Has the developmental ladder become steeper?

Loungani and Bhasin observe that the export-led model underpinning the 20th-century development is no longer a guaranteed tailwind.

Apr. 3, 2026 at 3:26pm

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A minimalist abstract illustration using bold geometric shapes and primary colors to represent the concept of institutional quality as a key driver of economic growth, moving away from a literal depiction of exports or trade.Institutional strength emerges as a critical factor for economic growth in the 21st century, as the traditional export-led development model loses its luster.Albany Today

This commentary examines how growth and development have fared in this century compared to the previous one. It presents the basic facts about growth, analyzes whether growth is still translating to poverty reduction, and explores the drivers of growth in this century, including the role of institutional quality as a key driver of the next generation of growth miracles.

Why it matters

The article provides insights into the changing dynamics of economic growth and development, highlighting the shift from an export-led model to one where institutional quality plays a more prominent role. This has implications for how countries can achieve sustainable development in the 21st century.

The details

The analysis finds that the annual average global growth rate of per-capita GDP in this century (2000-22) was 2.4%, lower than the 2.8% average during the first quarter of the previous century. However, the 21st century has still delivered remarkable progress in poverty alleviation, with the long-term decline in poverty continuing into the new millennium. The authors also identify a list of 'growth miracles' and 'growth champions' - countries that have experienced high per-capita growth rates over the last 25 years. Surprisingly, these success stories achieved their status with surprisingly little help from the export sector, suggesting that the traditional export-led development model may no longer be a guaranteed path to growth. Instead, the authors find that institutional quality, as measured by indices of 'rule of law,' continues to have a statistically significant and positive effect on per-capita incomes, even as the impact has moderated in the 21st century.

  • The analysis covers the period from 2000 to 2022.
  • The authors also look at poverty reduction trends in the early 2000s and 2010s.

The players

Prakash Loungani

Programme Director, Master's in Applied Economics at Johns Hopkins University.

Karan Bhasin

Doctoral Candidate at the University at Albany, SUNY.

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What they’re saying

“While the ascent to high-income status has grown increasingly steep in the 21st century, the strengthening of institutions ensures that the summit remains within reach.”

— Prakash Loungani and Karan Bhasin, Authors

What’s next

The authors indicate that their ongoing work with Songyan Ni will further explore the relationship between exports, institutional quality, and economic growth in the 21st century.

The takeaway

While the era of export-led development may be waning, the strengthening of institutions remains a viable route to growth and development in the 21st century. Countries can still climb the developmental ladder, and there is still hope for growth, even as the path has become more complex.