Economic Growth and Public Policy
Economic growth refers to the increase in a country's production of goods and services over time. Public policy plays a crucial role in fostering economic growth by creating a conducive environment for investment, innovation, and productivity. This can be achieved through policies that promote education, infrastructure development, technological advancement, and efficient market regulations.
6 Key excerpts on "Economic Growth and Public Policy"
eBook - ePubEconomics After the Crisis
An Introduction to Economics from a Pluralist and Global Perspective
- Irene van Staveren(Author)
- 2014(Publication Date)
- Routledge(Publisher)
...If social policy improves the position of a disadvantaged group, economic growth provides the possibility to finance this from an expansion of output. This reduces potential conflict as compared to the situation of redistribution from a fixed amount of output away from other groups. Moreover, individuals and families like to see progress in their economic position over time as a reward for their investment in schooling, work experience, and increased labour productivity. If they do not manage to improve their relative position vis-à-vis others, economic growth can at least provide them with progress in their own position over time. 12.1.1.3 Poverty The third justification for the widespread concern among economists and policy makers with economic growth is the fact that many people in the world live in poverty – about 1 billion people. An increase in GDP and particularly in GDP per capita (so, higher GDP growth than population growth) provides the resources for more jobs and income for the poor and more public good provisioning in social sectors by the state. Obviously, poverty reduction also depends on how growth is distributed over the population. Several countries, such as Pakistan and Ethiopia, have seen good growth rates over a decade or more, but slow improvements in poverty reduction and human development. Growth is clearly not sufficient for poverty reduction. I will examine this subject in greater depth in the final chapter of the book. 12.1.2 Measuring economic growth Economic growth is generally used as the only measure to assess the improvement in well-being in a country. Not CO 2 emissions, not mortality rates, and not survey results concerning feeling happy, but the increase in the gross domestic product is generally considered to be the key variable to measure how our well-being increases or decreases...
eBook - ePubContemporary Economics
An Applications Approach
- Robert Carbaugh(Author)
- 2016(Publication Date)
- Routledge(Publisher)
...The government has also supported aerospace research through NASA, and the U.S. Air Force and has provided tax breaks for firms practicing research and development. Working to reduce trade barriers. Economists have found that a country can raise its growth rate by increasing its openness to international trade, the education of its people, and its supply of telecommunications infrastructure. The impact on growth can be as much as 4 percentage points for a country that progresses from significantly below the average to significantly above the average on all of these indicators. 6 As a result, economists generally argue for the reduction of trade barriers and the opening of markets to global competition. Improving the efficiency of regulation. In many cases, an improvement in government regulation can simultaneously promote the more effective attainment of policy objectives and increase the efficiency of the economy. For example, a traditional approach to the problem of reducing pollution from the air might have entailed mandatory investment in costly new pollution-reduction equipment by all polluters. Instead, a system that is based on tradeable emissions certificates (see Chapter 8) can achieve the same results while encouraging the efficient allocation of pollution reduction among polluters. 6 The World Bank, World Development Report (Washington, D.C., 1999), p. 23. Check Point Describe the concept of long-run economic growth. How do economists measure the rate of economic growth? Of what significance is the “rule of 70” for economic growth? Identify the major determinants of economic growth. What policies might government enact to speed up economic growth? Theories Of Economic Growth The traditional theory of economic growth has its origins in the writings of Adam Smith, who wrote The Wealth of Nations in 1776. 7 According to Smith, larger markets encourage individuals to specialize in different parts of the production process and coordinate their labor...
eBook - ePub- Anthony J. Makin(Author)
- 2016(Publication Date)
- Routledge(Publisher)
...The structural-reform agenda put in place in the 1980s can be seen as a policy awakening to the macroeconomic importance of the supply side. Financial deregulation, less protection of domestic industry by means of tariffs and quotas on imports, privatisation of government assets and the internationalisation of economies’ capital markets were the first steps. These were followed in some economies by further policy initiatives to make labour markets more flexible, improve air, rail and water transport efficiency, and encourage greater competition in post and telecommunications. The benefits of economic growth seem obvious. Higher income per capita allows higher consumption levels and hence an improved standard of living. As a macroeconomic policy objective, however, striving for higher growth rates is not without its critics. Environmentalists, in particular, argue that higher economic growth rates tend to increase pollution, threatening the ecological system. In reply, however, proponents of growth argue that instead of halting economic growth, pollution should be addressed at its source, for instance through specific taxes at the firm level, emissions trading schemes or clearer definitions of property rights over air, land and water space. For open economies, factors of production continually flow across political boundaries. Policies aimed at increasing the scale of international resource flows by allowing freer trade in goods, services and assets are generally growth enhancing. Higher immigration rates, for instance, can raise the contribution of the labour force to growth...
