Panel Discussion Implications of Growth Theory for Macro-policy: What Have We Learned~

We are witnessing, in the second half of this century, an unprecedented wave of growth across the world. The experience of the East Asian and OECD economies has proved that real convergence can be achieved within a few decades. However, the welfare and technological gap between the developed and the least developed countries continues to widen, even as large sections of the world economy have recently joined the international trading system. Confronted with the extraordinary amount of quantitative and institutional data amassed by statistical and, case studies, we need theories to interpret these phenomena. Economists of the "old" and "new" growth theories have gone a long way in explaining why some countries grow faster than others, but I believe that any model that could explain such a variety of experiences would have to be quite complex. Otherwise, we would already have discovered the "recipe for making miracles," as Lucas (1993) has wisely reminded us, and countries around the world could already have applied such a simple model. I will attempt here not to review models of growth theory, but to underline some of the most important traits of the theory that are relevant for macro-policy. Let me begin by reviewing some assumptions about growth and technology that seem to come out of the recent flurry of empirical work. First, technological progress is of overriding importance in explaining growth in developed economies, while most of the growth in developing countries takes place through human and physical capital accumulation that incorporates ideas, products, or processes transferred from the more