Robert E. Hall and Charles I. Jones (1999), Why Do Some Countries Essay

Robert E. Hall and Charles I. Jones (1999), Why Do Some Countries Produce So Much More Output per Worker than Others,Quarterly Journal of Economics, 83-116 - Essay Example This diversion away from growth promoting investment takes the form of thievery, unprotected property rights The investigation is based around a hypothesis that these differences in investment in capital accumulation is primarily the result of differences in social infrastructure across countries. Social infrastructure, as a concept used in their research, includes a number of ideas such as institutions and government policies, all of which, they claim, contribute to creating an environment in which capital accumulation is encouraged. A social infrastructure favourable to high levels of output per worker provides an environment that supports productive activities and encourages capital accumulation, skill acquisition, invention, and technology transfer. The researchers claim that creation of this favourable social infrastructure is best done by the government because they have the authority to collect the resources needed to establish the regulations and laws that would create a framework to stop diversion. However, corrupted government, engaging in rent-seeking behaviour, contribute to the diversion of resources away from activities of capital accumulation by creating poor contracts, interfering in production activities, and impeding trade. As such, the paper does indicate that the most appropriate social infrastructure for growth would limit the role of government given government’s propensity for rent-seeking behaviour. A major issue that is developed in their research concerns the direction of causality between social infrastructure and output per worker. Hall and Jones admit that more productive workers, with higher levels of education and income levels, could influence the social infrastructure. As such, countries experiencing low growth levels are unable to provide the resources necessary to create a supportive social infrastructure that would encourage further human and physical capital accumulation, meaning that appropriate