3 Theoretical Analysis of Economic Growth

2020 ◽  
Author(s):  
Cheng Thomas K
Keyword(s):  
Economic Growth ◽  
Theoretical Analysis ◽  
Growth Model ◽  
Capital Accumulation ◽  
Growth Models ◽  
Product Variety ◽  
Nobel Laureate ◽  
Industrial Sector ◽  
Domestic Savings ◽  
Ak Model

This chapter presents a theoretical analysis of economic growth. The first growth model in modern economics is arguably the Harrod–Domar growth model, named after Roy Harrod and Evsey Domar. Under this model, the major obstacle to economic growth is a lack of investment, which in turn is caused by a lack of capital. Therefore, the solution to poor growth is to somehow plug the savings gap by increasing domestic savings or foreign aid. Two other growth models that emphasize the importance of investment and capital accumulation were proposed by Nobel Laureate Arthur Lewis and Walt Rostow. The main thesis behind Lewis’s model is the idea of unlimited surplus of rural labor. Growth is therefore predicated on the increase in size of the industrial sector in the economy. Meanwhile, Rostow posits a five-stage evolutionary growth model. He argues that the key to moving from one stage to the next is the extension of the existing structure of production, which again requires investment in the capital stock. The chapter also looks at the Solow–Swan model, which is often regarded as the first modern growth model, as well as the endogenous growth models such as the AK model; the Lucas Human Capital model; the Romer Knowledge Spillover and Product Variety models; and the Schumpeterian growth models.

Book Reviews

2010 ◽  
Vol 48 (4) ◽  
pp. 1041-1043
Keyword(s):  
Economic Growth ◽  
Labor Supply ◽  
Foreign Aid ◽  
Growth Model ◽  
Open Economy ◽  
Capital Accumulation ◽  
Growth Models ◽  
Small Open Economy ◽  
Basic Model ◽  
The University

Kent P. Kimbrough of Duke University reviews “Capital Accumulation and Economic Growth in a Small Open Economy” by Stephen J. Turnovsky,. The EconLit Abstract of the reviewed work begins “Investigates the process of economic growth in a small open economy and considers whether it is sensitive to the economy’s productive structure. Discusses a basic growth model with fixed labor supply; a basic growth model with endogenous labor supply; transitional dynamics and endogenous growth in one-sector models; two-sector growth models; nonscale growth models; a basic model of foreign aid; and foreign aid, capital accumulation, and economic growth--some extensions. Turnovsky is Castor Chair of Economics at the University of Washington. Index.”

scholarly journals A Discrete Heterogeneous-Group Economic Growth Model with Endogenous Leisure Time

2009 ◽  
Vol 2009 ◽  
pp. 1-17
Author(s):  
Wei-Bin Zhang
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Income Distribution ◽  
Growth Model ◽  
Time Allocation ◽  
Capital Accumulation ◽  
Economic Growth Model ◽  
National Economic ◽  
The Rich ◽  
Main Engine

This paper proposes a one-sector multigroup growth model with endogenous labor supply in discrete time. Proposing an alternative approach to behavior of households, we examine the dynamics of wealth and income distribution in a competitive economy with capital accumulation as the main engine of economic growth. We show how human capital levels, preferences, and labor force of heterogeneous households determine the national economic growth, wealth, and income distribution and time allocation of the groups. By simulation we demonstrate, for instance, that in the three-group economy when the rich group's human capital is improved, all the groups will economically benefit, and the leisure times of all the groups are reduced but when any other group's human capital is improved, the group will economically benefit, the other two groups economically lose, and the leisure times of all the groups are increased.

