Macroeconomic convergence, financial development and economic growth Dissertation

Macroeconomic convergence, financial development and economic growth - Dissertation Example The potential of the developing countries to grow faster is more than that of the developed countries as the developing countries have diminishing returns to factors. Convergence can be of two types, the process of poorer economies catching up with the richer economies is referred as alpha convergence whereas beta convergence is the process in which a country converges to its own steady state rate of growth (Alfaro et al.2005). As pointed out by professor Jeffrey Sachs ,many countries due to its closed economic policies cannot converge, this could however be overcome if the free trade policies are included which will lead to openness of the economy. Between the years 1970-1989, 111 countries have been studied on the basis of their rate of convergence. It was found by Andrew Warner and Sachs that the countries following closed economic policies had a growth rate of 2% whereas the countries following open economic policies have a growth rate of 4.5 % (Alfaro et al.2005) There are many countries that have converged with the developed countries such as the Asian tigers, HongKong, Singapore, Taiwan, and South Korea. As sited by many economists the endogenous rather than the exogenous factors triggers the growth of an economy (Alfaro et al.2005). ... tal are important as it significantly influences the savings and rate of investment (Halmai & Vasary.2009.p.3).Technological spread, change in growth rate and total productivity of the factors are the major players in enhancing the rate of convergence. Macroeconomic convergence and economic growth Integration of the national and regional economies with the global economy is one of the salient features over the history. Two models of economic integration which relates to income convergence are firstly growth models and secondly trade models (Kim.1997.p.4). According to the neoclassical Solow model of growth, the regional level of income varies due to the different capital labour ratios. Whereas the Hecksher Ohlin trade model says that the income varies across the regions due to the difference in the factor prices and factor endowments (Kim.1997.p.5). Income convergence occurs due to trades in goods and economic integration via equalisation in prices. Factor endowments vary across the regions and therefore various regions specialise in different industries. Thus if the regional variation in the factor endowments increases then there arises divergence in the income levels as the structure of industries diversifies. Conversely as there exits similarity in the factor endowments then the income level also converges in the due course. Economic integration also gives rise to income divergence (Kim.1997.p.5) The growth models put forward by Romer and Lucas, which are based on increasing returns on physical capital, states the chances of such income divergence. Even the trade models by Krugman states that income divergence may arise due to the differences in the industrial structures. If the industries equipped with high technology and high wages are subjected to external

History in the 21st Century Term Paper Example | Topics and Well Written Essays - 1500 words

History in the 21st Century - Term Paper Example The different approaches applied when studying the subject create uniqueness throughout the different historical eras. This essay will therefore investigate various historical approaches in the 20th century. The essay will also investigate the implication of the different approaches in history to scholars. Similar to ancient and medieval history, the twentieth history had its unique approach and method. Marxism is a historical approach of the twentieth century that was introduced by Marx. Through his philosophy, Marx had many followers who believed that that the existence of any society is determined by relationship between individuals and not the personal characteristic of each member of the society. Marxism historical approach was introduced at the height of conflict between capitalism and communism. According to Marx, capitalism was unsustainable and it would soon be overtaken by communism. Marxist considered the economy to be a key player in the determination of events or differe nt approaches taken by life. Introducing the notion of economy was an appropriate step that the Marxist took to study the subject. This is because the economy is a major determinant of social life and societies. The economic condition of a given community determines the different approaches towards life that the communities take for their own interest. The need to maintain economic stability also determines the different measurers that are taken by a community to protect its interest. Although communism might be a better economic approach, it is unsustainable and hence the predictions made by the Marxist are not realistic. Economic sustainability is realized from sustainable economic principles. Such economy is more likely to be realized from a capitalist economy than from a communist economy. This indicates that the predictions made by the Marxists are unrealistic and unreliable in the long-term. The new social history is the most recent branch of history. In this technique, histor ians apply cultural approaches to study political history of a given society. Culture is the overall collection of a community’s way of life and beliefs. Communities preserve their culture by passing it from generation to generation. The culture of a given society therefore defines a form of investment that a society makes over a long duration. Culture is therefore as good basis that historians can rely on to determined or investigate the political history of a certain community. The approach taken by the new social history to study the political history of a society is an appropriate approach since it utilizes the culture of a society1. Multiculturalism is more of an ideology than a historical approach. Scholars, who apply this approach in their investigations, consider the existence of cultural institutions. The institutionalization of different communities is the classification of different communities based on their common interests. Historians who study the society throu gh multiculturalists approach study the subject by analyzing the different classes of the society such as businesses, cities, nations and institutions. People have a tendency of forming groups that contain people with a common interest. The different groups or societies determine people way of life and their different approach towards life. Although this approach enables history scholars to study the general characteristic of a community, it does not give specific or detailed information about a community. The ap