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Achieving Fast-Track Convergence in Living Standards

Explore the convergence club theory and Solow model to understand how public and private investment can contribute to achieving fast-track convergence in living standards. Learn about the benefits and challenges of MNC and private investment, as well as government and public investment. Discover the potential solution of public-private partnerships to effectively drive economic and social development.

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Achieving Fast-Track Convergence in Living Standards

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  1. Jane Chiu Jacob Scott Mai Nguyen-Huu Achieving Fast-Track Convergence in Living Standards

  2. Overview Convergence club theory Solow model MNC and private investment pro and con Public investment pro and con Public and private partnerships

  3. Convergence Club Theory • Fundamental requirements must be fulfilled to take advantage of technological benefits • Economic • Social • Political infrastructure

  4. Solow Model • Technology is a nonlinear contributor to technology growth • Bottom Line: In the long run, technology will be the only factor that can cause convergence between two economies

  5. MNC and private investment • According to laissez faire, private only investment would be optimal • Markets perform best with little government intervention. • Given a good value proposition, the private sector can explode in developing colonies • Multinational corporations have the capital

  6. Problems with private investment • Only invest enough to be beneficial to them • Not equal to what is beneficial to society • Investment in developing and/or underdeveloped countries are usually deem not worthy • Developing and underdeveloped countries have to compete with developed countries for the investment

  7. Government and public investment • Internal vs. External public investment • Think in longer and broader terms than private firms • Profits not primary concern • Factors in social externalities

  8. Problems with public investment • Internal investment • Insufficient Funding • External investment • Heavily politically influenced • Not as efficient • By doing everything, not effectively engaging the country • Not necessarily sustainable

  9. Possible Solution • Public-Private Partnership • Private sector invests some • Governments add on to invest what is needed to make it beneficial to society

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