Economics
Economic Growth
Economic growth refers to the increase in a country's production of goods and services over time. It is often measured by the rise in a nation's gross domestic product (GDP) and is a key indicator of a country's overall economic health. Sustainable economic growth is essential for improving living standards and reducing poverty.
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9 Key excerpts on "Economic Growth"
eBook - PDFDevelopment Economics
Theory, Empirical Research, and Policy Analysis
- Julie Schaffner(Author)
- 2013(Publication Date)
- Wiley(Publisher)
chapter Economic Growth At the micro level of developing-country households, the objective in development is to raise well-being. At the macro level, the aim is to raise well-being not just for one household but for many and to raise well-being in a way that can be sustained and built upon over many years. Most development thinkers agree that widespread and sustained improvements in well-being are impossible without Economic Growth. This chapter begins by defining Economic Growth, describing how it is measured, and examining how it relates to the larger development objective. It then demonstrates the tremendous variation in rates of Economic Growth across countries and raises the natural question: What causes rapid Economic Growth? We begin answering this question by describing the proximate sources of growth, which are the economic processes through which Economic Growth comes about. Digging deeper, the chapter then raises questions about the “determinants of Economic Growth,” which are features of policy and of socioeconomic conditions that explain why growth rates are higher in some countries than others or why growth rates change over time within countries. We briefly review the large empirical literature employing aggregate-level cross- country data in the search for the determinants of growth, pointing out its lessons and limitations. We then argue the need for careful micro-level, context-specific analysis of barriers to growth and of the ways they might be overcome. Part III of the text equips readers for such analysis. 3.1 Meaning and Measurement of Economic Growth 3.1A The definition and developmental significance of Economic Growth The rate of Economic Growth is the rate of increase in an economy’s average income. In principle, average income is the total value of income earned in any form, from any source, by anyone in the country, divided by the number of people. Economic Growth thus takes place when total income grows faster than the population.
eBook - PDFMacroeconomics
An Introduction
- Alex M. Thomas(Author)
- 2021(Publication Date)
- Cambridge University Press(Publisher)
MACROECONOMICS 5 Economic Growth 5.1 Introduction At the very beginning of this book (Section 1.1), some of the motivating factors behind our decision to study economics were listed. One of them was the question: how to improve the per capita availability of goods and services? In other words, how does aggregate output per worker (Y/N) grow over time? The rate of growth of Y/N is an indicator of the health of an economy. For instance, if the Indian economy is growing at a good pace, it means that, on average, the income per person is also witnessing a good growth. However, owing to the effect of extreme values on averages, we can never be certain whether the growth is primarily driven by a tiny group of chief executive officers (CeOs) whose incomes grew substantially or owing to an increase in the agricultural incomes for a vast number of rural workers. And nor can we ascertain whether the agricultural sector as a whole is growing. To learn about the nature of growth (or in the language of statistics, the distribution of growth), we need to adopt a meso approach—this is what we do in Section 5.3. Given these considerations, treat the growth rate of an economy (growth of gross domestic product, or GDP) as you would treat the blurb of a book—as a reasonable guide to the story, but unable to provide the complete picture. Economic Growth 91 The previous chapter provided the determinants of output and employment levels in both closed and open economy settings. To continue with the analogy of the idli, while the last chapter examined the determinants of its size, the present chapter looks at the growth in its size over time. ‘Economic Growth’ is the study of the evolution of the size of output or output per worker over time.
eBook - PDF- David Shapiro, Daniel MacDonald, Steven A. Greenlaw(Authors)
- 2022(Publication Date)
- Openstax(Publisher)
It is not clear what productivity growth will be in the coming years. The rate of productivity growth is the primary determinant of an economy’s rate of long-term Economic Growth and higher wages. Over decades and generations, seemingly small differences of a few percentage points in the annual rate of Economic Growth make an enormous difference in GDP per capita. An aggregate production function specifies how certain inputs in the economy, like human capital, physical capital, and technology, lead to the output measured as GDP per capita. 186 7 • Key Terms Access for free at openstax.org Compound interest and compound growth rates behave in the same way as productivity rates. Seemingly small changes in percentage points can have big impacts on income over time. 7.3 Components of Economic Growth Over decades and generations, seemingly small differences of a few percentage points in the annual rate of Economic Growth make an enormous difference in GDP per capita. Capital deepening refers to an increase in the amount of capital per worker, either human capital per worker, in the form of higher education or skills, or physical capital per worker. Technology, in its economic meaning, refers broadly to all new methods of production, which includes major scientific inventions but also small inventions and even better forms of management or other types of institutions. A healthy climate for growth in GDP per capita consists of improvements in human capital, physical capital, and technology, in a market-oriented environment with supportive public policies and institutions. 7.4 Economic Convergence When countries with lower GDP levels per capita catch up to countries with higher GDP levels per capita, we call the process convergence. Convergence can occur even when both high- and low-income countries increase investment in physical and human capital with the objective of growing GDP.
