(DP 2000-04) The Social Costs of Economic Growth: A Theoretical Depiction

Abstract

Under certain features of less developed countries (LDCs), it is shown that external diseconomies of government affecting private production sector, and of private production sector affecting consumers must be accounted for in growth or development. The fundamental equation of sources of growth accounting if modified to include these negative effects may show a lower growth rate of total output.

The required genuine social, political and institutional reforms that will at least reduce these external diseconomies are noted but the problem of who will carry these out is left unresolved since this belongs to the realm of normative economics.