Why Doesn't Development Always Succeed? The Role of a Work Ethic

This paper presents a theory of underdevelopment. It explains why developing countries may not be able to successfully implement the productive technologies or modes of organization used in developed ones. It also suggests ways around this problem of implementation, and provides an explanation for why already developed countries did not face the same problems. The paper examines the interaction between the population’s work ethic and the actions of firms, where a person’s work ethic comes to matter. It is shown that an economy can be in either a high work ethic steady state, or a welfare dominated low work ethic one. Development makes the high work ethic steady state more e¢cient, but, if too rapid, will not allow it to be reached. Instead, the unique trajectory is to the low one, and welfare is reduced.