eBook - PDF- Steven A. Greenlaw, Timothy Taylor, David Shapiro(Authors)
- 2017(Publication Date)
- Openstax(Publisher)
Laws must be clear, public, fair, and enforced, and applicable to all members of society area of a country, usually with access to a port where, among other benefits, the government does not tax trade a combination of invention—advances in knowledge—and innovation all the ways in which existing inputs produce more or higher quality, as well as different and altogether new products KEY CONCEPTS AND SUMMARY 20.1 The Relatively Recent Arrival of Economic Growth Since the early nineteenth century, there has been a spectacular process of long-run Economic Growth during which the world’s leading economies—mostly those in Western Europe and North America—expanded GDP per capita at an average rate of about 2% per year. In the last half-century, countries like Japan, South Korea, and China have shown the potential to catch up. The Industrial Revolution facilitated the extensive process of Economic Growth, that economists often refer to as modern Economic Growth. This increased worker productivity and trade, as well as the 494 Chapter 20 | Economic Growth This OpenStax book is available for free at http://cnx.org/content/col12122/1.4 development of governance and market institutions. 20.2 Labor Productivity and Economic Growth We can measure productivity, the value of what is produced per worker, or per hour worked, as the level of GDP per worker or GDP per hour. The United States experienced a productivity slowdown between 1973 and 1989. Since then, U.S. productivity has rebounded for the most part, but annual growth in productivity in the nonfarm business sector has been less than one percent each year between 2011 and 2016. It is not clear what productivity growth will be in the coming years. The rate of productivity growth is the primary determinant of an economy’s rate of long-term Economic Growth and higher wages.
- Steven A. Greenlaw, Timothy Taylor, David Shapiro(Authors)
- 2017(Publication Date)
- Openstax(Publisher)
Land redistribution and price controls have disrupted the economy, and corruption and violence have dominated the political process. Although global Economic Growth has increased, those countries lacking a clear system of property rights and an independent court system free from corruption have lagged far behind. 6.2 | Labor Productivity and Economic Growth By the end of this section, you will be able to: • Identify the role of labor productivity in promoting Economic Growth • Analyze the sources of Economic Growth using the aggregate production function • Measure an economy’s rate of productivity growth • Evaluate the power of sustained growth Sustained long-term Economic Growth comes from increases in worker productivity, which essentially means how well we do things. In other words, how efficient is your nation with its time and workers? Labor productivity is the value that each employed person creates per unit of his or her input. The easiest way to comprehend labor productivity is to imagine a Canadian worker who can make 10 loaves of bread in an hour versus a U.S. worker who in the same hour can make only two loaves of bread. In this fictional example, the Canadians are more productive. More productivity essentially means you can do more in the same amount of time. This in turn frees up resources for workers to use elsewhere. What determines how productive workers are? The answer is pretty intuitive. The first determinant of labor productivity is human capital. Human capital is the accumulated knowledge (from education and experience), skills, and expertise that the average worker in an economy possesses. Typically the higher the average level of education in an economy, the higher the accumulated human capital and the higher the labor productivity. The second factor that determines labor productivity is technological change.
eBook - PDFChina's Economic Growth: Towards Sustainable Economic Development and Social Justice
Volume I: Domestic and International Economic Policies
- John Joshua(Author)
- 2016(Publication Date)
- Palgrave Macmillan(Publisher)
Furthermore, measurements of GDP generally ignore income distri- bution, quality of life and the environmental costs of Economic Growth. Environmental adjustments may be made for water, air and noise pollu- tion. Socio-economic adjustments may also be made for income inequal- ity and corruption. Public and private expenditure on education and on health, and public expenditure on infrastructure could be regarded as investment as they facilitate Economic Growth. 2 Economic Growth and Sustainable Economic Development 17 At the moment the global economy is slowing down and considering present economic policies Economic Growth is unlikely to be sustained. A continuing slowdown of Economic Growth in the major emerging econo- mies would have profound repercussions for the global economy, espe- cially as the industrialized nations are in decline and as China is regarded as a major engine of growth in the global economy. The financial crisis of 2008–2009 illustrates the risk of a country relying for Economic Growth solely on export markets; hence, it is only prudent for China to rebalance its growth strategy towards greater self-reliance, including an orienta- tion towards a domestic consumer-oriented economy. China’s Economic Growth has been slowing down: growth has declined from 9.9 per cent per annum for the period from 1979 to 2013 and 10.2 per cent for the period from 1991 to 2013 to 10 per cent per annum for the period from 2001 to 2013 (National Bureau of Statistics 2014). The present GDP annual growth rate was 6.7 per cent for the first quarter of 2016 and is expected to be between 5 and 6.2 per cent from 2021 to 2030. Eichengreen, Park and Shin (2011) argued that this slowdown is caused by a decline in the growth of the labour force, a slower rate of increase in human capital, a slower rate of capital accumulation, and a slowdown in the growth of TFP [Total Factor Productivity] (these four elements represent the four determinants of growth).
