DVM 3140 Chapter Notes - Chapter 1: Nations Of Nineteen Eighty-Four, Avoidance Speech, Aggregate Demand

• School: University of Ottawa
• Department: International Development and Globalization
• Course: DVM 3140
• Professor: Salamat Tabbasum

Document Summary

The ghost of financing gap: how the harrod-domar growth model still haunts development. Hard domar model: not meant for long run economic growth, it was for meant for short term business cycle. Assumes that production capacity was proportional to capital stock. Domar himself commented that the model made no sense for long run growth, and enforced the solow model. Financing gap: is the difference btw the required investment and countries own savings. Donors fill the financing gap with foreign aid to attain target growth. This growth model promised poor countries growth in the short run through aid and investment. Domar was writing in the aftermath of the great depression that made many ppl running the machines lose job. Gdp growth will be proportional to share of investment spending in gdp. Domar assumes that output is proportional to machines available at the beginning of the year. Domar did not consider labour playing a role in production, only machines.