Microeconomic Determinants of Growth Around the World

Guriev, SG and Salehi-Isfahani, D (2003) Microeconomic Determinants of Growth Around the World. In: Explaining Growth: A Global Research Project. Palgrave MacMillan, pp. 77-116. ISBN 9781403917461

Abstract

This chapter aims at summarizing the findings of the Global Research Project (GRP) on the microeconomic determinants of growth in nonOECD countries in 1950–2000.1 We study the behaviour of the main microeconomic agents, namely firms and households, the decisions they make, and the constraints they face with a particular emphasis on the implications for growth. The paper is mainly (but not exclusively) a survey of regional papers on microeconomics of growth, and therefore complements the effort made within the GRP to explain huge variations in growth rates around the world. Unlike other studies, this project does not exclusively rely upon cross-country regressions that include institutional variables; the idea is rather to understand what is behind the institutional and structural variables, what determines the productivity growth and factor accumulation at the microeconomic level. Regressions generally explain the variation in growth rates across countries by the large variations in the accumulation of physical and human capital, they do not explain how these variations arise in the first place. The GRP attempts to go beyond just the variation in inputs.