A Smithian analysis of economic growth in Colombia: Methodological advances

Abstract

Economic theory posits that economic growth is enhanced by factor accumulation, public good provision, and respect for property rights. Without disregarding this consensus, this paper rescues the Smithian hypothesis that diversification of production and the expansion of the population purchasing power are also integrated and fundamental engines of economic growth. In fact, the available data do not allow rejecting the hypotheses that the combined accumulation of physical and human capital, the diversification of technology-intensive productive activities, and the expansion of the urban population purchasing power are the main sources of economic growth in Colombia. The analysis also allows identifying three important plummets of domestic economic development: the insufficient development of transport infrastructure, high levels of violence, and the inadequacy, inefficiency and/or scarcity of governmental and financial services.