Economic Themes (2019) 57 (1) 7, 111-125
Slobodan Cvetanović, Uroš Mitrović, Marko Jurakić
Abstract: The research in this paper focuses on the perception of institutions as the drivers of economic growth. A critical presentation of the views of classical, neoclassical and endogenous growth theorists on this issue is given. It was pointed out that the classical economic theory presented in the works of Smith, Ricardo and Malthus implies the importance of the existence of an appropriate institutional framework for initiating economic growth. The attitude of the classics is that the state can stimulate economic growth through various measures aimed at building quality institutions. On the contrary, the neoclassical growth theory has completely neglected the treatment of institutions in the analysis of economic growth. Institutions as drivers of economic growth are not taken into account in the Robert Solow’s model. However, broadly speaking, it can be assumed that the impact of institutions on the initiation of economic growth is embedded in the category of residuals and the premise of the existence of a high substitution of production factors. But, this fact, even from a distance, does not call into question the general conclusion about the unacceptable neglect of the importance of institutions in explaining the physiology of economic growth by neoclassicists. Finally, the paper emphasizes the fact that only with the emergence of an endogenous growth theory, the question of the underdevelopment of the institutions as an important model of slow economic progress of certain countries is explored. Unfortunately, the developed theoretical models of growth, which include institutions as a full concept, still do not exist in the endogenous theory of economic development.
Keywords: institutions; economic growth; drivers of economic growth; models of economic growth; classical theory; neoclassical theory; endogenous growth theory
INSTITUTIONS AS THE DRIVER OF ECONOMIC GROWTH IN CLASSIC, NEOCLASIC AND ENDOGENOUS THEORY
Slobodan Cvetanović, Uroš Mitrović, Marko Jurakić
Abstract: The research in this paper focuses on the perception of institutions as the drivers of economic growth. A critical presentation of the views of classical, neoclassical and endogenous growth theorists on this issue is given. It was pointed out that the classical economic theory presented in the works of Smith, Ricardo and Malthus implies the importance of the existence of an appropriate institutional framework for initiating economic growth. The attitude of the classics is that the state can stimulate economic growth through various measures aimed at building quality institutions. On the contrary, the neoclassical growth theory has completely neglected the treatment of institutions in the analysis of economic growth. Institutions as drivers of economic growth are not taken into account in the Robert Solow’s model. However, broadly speaking, it can be assumed that the impact of institutions on the initiation of economic growth is embedded in the category of residuals and the premise of the existence of a high substitution of production factors. But, this fact, even from a distance, does not call into question the general conclusion about the unacceptable neglect of the importance of institutions in explaining the physiology of economic growth by neoclassicists. Finally, the paper emphasizes the fact that only with the emergence of an endogenous growth theory, the question of the underdevelopment of the institutions as an important model of slow economic progress of certain countries is explored. Unfortunately, the developed theoretical models of growth, which include institutions as a full concept, still do not exist in the endogenous theory of economic development.
Keywords: institutions; economic growth; drivers of economic growth; models of economic growth; classical theory; neoclassical theory; endogenous growth theory
