Testing the Harrod-Domar model: A comparative study of economic growth in Haiti and the Dominican Republic

Recent destruction caused by the January 2010 earthquake in Haiti revealed the country's vulnerability to the world. With more aid flowing into Haiti than ever before, it is important to recognize the connection between aid, savings, and potential economic growth in order to affectively apply economic policy and transport Haiti to a less vulnerable position. Although Haiti shares the island of Hispaniola, with its neighbour the Dominican Republic, there are stark contrasts in economic success between the countries with the divergence starting in 1960. Haiti is the poorest country in the western hemisphere with a meager or non-existent growth rate while the Dominican Republic, still a relatively poor country, has a strong economic growth rate of around 5 per cent and a GDP per capita five times greater than Haiti. This chapter investigates the last 19 years (1990 to 2008) of economic growth in the two countries using the Harrod-Domar Model of economic development. Section one includes a general history of Haiti and the Dominican Republic ranging from their existence as French and Spanish colonies to the dictatorships of Trujillo and Duvalier; it also emphasizes global
perspectives and internal policies that may impact each country's economy. The Harrod-Domar Model is explained in section two, including its background, mathematical calculation, and applicability. The Harrod-Domar Model has become the most widely used economic growth perspective in history due to its simplicity, resiliency, and ability to evolve. This section also contains an introduction to the "financing gap" and describes how aid, savings, and growth are connected. Section three applies the Harrod-Domar/Financing Gap Model to Haiti and the Dominican Republic, searching for insights on Haiti's stagnant growth. Omissions and adaptations, the title of section four, is designed to identify possible reasons for the disjuncture of the Harrod-Domar Model in regards to Haiti. Ideas of aid categorization, political instability, and environmental degradation are discussed. Finally, the conclusion is a summative section that suggests areas for future research.