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Development Research Briefs - Computations of Development Financing Gaps: Some Conceptual and Empirical Issues


Multilateral institutions such as the World Bank, the IMF, and regional banks routinely use simpler, but practical financing gap models to guide policy discussions and resource mobilisation. Frequently used by these institutions is the Two-Gap model, which is rooted in the works of Domar (1939), Harrod (1946, 1947), and Chenery and Strout (1966). The Two-Gap model is the precursor and foundation of more elaborated growth models (starting from SolowSwan, leading to modern endogenous growth models).

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