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Achieving Fast-Track Convergence in Living Standards Jane Chiu Jacob Scott Mai Nguyen-Huu
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Overview Convergence club theory Solow model MNC and private investment pro and con Public investment pro and con Public and private partnerships
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Convergence Club Theory Fundamental requirements must be fulfilled to take advantage of technological benefits Economic Social Political infrastructure
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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
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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
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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
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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
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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
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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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