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The ghost of financing gap : how the Harrod-Domar growth model still haunts development economics, Volume 1
Author:Easterly, William; Date Stored:2000/02/24
Document Date:1997/08/31Document Type:Policy Research Working Paper
SubTopics:Environmental Economics & Policies; Governance Indicators; Achieving Shared Growth; Economic Theory & Research; Payment Systems & Infrastructure; Economic Growth; Public Health Promotion; DecentralizationLanguage:English
Major Sector:Public Administration, Law, and JusticeReport Number:WPS1807
Sub Sectors:Other Public Sector ManagementCollection Title:Policy, Research working paper ; no. WPD 1807
Volume No:1  

Summary: 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."

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