISONLYPOSSIBLEIFTHEPOLITICALCLIMATEISRIGHT,ANDBORROWINGFOREIGNFUNDSISONLYAGOODSOLUTIONIFTHEFUNDSAREINVESTEDWISELYTOACHIEVEMOREGROWTHFROMBORROWEDFUNDSORIMPORTEDTECHNOLOGY,THEEFFICIENCYOFRESOURCEUTILIZATIONISOFTENMOREIMPORTANTTHANTHELEVELOFINVESTMENTSPENDINGINADDITION,ACOUNTRYTHATDECIDESTOCONCENTRATEONINVESTINGINPHYSICALCAPITALWHILEIGNORINGTHENEEDTOINVESTINHUMANCAPITALMAYACHIEVEHIGHERGROWTHINTHESHORTRUNBUTWILLULTIMATELYLOSEINTHELONGRUNAMOREFEASIBLEALTERNATIVETOINCREASINGTHESTANDARDOFLIVINGINAPOORCOUNTRYWITHHIGHPOPULATIONGROWTHISTOCONTROLTHATGROWTHBYENCOURAGINGCONTRACEPTIONORSTERILIZATIONOR,TOSOMEDEGREE,THROUGHTAXPOLICIESHOWEVER,SUCHPOLICIESARENOTEASILYIMPLEMENTEDANDSUCCESSISNOTALWAYSGUARANTEEDMANYSTUDENTSAREPROBABLYFAMILIARWITHINDIASANDCHINASATTEMPTSATPOPULATIONCONTROLANDTHECONTROVERSIESSURROUNDINGTHEMBUTWHENWECOMPARECHINASANDINDIASPERCAPITAGDPOVERTHELASTTHREEDECADES,ITBECOMESCLEARTHATEDUCATIONTHATIS,INVESTMENTINHUMANCAPITAL,ISALSOAVERYIMPORTANTFACTORTHEOLDSAYINGTHAT“ANATIONSMOSTPRECIOUSRESOURCEISITSPEOPLE“STILLHOLDSTRUEUNFORTUNATELY,WHILETHERATEOFRETURNONEDUCATIONTENDSTOBEQUITEHIGH,ITISALSOAVERYSLOWPROCESSSOMEEVIDENCESUGGESTSTHATFORDEVELOPINGCOUNTRIES,THEEDUCATIONOFWOMENISOFPARTICULARIMPORTANCEANDPAYSOFFHANDILY,SINCEWOMENOFTENHAVETHEPRIMARYRESPONSIBILITYFOREDUCATION,HEALTH,ANDEVENFARMINGTHELESSONLEARNEDFROMTHEEXPERIENCEOFTHEASIANTIGERSISTHATSAVING,HARDWORK,ANDINCREASEDCOMPETITIONLEADTOSTRONGECONOMICPERFORMANCETHESECOUNTRIESACHIEVEDENORMOUSGROWTHBETWEEN1966AND1990,ANDTHEREARESEVERALELEMENTSTHEYALLHAVEINCOMMONINCREASEDUSEOFINPUTSBOTHLABORANDCAPITAL,EMPHASISONEDUCATION,ANOPENECONOMYWITHSTRONGENCOURAGEMENTTOEXPORT,ANDAHIGHLEVELOFCOMPETITIONSTUDENTSMAYBEINTERESTEDINDISCUSSINGWHETHERTHESTRATEGIESEMPLOYEDBYTHESECOUNTRIESMIGHTALSOWORKFORCOUNTRIESATDIFFERENTSTAGESOFDEVELOPMENTINSTRUCTORSMAYALSOWANTTODEVOTEATLEASTSOMETIMETOTHEDISCUSSIONOFTHEASIANCRISISOF199798POINTINGOUTTHEORIGINSOFTHECRISISASWELLASWHATITTOOKFORTHESECOUNTRIESTORECOVERISAVALUABLEUNDERTAKINGANDSERVESASAGOODEXAMPLEOFTHEFACTTHATECONOMICSUCCESSCANNOTBETAKENFORGRANTEDINADDITION,THEINTERNATIONALSPILLOVEREFFECTSTHATCANARISEFROMSUCHFINANCIALCRISESCAN,INCERTAINCIRCUMSTANCES,BESEVEREEVENFORINDUSTRIALCOUNTRIESANDSHOULDGIVETHEMANINCENTIVETOHELPFOSTERGROWTHANDSTABILITYINOTHER,LESSDEVELOPED,COUNTRIESSTUDENTSAREALWAYSINTERESTEDINDISCUSSINGPOSSIBLEEXPLANATIONSOFWHYTHEREAREPRODUCTIVITYDIFFERENCESAMONGCOUNTRIESANDTHEYPROBABLYAGREEWITHTHENOTIONTHATTHESOCIALINFRASTRUCTURE,THATIS,THELEGALSYSTEM,THEBUREAUCRACYORINSTITUTIONALSETUP,ANDEVENTHETAXSYSTEM,CANINFLUENCEANATIONSECONOMICPERFORMANCEDISCUSSINGTHECHANGESTHATOCCURREDASCENTRALLYPLANNEDECONOMIESMOVEDTOWARDSMOREMARKETORIENTEDECONOMIESINEASTERNEUROPEORCHINAMAYBEOFSPECIALINTERESTTOSTUDENTSADDITIONALREADINGSBARRO,ROBERT,“ECONOMICGROWTHINACROSSSECTIONOFCOUNTRIES,”QUARTERLYJOURNALOFECONOMICS,MAY,1991BUSINESSWEEK,“CHINAHOWEVER,ITDOESNOTAFFECTTHELONGTERMGROWTHRATEBYAFFECTINGTHELEVELOFINVESTMENT,ITMAYAFFECTTHELEVELOFGDPPERCAPITABUTNOTTHEGROWTHRATEOFGDPBANINCREASEINGOVERNMENTSPENDINGMAYHAVESOMESHORTRUNEFFECTSONREALOUTPUT,BUTITWILLNOTAFFECTTHELONGTERMGROWTHRATEOFGDPONLYINCREASESINGOVERNMENTSPENDINGTHATAREDESIGNEDTOAFFECTTHELEVELOFPHYSICALCAPITALINVESTMENTSPENDINGORHUMANCAPITALSPENDINGONEDUCATIONORRESEARCHANDDEVELOPMENTHAVETHEPOTENTIALTOAFFECTECONOMICGROWTHINTHELONGRUNINAPOSITIVEWAYCINVESTMENTTAXCREDITSAREDESIGNEDTOCREATEINCENTIVESTOUNDERTAKENEWRESEARCHANDDEVELOPMENT,WHICHMAY,INTURN,LEADTOAHIGHERRATEOFTECHNOLOGICALPROGRESSTHESECREDITSMAYPOTENTIALLYAFFECTECONOMICGROWTHINTHELONGRUNDPOLICIESTHATSUPPORTEDUCATIONWILLLEADTOANINCREASEINHUMANCAPITALANDTHIS,INTURN,WILLAFFECTTHELONGTERMGROWTHRATEHOWEVER,THISISLIKELYTOBEAVERYSLOWPROCESSEPOLICIESDESIGNEDTOAFFECTTHEPOPULATIONGROWTHRATEWILLAFFECTTHESTEADYSTATELEVELOFGROWTHFOREXAMPLE,INDEVELOPINGCOUNTRIESTHATHAVERAPIDRATESOFPOPULATIONGROWTH,MOSTOFTHEAVAILABLERESOURCESARENEEDEDTOFEEDPEOPLEANDMAINTAINACONSTANTCAPITALLABORRATIOTHISLEAVESONLYLIMITEDRESOURCESFORINVESTMENTINNEWCAPITALEQUIPMENTTHATWOULDALLOWFORANINCREASEINOUTPUTPERCAPITAANDAHIGHERSTANDARDOFLIVING11COMMENTONTHEFOLLOWINGSTATEMENT“THEASIANTIGERSACHIEVEDPHENOMENALECONOMICGROWTHFROM19661990BYDEVOTINGALARGESHAREOFGDPTOINVESTMENTANDBYRELYINGONLAISSEZFAIREECONOMICS”THEASIANTIGERSHONGKONG,SINGAPORE,SOUTHKOREA,ANDTAIWANEXPERIENCEDAHIGHRATEOFECONOMICGROWTHBYINCREASINGTHEIRSAVINGSRATESOMORECOULDBEINVESTEDHOWEVER,THEYALSOINCREASEDTHEIRLABORFORCESANDCONCENTRATEDONIMPROVINGTHEEDUCATIONOFTHEIRPEOPLEWHILEHONGKONGRELIEDLARGELYONLAISSEZFAIREECONOMICS,THEREWASSIGNIFICANTGOVERNMENTINVOLVEMENTINSINGAPORE,WHERETHEGOVERNMENTDIRECTEDMANYINVESTMENTPROJECTS12DEVELOPINGCOUNTRIESCANINCREASEPRODUCTIVITYGROWTHMOREEASILYTHANINDUSTRIALCOUNTRIESDOESTHISIMPLYTHATTHEYWILLEVENTUALLYBEABLETOACHIEVETHESAMELIVINGSTANDARDSASINDUSTRIALCOUNTRIESWHYORWHYNOTIFDEVELOPINGCOUNTRIESAREABLETOOBTAINNEWTECHNOLOGY,THEYCANINCREASETHEIRPRODUCTIVITYGROWTHFAIRLYRAPIDLYATTHESTARTOFTHEPROCESSOFINDUSTRIALIZATION,DEVELOPINGCOUNTRIESMAYHAVELOWPERCAPITAINCOMELEVELS,BUTEVENTUALLYTHEYWILLBEGINTOCATCHUPWITHTHEMOREINDUSTRIALIZEDCOUNTRIESASTHEINCOMELEVELSINTHEPOORERCOUNTRIESBEGINTORISE,HOWEVER,APOINTWILLEVENTUALLYBEREACHEDWHENPRODUCTIVITYGROWTHWILLFALLOFFTHEREFORE,ITISIMPOSSIBLETOPREDICTWITHCERTAINTYWHETHERADEVELOPINGCOUNTRYWILLEVERSUCCEEDINCATCHINGUPWITHTHESTANDARDOFLIVINGOFANINDUSTRIALCOUNTRYTHEECONOMICGROWTHRATEOFACOUNTRYISLARGELYDETERMINEDBYHOWMUCHTECHNOLOGICALPROGRESSISMADEANDHOWMUCHISINVESTEDINHUMANCAPITALTHEENDOGENOUSGROWTHTHEORYDOESNOTPREDICTACONVERGENCEOFINCOMEPERCAPITALEVELS