Prices, Incentives and Economic Growth

  • Bela Balassa


The period since the depression of the nineteen-thirties has seen a multiplication of government interventions in economic life — although in some respects a reversal has occurred in recent years. Government interventions take a variety of forms, depending on the system of economic decision-making applied. The present essay will examine the economic effects of these interventions in developed, developing, and socialist economies.


Interest Rate Minimum Wage Real Interest Rate Fringe Benefit Socialist Country 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. 1.
    J. N. Bhagwati, ‘The Generalized Theory of Distortions and Welfare’ in J. N. Bhagwati, R. W. Jones, R. A. Mundell and J. Vanek (eds), Trade, Balance of Payments and Growth (Amsterdam: North-Holland, 1971) pp. 69–90.Google Scholar
  2. 3.
    R. G. Harris with D. Cox. Trade, Industrial Policy and Canadian Manufacturing (Toronto: Ontario Economic Council, 1983) p. 115.Google Scholar
  3. 4.
    B. Balassa et al.The Structure of Protection in Developing Countries (Baltimore, Md.: Johns Hopkins University Press, 1971) p. 82.Google Scholar
  4. 5.
    J. de Melo, ‘Estimating the Costs of Protection: A General Equilibrium Approach’, Quarterly Journal of Economics, CXII (1978) pp. 209–26.CrossRefGoogle Scholar
  5. 6.
    H. G. Johnson, ‘The Possibility of Income Losses from Increased Efficiency or Factor Accumulation in the Presence of Tariffs’, Economic Journal, CXXVII (1967) pp. 151–4.CrossRefGoogle Scholar
  6. 7.
    B. Balassa, ‘The Newly Industrializing Countries After the Oil Crisis’, Weltwirtschaftliches Archiv, CXVII (1981) pp. 142–94; ‘The Policy Experience of Twelve Less Developed Countries, 1973–1978’, in G. Ranis, R. West, M. Leiserson and C. Morris (eds), Comparative Development Perspectives, Essays in Honor of Lloyd G. Reynolds (Boulder, Colorado: Westview Press, 1984) pp. 96–123; and ‘Adjustment Policies in Sub-Saharan Africa, 1973–78’, in M. Syrquin, L. Taylor and L. E. Westphal (eds), Economic Structure and Performance, Essays in Honor of Hollis B. Chenery (New York: Academic Press) forthcoming.CrossRefGoogle Scholar
  7. 11.
    C. Brown, C. Gilroy and A. Kohen, ‘The Effect of the Minimum Wage on Employment and Unemployment’, Journal of Economic Literature, XX (1982) pp. 512–22.Google Scholar
  8. 12.
    P. Linneman, ‘The Economic Impact of Minimum Wage Laws: A New Look at an Old Question’, Journal of Political Economy, XC (1982) p. 468.Google Scholar
  9. 13.
    J. Schaafsma and W. D. Walsh, ‘Employment and Labor Supply Effects of the Minimum Wage: Some Pooled Timed Series Estimates from Canadian Provincial Data’, Canadian Journal of Economics, XVI (1983) pp. 86–97.CrossRefGoogle Scholar
  10. 15.
    W. R. Johnson and E. K. Browning, ‘The Distributional and Efficiency Effects of Increasing the Minimum Wage: A Simulation’, American Economic Review, LXXVIII (1983) p. 211.Google Scholar
  11. 16.
    J. Z. Drabicki and A. Takiyama, ‘Minimum Wage Regulation and Economic Growth’, Journal of Economics and Business, XXXIV (1982) p. 232.Google Scholar
  12. 17.
    United States Department of Health and Human Services, Social Security Administration, Social Security Programs Throughout the World 1981 (Washington, DC, 1982).Google Scholar
  13. 19.
    J. Brittain, The Payroll Tax for Social Security (Washington, DC: The Brookings Institution, 1972) Ch. III.Google Scholar
  14. 20.
    S. A. Woodbury, ‘Substitution between Wage and Non-wage Benefits’, American Economic Review, LXXIII (1983) p. 179.Google Scholar
  15. 21.
    W. Eltis, ‘How Rapid Public Sector Growth Can Undermine the Growth of the National Product’, in W. Beckerman (ed.), Slow Growth in Britain: Causes and Consequences (Oxford: Clarendon Press, 1979) pp. 127–28.Google Scholar