On the Effectiveness of Growth- Enhancing Policies in a Model of Growth Without Scale Effects

2002 ◽  
Vol 3 (3) ◽  
pp. 339-346 ◽  
Author(s):  
Lutz G. Arnold
Keyword(s):  
Economic Growth ◽  
Growth Rate ◽  
Human Capital ◽  
Population Growth ◽  
Capital Accumulation ◽  
Scale Effects ◽  
Growth Models ◽  
Empirical Studies ◽  
Human Capital Accumulation ◽  
Accelerate Growth

Abstract Standard R&D growth models have two disturbing properties: the presence of scale effects (i.e., the prediction that larger economies grow faster) and the implication that there is a multitude of growth-enhancing policies. Recent models of growth without scale effects, such as Segerstrom's (1998), not only remove the counterfactual scale effect, but also imply that the growth rate does not react to any kind of economic policy. They share a different disturbing property, however: economic growth depends positively on population growth, and the economy cannot grow in the absence of population growth. The present paper integrates human capital accumulation into Segerstrom's (1998) model of growth without scale effects. Consistent with many empirical studies, growth is positively related not to population growth, but to investment in human capital. And there is one way to accelerate growth: subsidizing education.

scholarly journals The Dynamics of a Spatial Economic Model with Bounded Population Growth

2021 ◽  
Vol 2021 ◽  
pp. 1-11
Author(s):  
Yue Zhong
Keyword(s):  
Economic Growth ◽  
Population Growth ◽  
Growth Model ◽  
Explicit Solution ◽  
Capital Accumulation ◽  
Initial Distribution ◽  
Time Behavior ◽  
Continuous Space ◽  
Infinite Dimensional ◽  
Economic Growth Model

We investigate a spatial economic growth model with bounded population growth to obtain the asymptotic behavior of detrended capital in a continuous space. The formation of capital accumulation is expressed by a partial differential equation with corresponding boundary conditions. The capital accumulation interacts with the morphology to affect the optimal dynamics of economic growth. After redrafting the spatial growth model in the infinite dimensional Hilbert space, we identify the unique optimal control and value function when the bounded population growth is considered. With nonnegative initial distribution of capital, the explicit solution of the model is obtained. The time behavior of the explicit solution guarantees the convergence issue of the detrended capital level across space and time.

scholarly journals Impact of Domestic Industrial Output on Economic Growth in Nigeria

2021 ◽  
Vol 2 (1) ◽  
pp. 57-67
Author(s):  
Kazeem Fasoye ◽  
Abiodun Sunday Olayiwola ◽  
Kehinde Elizabeth Joseph
Keyword(s):  
Economic Growth ◽  
Gross Domestic Product ◽  
Practical Implication ◽  
Industrial Sector ◽  
Domestic Product ◽  
Industrial Output ◽  
Domestic Production ◽  
Real Gross Domestic Product ◽  
Distributed Lag ◽  
Domestic Savings

Purpose: This paper examined the potential of domestic industrial output on economic growth in Nigeria. Approach/ Methodology/ Design: An Autoregressive Distributed Lag (ARDL) model procedure was employed for data analysis. Findings: The results revealed that the contribution of the domestic industrial output to economic growth was appalling which was necessitated by the worrisome image of “Made-in-Nigeria” goods. It was also showed that the results that domestic industrial output and domestic savings have positive relationships with real gross domestic product (RGDP) in the long run. This implies that a rise in the level of each of domestic output and domestic savings necessitated an increase in real gross domestic product (RGDP). Practical Implication: The implication presented in this study is related to the concerned authorities. The results indicate the need for diverse domestic production in order to achieve a healthy competition in the industrial sector in the country. Originality/Value: The study innovates by employing various statistical tools for exploring the effect of domestic industrial output on economic growth. The significant contribution of this study is in identifying that domestic production in Nigeria has been lagged behind in terms of output performance in the economy.

scholarly journals Incorporating Fuzzy Logic in Harrod’s Economic Growth Model

Mathematics ◽  
2021 ◽  
Vol 9 (18) ◽  
pp. 2194
Author(s):  
Joan Carles Ferrer-Comalat ◽  
Salvador Linares-Mustarós ◽  
Ricard Rigall-Torrent
Keyword(s):  
Economic Growth ◽  
Fuzzy Logic ◽  
Growth Model ◽  
Growth Models ◽  
Classical Model ◽  
Economic Growth Model ◽  
Fuzzy Logic Theory ◽  
Endogenous Growth Models ◽  
Economic Growth Models ◽  
Equilibrium Growth

