GROWTH DIAGNOSTICS

Growth Diagnostics is a methodology I developed with Dani Rodrik and Andrés Velasco to determine the obstacles to a country’s capacity to grow. It is a unified framework for identifying the binding constraints to growth, which is key to formulating growth strategies. The main idea is that each country may be bumping against different potential constraints but each constellation of constraints must be giving off a different collection of symptoms or signals. These symptoms can then be used to perform a differential diagnosis.

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Potential constraints are scrutinized systematically using a decision tree. The, researchers need then to come up with a syndrome that can account for the identified constellation of symptoms and can account for their persistence. By using Growth Diagnostics, policymakers can develop a clearer theory of change by designing policies that can take the country out of (or work around) its current syndrome and relax its most binding constraints.

 

I subsequently wrote a how-to handbook with Bailey Klinger and Rodrigo Wagner. I have participated in growth diagnostic exercises in a bunch of countries including Algeria, Armenia, Belize, Botswana, Brazil, Dominican Republic, Ecuador, El Salvador, Mexico, Morocco, Pakistan, Peru and South Africa, among others. I have also collaborated with the World Bank (setting up the PREM project) and the Inter-American Development Bank (that eventually became a book on the application of Growth Diagnostics to Latin America). Dani Rodrik keeps a website with papers related to Growth Diagnostics. Also, the Millennium Challenge Corporation has adopted an approach based on growth diagnostics that they call constraints analysis, requiring its application to all partner countries.

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