3. a. What are proximate causes of a country’s level of growth/lack of growth. b. What...

3.

a. What are proximate causes of a country’s level of growth/lack of growth.

b. What are fundamental causes of a country’s level of growth/lack of growth.

Expert Solution

a) Proximate Cause are direct cause - things in the production function.

Technology, physical capital and human capital are the proximate cause of a country’s level of growth/lack of growth.

b) The major fundamental causes of economic growth can be classified into four main hypotheses.

1 The luck hypothesis (otherwise identical countries experience different paths because of some small uncertainty or heterogeneity, or choose different equilibria among possible, for example, in technology adoption).

2 The geography hypothesis (soil quality and agricultural productivity, natural resources (e.g. coal) and industrialization, disease environment/preferences and economic performance).

3 The culture hypothesis (beliefs, preferences, values: influence choices of occupations, savings rates, willingness to accumulate physical and human capital).

4 The institutions hypothesis (rules, regulations, policies that affect economic incentives).

Rahul Sunny answered 2 years ago

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