Comment
LARS CALMFORS
Kevin Grier's paper deals with an important subject, namely 'the role of institutional factors in secular economic growth'. It is a topic that for many years received surprisingly little interest in mainstream economics. Recent years have, however, seen an explosion of research in this area. It is true, as pointed out by Grier, that this new interest has been triggered off by the development of endogenous growth models--for example, Romer ( 1986) and Lucas ( 1987)--that may motivate why institutional factors have long-run growth effects. It is, however, surprising that no mention is made of the seminal work in the area by researchers such as Douglass North and Mancur Olson. Their contributions may not have the same formal elegance as those of the new growth theorists but they do expound all the more exciting visions of the essentials.
The main analysis in the paper is econometric. The baseline model examines the effects on growth of a number of 'standard' variables: initial wealth, population growth, investment, growth of government consumption and the change as well as the variability of inflation. To this is added an analysis of how the extent of centralization of wage bargaining and the degree of 'corporatism' affect growth. Both time-series and cross-country variations among the OECD countries are exploited.
As far as I can judge the econometric investigation is competently executed. My main objection concerns the lack of a well- specified theoretical model. This is a problem especially for the discussion of the impact of centralization of bargaining on growth. Here the main result is that there appears to be a monotonic negative relationship between the degree of centralization and economic growth, with more decentralized bargaining always leading to higher growth. This conclusion is contrasted with the Calmfors - Driffill ( 1988) hypothesis of a hump-shaped
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