Emerging Markets Ranking the countries in terms of their growth prospects
Emerging Markets 1. Ranking the countries in terms of their growth prospects To respond to this question, we need to distinguish between short term growth and long term growth. Considering the neo classical growth models or the Solow growth model, an increase in inputs (employment, education and physical capital) will result in an increase in outputs thus in growth. These models also assume diminishing marginal product of capital (MPK) hence a convergence of poor countries which are the furthest away from their steady state towards rich countries, thus creating fast growth. This would typically make us focus on the GDP per capita relative to US, 2001 (PPP adjusted) (A), given that the lower the current GDP is the easier it would be to achieve high growth, the education level (D Net Secondary school enrolment rate 1998), the investment level (F Investment (% GDP) 2001) and the availability of loans as a complement to the investment level (B Ease of access to loans). I exclude on purpose factor L (Quality of management schools) as this element is both controversial and to some extent difficult to measure without having other higher education statistics like engineering schools, economics PhDs etc On these accounts, Malaysia, China and Estonia as well as Morocco, India and Vietnam come out with the highest potential for growth, primarily due to high education and high investment rates for the three first ones and relative low starting GDP per capita and strong investment rates for the latter. With high investment rates the steady state level of capital is high for those countries. But we know that if we consider empirical evidence since the 1950s, there is no sign of convergence and that the assumption of diminishing MPK is inappropriate except in groupings of countries with similar more complex characteristics than just education, GDP per capita and investment. The analysis of the Asian growth done by the economist Alwyn Young also illustrated that it is hard to maintain fast growth through capital accumulation alone due to the law of diminishing returns hence China might be able to boost growth for quite a few years by a high level of investment but ultimately will have to resort to other factors of growth. ... We also know that the portion of growth in South East Asia obtained through the mobilization of resources, which can take the form of shifting the working population away from low productivity agriculture to higher productivity industrial activities or increasing the numbers of hours worked per worker, is inherently limited due to physical or political constraints.