New Growth Theories: What is in there for Developing Countries?

This paper reviews new growth theories (NGT) from the perspective of developing countries. It shows that despite some views to the contrary, NGT and the growth debate that it spawned have some useful lessons for developing countries. Some of these lessons and ideas were indeed available from before. However, these are now more precisely formulated and connected more intimately with other fields of economics. Developing countries can benefit from such NGT implications as the possibility of policy influence on the long term growth rate, importance of technological diffusion in convergence, distinct role of institutions in growth, and potency of trade for growth. NGT has also led to a re-examination of cross-country implications of the neoclassical growth theory (NCGT), revealing in the process that, when unencumbered from unwarranted assumptions, NCGT can be more useful in understanding the growth regularities across developing countries.