Priority Area Economic Development
Economic Development was in 2011 selected as a priority area by the Dean of the Faculty of Social Sciences at the University of Southern Denmark. The purpose of this initiative is to support and foster research excellence within seven selected areas. As part of this initiative, Economic Development has received extra funding from the Dean for an initial period of three years.
Average income levels in the world’s richest and poorest nations differ by orders of magnitude. What accounts for such enormous differences and what can be done to foster development and eventually convergence between poor and rich countries? Attempting to cast light on these questions, neoclassical growth theory has traditionally focused on factor accumulation and, in its endogenous growth variant, on technological change. But, as noted early on by economic historians, accumulation and technological change are only proximate causes of economic growth. What one really wants to ask is this: Which fundamental causes can account for the fact that some societies managed to accumulate and innovate more rapidly than others?
In the academic literature the focus has been on four fundamental factors of long-run growth and development. First, there is a long and distinguished line of work that places geography at the center of the story. Geography is a key determinant of climate, endowment of natural resources, disease burden, transport costs, and diffusion of knowledge and technology from more advanced areas. It therefore exerts a strong influence on key variables such as agricultural productivity and the quality of human resources. Another long and distinguished line of work focuses on the role of culture. Prominent economic historians, for instance, maintain that culture is the key to unlocking the rise of capitalism in Western Europe and East Asia. A third tradition highlights the role of international flows of capital, goods, and people as the main driver of productivity change. This so-called integration view gives integration into the global economy, and impediments thereof, a key role in fostering welfare and growth as well as convergence between rich and poor parts of the world. Finally, there is the institutions view. According to this view, what matters are the rules of the game in a society and their contribution to beneficial economic behavior. The research carried out by members of HEDG attempts to improve our understanding of all four fundamental factors of economic development.