The ghost of financing gap: how the Harrod-Domar growth model still haunts development economics

No 1807, Policy Research Working Paper Series from The World Bank

Abstract: The Harrod-Domar growth model supposedly died long ago. But for more than 40 years, economists working on developing countries have applied -and still apply- the 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. The author 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."

Keywords: Economic Theory&Research; Environmental Economics&Policies; Payment Systems&Infrastructure; Decentralization; Public Health Promotion; Governance Indicators; Economic Theory&Research; Achieving Shared Growth; Environmental Economics&Policies; Economic Growth (search for similar items in EconPapers)
Date: 1997-08-31
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Citations: View citations in EconPapers (26)

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