During the last decades two factors have been recognised as major deten-ninants of economic growth. Firstly, the ongoing integration of international capital markets has rendered foreign physical capital a crucial factor in the performance of open economies. Secondly, in addition to greater capital mobility, there has been an increasing awareness among economists that economic growth swivels around the production and use of knowledge. The connections relating those two crucial factors (i. e. physical capital mobility and knowledge production) have been, however, seldom explored in the relevant literature. This is an important omission which we seek to remedy in this thesis. The main objective of this dissertation is, essentially, to explore the joint role of physical capital and knowledge accumulation in the economic growth process, when physical capital mobility exists. Another important objective is to study the role of knowledge accumulation in attracting foreign physical capital. For this purpose, we advance two theoretical models of growth to explore these connections, from an exogenous and an endogenous point of view respectively. An empirical application complements the theoretical approach concentrating on the long-term linkages between human capital accumulation and physical capital movements. The thesis comprises three chapters. In Chapter I we construct a two-country Solow-Swan growth model in which 'knowledge production' is treated as pure human capital accumulation. In this model, physical capital moves freely across borders and human capital is immobile, whilst the interest rate is determined endogenously. In Chapter 2 we develop a two-country endogenous growth model with capital flows. This time, 'knowledge production' is achieved by means of a learningby- doing process in both countries, this being a side-effect of world physical capital accumulation. Once again, physical capital is mobile between countries, whilst labour is immobile, and the interest rate is determined endogenously. in Chapter 3 we build on the connections between knowledge production and physical capital accumulation explored theoretically in previous chapters. Essentially, we investigate the extent to which human capital differences across countries could account for differences in physical capital inflows, after controlling for other factors. The main result obtained throughout our investigation is the confirmation of the existence of strong links relating knowledge production to international capital flows. Both theory and data seem to strongly support this conclusion.

This thesis has two main objectives. First, it outlines a taxonomy of reflexive development practice, which aims at transcending the divide between modernism and postmodernism in the methodology of development economics. Second, the thesis examines the taxonomy in two countries at opposite ends of the development spectrum, Vanuatu and Singapore, attempting to show that the taxonomy provides insights for policymaking. The taxonomy is the principal contribution. It suggests an examination of external values and norms; an assessment of the importance of local context; a recognition that policies can worsen the problems that they try to solve; and the idea that theory and policy should be revised as circumstances change. The taxonomy is developed as a way of addressing the difficulties encountered by the modernist Washington Consensus on the one hand and postmodernism on the other. Some postmodernists have criticised modernists for trying to make universal statements based on findings specific to a particular time and context. A further criticism is that the modernist-type theorising exemplified by the Washington Consensus assumes too much certainty, putting excessive faith in the ‘expert’ outsider. Postmodernists, on the other hand, have often been criticised for being relativist or even being against theory itself. In extreme versions of postmodernism, the entire rejection of epistemological foundations allows no analysis or significant discussion. The taxonomy aims to steer away from the pitfalls of either tradition, emphasising in particular the unity of theory and practice and the need for analysis and policy advice to take account of both the objectivism of the outsider and the subjectivism of the insider. The thesis is divided into two parts. The first part discusses how the open systems approach of critical realism, John Maynard Keynes and the neo-Austrians aims to overcome the difficulties of modernism and postmodernism. It then examines some of the principal uses of the term reflexivity in the past century or so, suggesting that some of these uses are compatible with each other and with the idea of open systems. This section draws on the work of several economic methodologists and sociologists, including Karl Marx, Karl Mannheim, Pierre Bourdieu, Anthony Giddens and thinkers within the sociology of scientific knowledge. Next is a critical discussion of the Washington Consensus and its amended version, followed by the development of the taxonomy. Part two begins with a brief discussion of the nature of comparison within developing economies, before looking at the taxonomy in the context of Vanuatu and Singapore. Following the case-studies is an attempt to draw lessons from the experience of the two countries. Finally, the discussion is summarised and some conclusions established.