How to develop a country is a subject that Adam Smith analysed in The Wealth of Nations, the publication of which in 1776 marked the birth of modern economics. The very diverse performances in economic development among various developing countries and in the transition of various socialist countries have recently revived economists' interest in economic development.

Recent studies have tried many ways to identify the determinants of economic growth in a country and have proposed various theories to explain why a country becomes wealthy and what actions a government in a poor country can take to improve its economic performance. Looking at the issue from an accounting perspective, the differences in per capita income between countries can be explained by the differences in their physical capital, human capital and productivity. From this point of view, the way for a country to become rich is to invest in physical and human capital and to adopt new and better technologies. Such differences are just the proximate causes of the income differences between countries, however, as the accumulation of physical and human capital and productivity growth are themselves endogenous (Acemoglu, Johnson and Robinson, 2005; Lewis, 1955; Rodrik, 2003).