Interaction between theory and observation in development

The author reviews empirical research carried out over the past 30 years with respect to the process of development. He first examines the extent to which economic theories and generalizations derived from the experience of the developed countries are relevant to the developing countries. He next explores the relationship between the ‘structural transformation’ that occurs in the process of development and economic growth, summarizing his own current research on several issues. Finally he compares applications of the neoclassical growth model to both the more advanced countries, whose economic transformation is near completion, and the developing countries still in the process of structural transformation. The author argues that further empirical work can reduce the controversy between neoclassical and structural approaches to development by making possible the formulation of computable models in which the distinction between developing and developed countries can be largely reduced to observable differences in certain statistical parameters: initial conditions, price and income elasticities, and adjustment lags.