Economics
Modern Economic Growth
Modern Economic Growth refers to sustained and significant increases in a country's real per capita income. It is characterized by technological advancements, increased productivity, and improvements in living standards. This concept is central to understanding the long-term economic development and prosperity of nations.
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11 Key excerpts on "Modern Economic Growth"
No longer available |Learn moreAn Economic History of the United States
Connecting the Present with the Past
- Mark V. Siegler(Author)
- 2017(Publication Date)
- Red Globe Press(Publisher)
25 2 Standards of Living and American Economic Growth Economic growth refers to the increase in average standards of living in a country over a sustained period. It is commonly measured as the growth rate of real GDP per capita, which is the amount of production per person. Economic growth, however, is not just more of the same goods and services, but fundamentally new and different ones as well. To appreciate the benefits of economic growth, try to live for just one day by using only the goods and services that were available to Americans in 1776 (or even 1876). This would be a day without electric lights, flush toilets, indoor plumbing, air conditioning, central heating, refrigeration, automobiles, airplanes, televisions, computers, the Internet, smartphones, vaccinations, antibiotics, or modern medical care. In fact, such a day would be nearly impossible to live because nearly everything we use now relies on inventions and innovations since 1776. For starters, you would not be able to brush your teeth or zip up your pants in the morning! 1 Economic growth has also led to longer, healthier, and more educated lives, with far less drudg-ery and much more leisure time. What makes the American experience unique is that the United States was able to maintain rapid growth for so long. Because of past economic growth, Americans today are able to consume a vast amount and variety of goods and services that would have been difficult to imagine in 1776. Economic growth, however, is a very recent develop-ment in human history. Before the Industrial Revolution, beginning in 1760 or so, average standards of living across the globe did not change perceptibly over the long run. 2 While wars, plagues, and other catastrophes led to transitory changes in living standards, the long-run pace of progress was extremely slow. Between the years 1 A.D. and 1700 A.D., output per person worldwide is estimated to have increased only 0.016
eBook - PDFTrading Economics
A Guide to Economic Statistics for Practitioners and Students
- Trevor Williams, Victoria Turton(Authors)
- 2014(Publication Date)
- Wiley(Publisher)
2 Economic Growth A nation is not made wealthy by the childish accumulation of shiny metals, but is enriched by the economic prosperity of its people. Adam Smith 1 Economic growth is the litmus test of modern national and global suc-cess. Lack of growth can topple governments, bankrupt states, jeopar-dise currencies, cause wars and create long-term structural and societal problems that create hardship for millions. Understanding how growth occurs, what jeopardises it, but, perhaps more importantly, how to sus-tain it, has become the Holy Grail of politicians. The universal, standard measure of a country’s economic growth is its gross domestic product (GDP). It is vital to understand what components make up this mea-sure and how they impact on wider society, to be able to analyse and understand their impact on financial markets. ECONOMIC GROWTH THROUGH THE AGES Figure 2.1 shows the world economy from 1 to 2008. The author esti-mates data for year 1 and then for year 1000, then 500 years later, and, after that, at 100-year intervals until 1800 when it becomes annual. Prior to 1500, figures are based on population trends, as there was very little productivity difference. This is not to say there was no divergence – there was – as better agricultural techniques, better access to land and water and so forth started to make a difference in some parts of the world, from around 1000. However, the real game changer was the Industrial Revolution, which altered everything, starting in Europe, but then quickly spreading around the world. And this process has not yet ended, as there is still catch-up occurring in some countries. There is still potential for big changes in GDP per head (per capita), as even a cursory glance at the chart will show. Japan and China have made remarkable progress in a short time, 1 Smith, Adam, An Inquiry into the Nature and Causes of the Wealth Of Nations (1776). http://www.econlib.org/library/Smith/smWN.html (accessed 12 April 2013).
