October
26
08
Fall

The Determinants of Economic Growth

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Executive summary

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Introduction
Barro (1991) and Fernandez, Ley, and Steel (2001) use various regression techniques to determine the key determinants of growth, and in particular, the driving forces behind cross-country variations. Neoclassical growth theory proposes that cross-country and per capita income will converge due to diminishing returns to capital and the diffusion of technology. There are samples of countries that display this ‘absolute convergence, however, such a phenomenon is not universal. These seemingly inexplicable variations in growth present an important question of what are the determinants and is there a role for stabilizing policy.
Explain why the study is important. Why is economic growth so important? Coexistence of Growth miracles, Growth Disasters

Barro (1991) provides that it is ultimately the relationship between the level of human capital and initial GDP that allows some poor countries to converge on rich countries. Ultimately, our conclusion parallels that of Barro’s and we find that the driving determinants of growth are Human capital, Investment and the initial GDP level.

Our analysis follows the key ideas and assumptions of Barro’s model. We use both Primary and High School enrolment as a proxy for the accumulation of Human capital, however, this does pose some restrictions on our analysis. To examine this, a new index of human capital stock will be recommended. Most significantly… Summarise the findings of the paper.
Our finding will ultimately accord with recent models such as Lucas [1988] and Romer [1990] that assume constant returns to reproducible capital. Although in these models the growth rate is independent of the starting GDP. We divorce