Having seen what it means to be a developing country, we now turn to an analysis of the process bywhich low-income countries improve their living standards. We saw in Chapter 27 that economic growth in the United States-growth in its potential output-rides on four wheels. These are (l) human resources, (2) natural resources, (3) capital formation, and (4) technology: These four wheels operate in rich and poor countries, although the mix and strategy for combining them will differ depending on the state of development. Let’s see how each of the four wheels operates in developing countries and consider how public policy can steer the growth process in favorable directions.

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