eBook - ePub- Panagiotis E. Petrakis, Dionysis G. Valsamis, Kyriaki I. Kafka(Authors)
- 2020(Publication Date)
- Palgrave Macmillan(Publisher)
...Sect. 5.2.2) obstructs reforms that would promote growth and development because growth and development would undermine its political leverage and (d) banks intervene in the political processes, taking excessive risks. As a result, political decisions play an important role in economic developments (Rodrik, 2013). Finally, economic activity influences political decisions and political decisions affect the state of the economy (Frey & Steiner, 2012). In particular, (a) the government systematically influences economic activity, through a large number of policy tools, from taxation and public expenditure to many different kinds of regulations, and (b) economic activity, as reflected in the size of and change in GDP, the unemployment rate and inflation, affects how popular a government is with the people and, hence, whether it will be re-elected. 5.2.1 Policy Change and Reforms The modern world and economy are constantly changing under the influence of economic policies. The latter may cause smaller or greater gradual changes or may even take on the aspect of major reform programmes. Policy change should be differentiated from the concept of policy reform, which has far more ambitious goals than a gradual policy change (Cerna, 2013). So, then, the distinction between the concepts of policy change and reform plays a very important role in the whole process...
eBook - ePubThe Scottish Economy
A Living Book
- Kenneth Gibb, Duncan Maclennan, Des McNulty, Michael Comerford(Authors)
- 2017(Publication Date)
- Routledge(Publisher)
...Sustainable economic growth is the one central purpose to which all else in Government is directed and contributes." It set "an immediate growth target" of raising Scotland's gross domestic product (GDP) growth rate to the UK level by 2011. While there was a clear break from its predecessors in the tone of the 2007 strategy — it speaks of ambition and solidarity, it contains targets, its language is more ambitious than had previously been the case — the main objective and the underpinning economic analysis are substantially the same as that of the 1999 and 2003 administrations and of both iterations of FEDS: that faster and sustainable income growth is the main objective; that faster income growth derives from faster productivity growth; and that productivity growth is a consequence of, among other things, investment in capital of various kinds. Scotland's Economic Strategy (Scottish Government, 2015) of 2015 is the most recent development in the series of statements about objectives and policies. It reiterated the importance of productivity growth as the route to income growth — "our ambition remains to reach the top quartile of OECD economies in terms of productivity" — and the importance of investment and innovation in realising that. Its own innovation was to forge a causal link between inequality and economic growth...
eBook - ePubIssues and Challenges in the Malaysian Economy
Towards Inclusive Growth
- Mohd Fahmee Ab Hamid, Umar Abdul Basar, Rozilee Asid, Wan Farisan Wan Sulaiman, Elya Nabila Abdul Bahri, Nor Fatimah Che Sulaiman, Norlee Ramli(Authors)
- 2019(Publication Date)
- Emerald Publishing Limited(Publisher)
...This income inequality could be detrimental in achieving macroeconomic stability and growth. Fiscal policy has been identified as one of the main policy tools that can be used to reduce income inequality, through redistributing efforts using taxation and public spending to increase capacities of lower income groups (IMF, 2014). In addition, social safety nets programmes are very important to protect the income of the poor and ensure equal access to healthcare and education services that provide increased productive capabilities. 7.2 Review of Fiscal Policy in Inclusive Growth The new challenge of fiscal policy in emerging and developing economies is to create adequate fiscal space. This was due to the large fiscal stimulus implemented to overcome the impact of fiscal crisis in 2008 (Huidrom, Ayhan Kose, & Franziska 2018). The current fiscal policy in many emerging and developing economies is inadequate for effective future countercyclical measures and facing new fiscal challenges such as achieving inclusive growth. A study by Estrada, Lee, & Park (2014) has indicated that due to rise in income and population ageing, public spending over GDP will increase from 2.4% in 2010 to 7.3% in 2050, while for social security and welfare, the increase is 2.5% and 5.6%. This would require for governments to increase their fiscal revenue to ensure fiscal sustainability (Estrada, Lee, & Park, 2014). In addition to inadequate fiscal space, other issues concerning the role of fiscal policy in the economy especially in achieving inclusive growth are how does fiscal policy reduce inequality and is it effective? Some of the approaches taken by fiscal policymakers to achieve inclusive growth include revisiting the tax and public transfer policy, increasing the public service delivery, enhancing the role of business dynamism and public spending pro-poor and better targeted (OECD, 2017)...