eBook - PDF- Steven Durlauf, L. Blume, Steven Durlauf, L. Blume(Authors)
- 2016(Publication Date)
- Palgrave Macmillan(Publisher)
economic growth in the very long run The evolution of economies during the major portion of human history was marked by Malthusian stagnation. Technological progress and population growth were minuscule by modern standards, and the average growth rates of income per capita in various regions of the world were even slower due to the offsetting effect of population growth on the expansion of resources per capita. In the past two centuries the pace of technological progress increased significantly in association with the process of industrialization. Various regions of the world departed from the Malthusian trap and experienced a considerable rise in the growth rates of income per capita and population. Unlike episodes of technological progress in the pre-Industrial Revolution era that failed to generate sustained economic growth, the increasing role of human capital in the production process in the second phase of industrialization ultimately prompted a demographic transition, liberating the gains in productivity from the counterbalancing effects of population growth. The decline in the growth rate of population and the enhancement of human capital formation and technological progress paved the way for the emergence of the modern state of sustained economic growth. Variations in the timing of the transitions from a Malthusian epoch to a state of sustained economic growth across countries lead to a considerable rise in the ratio of GDP per capita between the richest and the poorest regions of the world from 3:1 in 1820 to 18:1 in 2000 (see Figure 1). 0 4,000 8,000 12,000 16,000 20,000 24,000 0 250 500 750 1,000 1,250 1,500 1,750 2,000 GDP per capita (1990 int'l$) Western Europe Western Offshoots Asia Latin America Africa Eastern Europe Figure 1 The evolution of regional income per capita, 1–2000. Source: Maddison (2001).
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 - PDFInnovation for Value and Mission
An Introduction to Innovation Management and Policy
- Peet van Biljon(Author)
- 2022(Publication Date)
- De Gruyter(Publisher)
Examples are passenger-airplane manufacturing (an effective duopoly between Airbus and Boe- ing for large-bodied jets), shipping companies, telecommunication companies, and semiconductor foundries. Growth theory in economics is concerned with changes in the aggregate produc- tion function, which is conceptually obtained by adding up all the production func- tions in an economy. The sum of the outputs of all the production functions in the economy is the gross domestic product (GDP), which is the sum of all goods and services produced in an economy over a certain period (usually one year). Economic growth is commonly defined as growth in GDP (percent increase per year, or per quarter). Growth theory comprises the study of how increases in factors of produc- tion drive increases in GDP, and how changes in the production function drive in- creases in GDP. GDP is the modern measurement of the total size of the economy, which Simon Kuznets (Acting Secretary of Commerce 1934) proposed as a measure of national eco- nomic activity to the U.S. Congress during the Great Depression. 84 Subsequently, GDP came into worldwide use in the Post World War II years. xvi The conventional way economists think about living standards is that they are expressed as per capita wage income, output, or consumption. The commonly used measure is GDP per cap- ita, that is, GDP divided by population size. xvii Kuznets initially used the related, but not identical, term national income. Today, gross national income (GNI) is defined as gross domestic product plus net receipts from abroad of compensa- tion of employees, property income, and net taxes less subsidies on production. This and other official international definitions may be found in The System of National Accounts (2008), which is the latest version of the international statistical standard for national accounts maintained by the United Nations.
eBook - PDF- David Shapiro, Daniel MacDonald, Steven A. Greenlaw(Authors)
- 2022(Publication Date)
- Openstax(Publisher)
Laws must be clear, public, fair, and enforced, and applicable to all members of society special economic zone (SEZ) area of a country, usually with access to a port where, among other benefits, the government does not tax trade technological change a combination of invention—advances in knowledge—and innovation technology all the ways in which existing inputs produce more or higher quality, as well as different and altogether new products Key Concepts and Summary 7.1 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 development of governance and market institutions. 7.2 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. 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.