eBook - PDF- Steven A. Greenlaw, David Shapiro, Daniel MacDonald(Authors)
- 2022(Publication Date)
- Openstax(Publisher)
20.3 Components of Economic Growth LEARNING OBJECTIVES By the end of this section, you will be able to: • Discuss the components of Economic Growth, including physical capital, human capital, and technology • Explain capital deepening and its significance • Analyze the methods employed in Economic Growth accounting studies • Identify factors that contribute to a healthy climate for Economic Growth Over decades and generations, seemingly small differences of a few percentage points in the annual rate of Economic Growth make an enormous difference in GDP per capita. In this module, we discuss some of the components of Economic Growth, including physical capital, human capital, and technology. The category of physical capital includes the plant and equipment that firms use as well as things like roads (also called infrastructure). Again, greater physical capital implies more output. Physical capital can affect productivity in two ways: (1) an increase in the quantity of physical capital (for example, more computers of the same quality); and (2) an increase in the quality of physical capital (same number of computers but the computers are faster, and so on). Human capital refers to the skills and knowledge that make workers productive. Human capital and physical capital accumulation are similar: In both cases, investment now pays off in higher productivity in the future. The category of technology is the “joker in the deck.” Earlier we described it as the combination of invention and innovation. When most people think of new technology, the invention of new products like the laser, the smartphone, or some new wonder drug come to mind. In food production, developing more drought-resistant seeds is another example of technology. Technology, as economists use the term, however, includes still more.
eBook - PDF- Robert J. Barro; Angus C. Chu; Guido Cozzi, Robert Barro, Angus Chu, Guido Cozzi(Authors)
- 2017(Publication Date)
- Cengage Learning EMEA(Publisher)
The 21 countries included are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Italy, Ireland, Japan, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and the United States. The growth rates are unweighted averages for the countries with available data. Fewer countries have data for the earlier periods. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-300 37 Chapter 3 Introduction to Economic Growth The answers to these questions could contribute a great deal to the living standards of future generations. The theo -ries about Economic Growth that we turn to next bring us closer to finding these answers. Theory of Economic Growth Now we will build a model of Economic Growth to help understand the patterns found in the international data. We start by considering the production function , which tells us how goods and services are produced. THE PRODUCTION FUNCTION We begin our theoretical study of Economic Growth by considering how a country’s technology and factors of production – or factor inputs – determine its output of goods and services, measured by real GDP. The relation of output to technology and the quantities of factor inputs is called a production function. We will build a simplified model that has two factor inputs: capital stock , K , and labour, L . In this model, capital takes a physical form, such as machines and buildings used by businesses. A more complete model would include human capital , which embodies the effects of education and training on workers’ skills, and the effects of medical care, nutrition and sanitation on workers’ health. In our simplified model, the amount of labour input, L , is the quan -tity of working hours per year for labour of a standard quality and effort. That is, we imagine that, at a point in time, each worker has the same skill.
eBook - PDFMacroeconomics for Business
The Manager's Way of Understanding the Global Economy
- Lawrence S. Davidson, Andreas Hauskrecht, Jürgen von Hagen(Authors)
- 2020(Publication Date)
- Cambridge University Press(Publisher)
Government cooperation, therefore, suffers from a collective-action problem. Even if one or a group of countries musters sufficient leadership to get all governments to sign a climate agreement, it is not clear how such an agreement would be enforced. ........................................................................................................................ 7.6 SUMMARY Economics Nobel laureate Robert Lucas of the University of Chicago once said that economists should stop worrying about business cycles and think about Economic Growth instead, because this is what really matters for a nation’s wellbeing. History clearly proves that he was right. Over long periods of time, Economic Growth or the lack of it are the most important macroeconomic facts. Business cycles make us nervous or excited, growth makes us happy or unhappy. We have seen that the most important part of Economic Growth is productivity growth that comes from techno- logical progress. Capital accumulation cannot sustain growth of per-capita real output for a long time, and the contribution of human capital to Economic Growth Summary 237 seems rather limited, too. Therefore, the forces of technological progress are the most important determinants of a nation’s wellbeing in the long run. The past 200 years have seen repeated arguments claiming that Economic Growth will and must come to an end, soon, because the earth’s resources are limited and its population is growing too large. Such arguments raise a host of ethical questions that are difficult to solve in free democratic societies: Who decides which human beings are allowed to have children and how many? Who decides how long human beings are allowed to live? Who sets the level of consumption that is made available to each person? The Rev. Malthus at least was honest about this and recommended ending policies assisting the poor. It did not make him popular in his time. So far, however, these arguments have turned out to be wrong.
Index pages curate the most relevant extracts from our library of academic textbooks. They’ve been created using an in-house natural language model (NLM), each adding context and meaning to key research topics.
