Growth and development in a Harrodian economy: With evidence from China

Abstract

In this paper, we construct a macrodynamic model that expresses the growth and development process in a less developed economy. The model introduces price, wage and government policy into an otherwise Harrodian economy. We find that these components can be regarded as stabilization mechanisms to overcome the destabilization mechanism in the original Harrod model and therefore the instability puzzles can be resolved. Using the evidence from China, we will show that the model can explore some important phenomenon with regard to growth and development in a less developed economy. © 2012 Blackwell Publishing Ltd.