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Role of attitudes in economic growth

May 10, 2004 - The Daily Dawn News Paper

Economic development of less developed countries has received enormous attention since World War II. A large number of studies have attempted to understand the internal structure of economic backwardness of less developed countries including Pakistan.

Prudent monetary and fiscal policies, efficient use of foreign direct investment, honest bureaucracy and transparent judiciary system, political stability civil liberty, well enforced property rights, democracy, availability of potable water, sanitation and roads, clean environment, and many more are held responsible for reducing backwardness of any society. However, for a large number of countries these statistics (now referred to explicit indicators) have failed to explain the growth differentials.

For example, in year 2000-2001 Sri Lanka citizens had a literacy rate close to 98 per cent but their GDP per capita (PPP) was $3560 which is even less than average per capita income ($3930) of low and middle income countries.

Similarly, the adult literacy rate in Bolivia is 86 per cent but their per capita income (PPP) is $2380. Scholars are now considering the efficacy of these explicit indicators with a significant degree of skepticism.

It has been observed that countries such as Costa Rica, Columbia and Nicaragua with similar literacy rate and life expectancy have experienced different levels of per capita income.

Similarly, China and Indonesia both have similar adult literacy and life expectancy but with $4260 and $2940 per capita income respectively. We have examples of countries that grow much faster despite having similar explicit indicators.

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