Lund Papers in Economic History,
Lund University, Department of Economic History

Abstract: This paper highlights and assesses the importance of the role of economic shrinking for the long-term growth process in the developing world over the period 1951-2016. On the basis of descriptive analysis it shows that resilience to shrinking, even among the miracle economies in Pacific Asia, plays a more important role for successful catching up than economic growth per se. The paper then proposes and elaborates on a novel way of how to understand resilience to shrinking and argues that five interrelated social capabilities are of special significance: inclusive and broad based economic growth; engagement in more complex and transformative economic activities; generation of social arrangements for conflict resolution; the state’s autonomy against vested interests; and the state’s accountability in delivering public goods. The implication of the paper is that economic development would be better encouraged by strengthening these social capabilities rather than focusing on the short-term growth rate.

Keywords: Economic shrinking; social capability; economic growth; catching up; developing countries

JEL-codes: F63; N10; O10; O11; O47; O57

25 pages, November 6, 2018

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