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Submitted by Shanta on

Julian: As I recall, the Hausmann-Rodrik-Velasco growth diagnostics did not identify interventions in terms of the rationale for public intervention. That is, they identified binding constraints to growth, regardless of whether the government should be spending scarce public resources on relaxing it (because there's a market failure) or not. Yet, this is the point that Jeff was making in this post. I think we need to devote more research resources to identifying and measuring these market failures because that is the relevant answer to the chief minister's question of how much he should spend. Shanta