Research On The Growth Effects Of Policy Distortions In The Prices Of Factors Of Production In Late-developing Countries

Researching the economic development process of later developing countries,we found that the later developing countries adopt distorted economic policies in most cases during the economic catch-up stage.At the same time,the distortion of production factor prices which is less than equilibrium price by policy is a momentous condition for the late developing countries to accomplish low price industrialization and maintain high economic growth for a long time.This paper takes a class of economies that have successfully achieved economic catch-up as the research object.We use the production function method to calculate factor price distortion.And we discusses the influence of price distortion of production factors on investment,consumption and economic growth of the economy in stages,and then summarizes the regularity characteristics.There is a non-linear relationship between absolute distortion of factor prices and economic growth in later developing countries.When the economy is in the middle and low income stage,it is common to depress the price of factors of production to promote capital accumulation and realize industrialization.Distortion can stimulate investment and achieve rapid economic growth in a short term.However,when the economy gradually approaches or enters the high-income stage,the positive effect of distortion gradually weakens and the degree of distortion decreases together with the economic growth slowdown.Therefore,policy distortion of production factor prices is not sustainable for promoting economic growth.