Barriers to Riches

by Stephen L. Parente, Edward C. Prescott

Why isn't the whole world as rich as the United States? Conventional views holds that differences in the share of output invested by countries account for this disparity. Not so, say Stephen Parente and Edward Prescott. In Barriers to Riches , Parente and Prescott argue that differences in Total Factor Productivity (TFP) explain this phenomenon. These differences exist because some countries erect barriers to the efficient use of readily available technology. The purpose of these barriers is to protect industry insiders with vested interests in current production processes from outside competition. Were this protection stopped, rapid TFP growth would follow in the poor countries, and the whole world would soon be rich. Barriers to Riches reflects a decade of research by the authors on this question. Like other books on the subject, it makes use of historical examples and industry studies to illuminate potential explanations for income differences. Unlike these other books, however, it uses aggregate data and general equilibrium models to evaluate the plausibility of alternative explanations. The result of this approach is the most complete and coherent treatment of the subject to date.

184 pages, Paperback

First published August 28, 2000

Reviews

[Erick · Rating 4 out of 5]

Good read for modeling some of the interactions of organizational as well as institutional settings with productivity. Interesting questions posed at the beginning of the book are addressed at the end after coherent arguments and models are presented and developed. The book would have benefited if the authors had expanded the argumentation of the models to the behavior of some investors and managerial levels in relation to incentives that conduce them not to always act in the best interest of determined industries. In addition, there is very limited attention to financial systems. Despite those potential shortcomings, other topics touched upon by the book are developed brilliantly.

[Benji]

Future will teach if monopolies in the digital realm truly are of a different breed.

Maybe Peter Thiel proves to be right on this count, and they can be agents of progress, whereby the promise of years of monopoly rents provides a powerful incentive to innovate and execute bold long-term plans and ambitious research plans. Let's hope.

[Samito · Rating 4 out of 5]

great background on international development. Presents theories and puts others to rest.