  16. 22.
    The corresponding results for the United Kingdom are not reported on the grounds that with the inclusion of this parameter, ‘the coefficients for prices and productivity would take on too high values’, A. Knoester, ‘Stagnation and the Inverted Haavelmo Effect: Some International Evidence’, De Economist, CXXXI (1983) p. 564.Google Scholar
  17. 24.
    The calculations relate a single worker with monthly pre-tax earnings of DM 2000 in the first case and DM 3000 in the second. Practically the same result is reached for a family of four, with two breadwinners each having the stated-earnings. A. Boss, G. Fleming, P. Trapp and N. Walter, ‘Bundesrepublik Deutscheland: Trotz Krise noch Kein Undenken’, Die Weltwirtschaft, II (1982) pp. 22–47.Google Scholar
  18. 25.
    A. Lindbeck, ‘Work Disincentives in the Welfare State: The Case of Sweden’, European Economic Review, XXI (1983) p. 245.Google Scholar
  19. 26.
    M. Feldstein, ‘The Effect of Social Security on Savings’ in D. Currie, R. Nobay and D. Peel (eds), Macroeconomic Analysis: Essays in Macroeconomics and Econometrics (London: Croom Helm, 1981) pp. 18–19.Google Scholar
  20. 27.
    M. Janssen, ‘Social Insurance: Incentives and Disincentives to Save and to Work’, paper prepared for the Conference on Economic Incentives, held at the Institute of World Economics of the University of Kiel on 18–22 June 1984, p. 24.Google Scholar
  21. 29.
    O. Evans, ‘Social Security and Household Saving in the United States: A Re-Examination’, International Monetary Fund Staff Papers, XXX (1983) p. 611.Google Scholar
  22. 31.
    M. S. Boskin, ‘Taxation Savings and the Rate of Interest’, Journal of Political Economy, LXXXVI (1978), pp. S3–S28.CrossRefGoogle Scholar
  23. 32.
    L. H. Summers, ‘Capital Taxation and Accumulation in a Life Cycle Growth Model’, American Economic Review, LXXI (1981) p. 536.Google Scholar
  24. 34.
    L. H. Summers, ‘The After Tax Rate of Return Affects Private Savings’, American Economic Review, LXXIV (1984) p. 250.Google Scholar
  25. 35.
    International Monetary Fund, Interest Rate Policies in Developing Countries, Occasional Paper No. 22 (1983) p. 19.CrossRefGoogle Scholar
  26. 37.
    A. C. Harberger, ‘Efficiency Effects of Taxes on Income from Capital’, in M. Krzyzahiak (ed.), Effects of the Corporation Income Tax (Detroit: Wayne State University Press, 1966).Google Scholar
  27. 38.
    M. Feldstein, ‘The Welfare Cost of Capital Income Taxation’, Journal of Political Economy, LXXXII (1978) p. 547.Google Scholar
  28. 41.
    M. A. King and D. Fullerton, The Taxation of Income from Capital: A Comparative Study of the United States, Sweden and West Germany (Chicago: University of Chicago Press, 1984) Tables 6.20, 6.27–28, 6.31–32, 7.1.CrossRefGoogle Scholar
  29. 43.
    A. O. Krueger, Trade and Employment in Developing Countries 3. Synthesis and Conclusions (Chicago: University of Chicago Press, 1983), p. 150.Google Scholar
  30. 45.
    J. Kay and J. Sen, ‘The Comparative Burden of Business Taxation’, Fiscal Studies, IV (1983) pp. 23–28, Table 5.CrossRefGoogle Scholar
  31. 47.
    H. G. Peterson, ‘Taxes, Tax Systems and Economic Growth’, in H. Giersch (ed.), Towards an Explanation of Economic Growth (Tubingen: J. C. B. Mohr, 1981) Tables 1 and 2.Google Scholar
  32. 48.
    K. Marsden, ‘Links between Taxes and Economic Growth, Some Empirical Evidence’, World Bank Staff Working Paper No. 605 (1983) Tables 3 and 4.Google Scholar

Copyright information

© The World Bank and Bela Balassa 1985

Authors and Affiliations

  • Bela Balassa
    • 1
    • 2
  1. 1.The Johns Hopkins UniversityUSA
  2. 2.The World BankUSA

Personalised recommendations