- 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 - PDF- 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. 7.2 | 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 - PDF- Steven A. Greenlaw, Timothy Taylor, David Shapiro(Authors)
- 2017(Publication Date)
- Openstax(Publisher)
According to the World Bank, GDP for South Korea now exceeds $30,000 in nominal terms, placing it firmly among high-income countries like Italy, New Zealand, and Israel. Measured by total GDP in 2015, South Korea is the eleventh-largest economy in the world. For a nation of 50 million people, this transformation is extraordinary. South Korea is a standout example, but it is not the only case of rapid and sustained economic growth. Other East Asian nations, like Thailand and Indonesia, have seen very rapid growth as well. China has grown enormously since it enacted market-oriented economic reforms around 1980. GDP per capita in high-income economies like the United States also has grown dramatically albeit over a longer time frame. Since the Civil War, the U.S. economy has transformed from a primarily rural and agricultural economy to an economy based on services, manufacturing, and technology. 20.1 | The Relatively Recent Arrival of Economic Growth By the end of this section, you will be able to: • Explain the conditions that have allowed for Modern Economic Growth in the last two centuries • Analyze the influence of public policies on an economy's long-run economic growth Let’s begin with a brief overview of spectacular economic growth patterns around the world in the last two centuries. We commonly refer to this as the period of Modern Economic Growth. (Later in the chapter we will discuss lower economic growth rates and some key ingredients for economic progress.) Rapid and sustained economic growth is a relatively recent experience for the human race. Before the last two centuries, although rulers, nobles, and conquerors could afford some extravagances and although economies rose above the subsistence level, the average person’s standard of living had not changed much for centuries. Progressive, powerful economic and institutional changes started to have a significant effect in the late eighteenth and early nineteenth centuries.
eBook - PDF- Steven A. Greenlaw, David Shapiro, Daniel MacDonald(Authors)
- 2022(Publication Date)
- Openstax(Publisher)
According to the World Bank, GDP for South Korea now exceeds $30,000 in nominal terms, placing it firmly among high-income countries like Italy, New Zealand, and Israel. Measured by total GDP in 2015, South Korea is the eleventh-largest economy in the world. For a nation of 50 million people, this transformation is extraordinary. South Korea is a standout example, but it is not the only case of rapid and sustained economic growth. Other East Asian nations, like Thailand and Indonesia, have seen very rapid growth as well. China has grown enormously since it enacted market-oriented economic reforms around 1980. GDP per capita in high-income economies like the United States also has grown dramatically albeit over a longer time frame. Since the Civil War, the U.S. economy has transformed from a primarily rural and agricultural economy to an economy based on services, manufacturing, and technology. 20.1 The Relatively Recent Arrival of Economic Growth LEARNING OBJECTIVES By the end of this section, you will be able to: • Explain the conditions that have allowed for Modern Economic Growth in the last two centuries • Analyze the influence of public policies on an economy's long-run economic growth Let’s begin with a brief overview of spectacular economic growth patterns around the world in the last two centuries. We commonly refer to this as the period of Modern Economic Growth. (Later in the chapter we will discuss lower economic growth rates and some key ingredients for economic progress.) Rapid and sustained economic growth is a relatively recent experience for the human race. Before the last two centuries, although rulers, nobles, and conquerors could afford some extravagances and although economies rose above the subsistence level, the average person’s standard of living had not changed much for centuries. Progressive, powerful economic and institutional changes started to have a significant effect in the late eighteenth and early nineteenth centuries.
eBook - PDF- Philippe Aghion, Steven Durlauf(Authors)
- 2005(Publication Date)
- North Holland(Publisher)
178 O. Galor link between income per capita and population growth reversed its course in some economies but not in others? why have the differences in income per capita across coun- tries increased so markedly in the last two centuries? and has the transition to a state of sustained economic growth in advanced economies adversely affected the process of development in less-developed economies? Unified growth theory suggests that the transition from stagnation to growth is an in- evitable by-product of the process of development. The inherent Malthusian interaction between technology and population, accelerated the pace of technological progress, and ultimately brought about an industrial demand for human capital, stimulating human capital formation, and thus further technological progress, and triggering a demographic transition, that has enabled economies to convert a larger share of the fruits of factor ac- cumulation and technological progress into growth of income per capita. Moreover, the theory suggests that differences in the timing of the take-off from stagnation to growth across countries contributed significantly to the Great Divergence and to the emergence of convergence clubs. Variations in the economic performance across countries and re- gions (e.g., earlier industrialization in England than in China) reflect initial differences in geographical factors and historical accidents and their manifestation in variations in institutional, demographic, and cultural factors, trade patterns, colonial status, and pub- lic policy. 2. Historical evidence This section examines the historical evidence about the evolution of the relationship between income per capita, population growth, technological change and human capital formation during the course of three distinct regimes that have characterized the process of economic development: The Malthusian Epoch, The Post-Malthusian Regime, and the Sustained Growth Regime.
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