Essays in Honour of A.P. Thirlwall
Edited by Philip Arestis, John S.L. McCombie and Roger Vickerman
Philip Arestis and Malcolm Sawyer THE CONTRIBUTION OF TONY THIRLWALL TO GROWTH THEORY Tony Thirlwall has been a consistent critic of endogenous growth theory. His writings on growth theory with his emphasis on the role of demand, balance of payments constraints, endogeneity of the natural rate and the role of sectoral analysis have made major contributions to understanding the growth process, and they also provide a continuing (sometimes implicit, sometimes explicit) critique of endogenous growth theory. It is, thus, very fitting to indulge in a critique of endogenous growth theory in this Festschrift. The critique is partial in both the sense of not being comprehensive which is precluded by space considerations and in the sense that we are partial to the work of Tony! We begin with a brief critical review of endogenous growth theory (EGT). The next section focuses on the assumptions made in EGT on returns to scale and the implications of those assumptions. This is followed by a discussion on the approach to investment and productivity growth in EGT. Section 4 contains a brief review of empirical evidence, followed by a concluding section. A BRIEF REVIEW OF ENDOGENOUS GROWTH THEORY It is generally recognised that a revival of interest in growth theory within the mainstream literature was stimulated by papers such as Romer (1986) and Barro (1991), which launched what is now usually termed as Endogenous Growth Theory (hereafter EGT). Other labels were also given (e.g. post-classical growth theory) but the term ‘endogenous’ was particularly significant as...
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