This paper suggests the possibility of incorporating the methodology of fuzzy logic theory into Harrod’s economic growth model, a classic model of economic dynamics for studying the growth of a developing economy based on the assumption that an economy with only savings and investment income is in equilibrium when savings are equal to investment. This model was the first precursor to exogenous growth models, which in turn gave rise to endogenous growth models. This article therefore represents a first step towards introducing fuzzy logic into economic growth models. The study concerned considers consumption and savings to depend on income by means of uncertain factors, and investment to depend on the variation of income through the accelerator factor, which we consider uncertain. These conditions are used to determine the equilibrium growth rate of income and investment, as well as the uncertain values for these variables in terms of fuzzy numbers. As a result, the new model is shown to expand the classical model by incorporating uncertainty into its variables.

scholarly journals Capital formation and economic growth under central planning and transition: A theoretical and empirical analysis, ca. 1920–2008

2015 ◽  
Vol 65 (1) ◽  
pp. 27-50 ◽  
Author(s):  
Péter Földvári ◽  
Bas van Leeuwen ◽  
Dmitry Didenko
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Capital Accumulation ◽  
Growth Models ◽  
Physical Capital ◽  
Early Years ◽  
National Accounts ◽  
System Of National Accounts ◽  
Long Run ◽  
Physical Capital Accumulation

According to the consensus view, it was primarily physical capital accumulation that drove economic growth during the early years of state socialism. Growth models incorporating both human and physical capital accumulation led to the conclusion that a high physical/human capital ratio can cause a lower economic growth in the long run, hence offering an explanation for the failure of socialist economies. In this paper, we show theoretically and empirically that according to the logic of the socialist planner, it was optimal to achieve a higher physical to human capital ratio in socialist countries than in the West. Using a VAR analysis, we find empirical confirmation that within the Material Product System of national accounting, the relative dominance of investment in physical capital accumulation relative to human capital was indeed more efficient than under the system of national accounts.

scholarly journals ELEMENTS OF THE NEOCLASSICAL GROWTH THEORY

2014 ◽  
Author(s):  
Florina Popa
Keyword(s):  
Economic Growth ◽  
Growth Model ◽  
Technical Progress ◽  
Capital Accumulation ◽  
Growth Theory ◽  
Economic Science ◽  
Growth Phenomenon ◽  
New Guidelines ◽  
Neoclassical Growth Theory ◽  
Neoclassical Growth

One of the relevant components of the contemporary economic science is the economic growth theory, the economic background of the time leading to new guidelines of the research. The neoclassical growth theory - the core of modern analysis - explains how the capital accumulation and technological changes affect the economy, significant for the analysis of the economic growth process being the Solow’s neoclassical growth model. The paper brief describes the elements of the economic growth model developed by Solow, both for the situation when it allows the explanation of extensive growth and that wherein the growth is of intensive nature, as a result of the intervention of exogenous technical progress – a determinant of factors productivity growth. It is highlighted the importance of the exogenous neoclassical model, proposed by Solow, who showed the determinant role of the technical progress in the economic growth phenomenon.

scholarly journals Modeling and Application of Fractional-Order Economic Growth Model with Time Delay

2021 ◽  
Vol 5 (3) ◽  
pp. 74
Author(s):  
Ziyi Lin ◽  
Hu Wang
Keyword(s):  
Economic Growth ◽  
Time Delay ◽  
Fractional Order ◽  
Growth Model ◽  
Capital Accumulation ◽  
High Speed ◽  
Time Lag ◽  
Sufficient Conditions ◽  
Economic Growth Model ◽  
Proposed Model

This paper proposes a fractional-order economic growth model with time delay based on the Solow model to describe the economic growth path and explore the underlying growth factors. It effectively captures memory characteristics in economic operations by adding a time lag to the capital stock. The proposed model is presented in the form of a fractional differential equations system, and the sufficient conditions for the local stability are obtained. In the simulation, the theoretical results are verified and the sensitivity analysis is performed on individual parameters. Based on the proposed model, we predict China’s GDP in the next thirty years through optimization and find medium-to-high-speed growth in the short term. Furthermore, the application results indicate that China is facing the disappearance of demographic dividend and the deceleration of capital accumulation. Therefore, it is urgent for China to increase the total factor productivity (TFP) and transform its economic growth into a trajectory dependent on TFP growth.

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