Maica Fetalino BSA II-A

REFLECTION

There are different economic development theories; these are the Theory of Economic Stagnation, the
Marx's Historical Materialism, the Rostow's Stages of Economic Growth, the Vicious Circle Theory, the Balanced
Versus Unbalanced Growth, the O-Ring Theory of Economic Development, the Lewis-Fei-Ranis Model, the
Baran's Neomarxist Thesis, the Dependency Theory, the Neoclassical Counterrevolution, and the Neoclassical
Growth Theory. But for me, among these theories, the most applicable to the Economic Development of
Philippines is the Neoclassical Growth Theory.
Neoclassical Growth Theory is introduced in 1956 by Robert Solow and Trevor Swan; the researchers in
National Bureau of Economic Research, but in 1957 Solow include technology as part of this theory. Neoclassical
Growth Theory states that the economic growth of a country is depending on three factors which are the labour,
the capital and technology. The theory assumes that the short -term balance in the economy is a result of different
volumes of labour and capital that play an important role in the production process. The theory states that
technological change notably influences the overall operation of an economy. Neoclassical growth theory indicated
the three factors needed for a growing economy. However, the theory stresses that short-term balance does not
require any of the three factors unlike the long-term balance. It is also state in this theory that gathering of capital
in an economy and the way of people in spending it will greatly help in determining the economic growth of a
country. In addition, the theory explains that the relation between capital and labour in an economy is affecting its
total output. Eventually, this theory also states, that technology increases the labour productivity that led in
increasing the overall output through expanding labour efficiency.
The latest information of Philippine Statistic Authority [PSA] reveals that there are at least 47.3 million
Filipinos in the labour force including employed and not-employed that contribute to the production of good and
services in the country. In February 2021, it shows that the employment rate is at 91.2%, it’s signifying that the
labour force in our country is enough to contribute to the economic development of our country. On the other hand,
the latest survey, when it comes to capital, show that the market capitalization of Philippines was 272, 790 US
dollars. As we noticed, the market capitalization of our country is fluctuating, and that’s one of the reasons why it’s
hard to balance the production in our country. Although there is enough labour force if the market capitalization is
not stable, it will be hard to operate production efficiently. Lastly, when it comes to technology, weather we admit
it or not, we can’t deny that we are lagging behind compared to other country. Sometimes other countries have
been using specific technology for a long time but when it introduce in to our country we think its new technology
and we are amazed. However, we keep pace with modern technologies especially technologies that will help to
growth of our economy. We strive to go along with other country when it comes to modern technologies but then
the market capitalization of our country is not enough to acquired heavy duties technology that can help in
productivity of our economy. Having advancement in technology is one of the strategies of developed countries to
maintain the stability of their economy.
So, labour, capital, and technology is interrelated. If our country will use this theory I believed that it will
help our country to step forward in being a developed country. Actually, we already have those three factors of
neoclassicism growth theory. We have enough labour force, we have market capitalization but the problem is it’s
fluctuating so it’s hard to predict, and last we have some technologies but then it’s not enough to sustain the overall
operation of our economy. If we want to pass this theory all we need to do is to improve these three factors of this
theory.

REFERENCES:

Banton, Caroline. “The Neoclassical Growth Theory Explained.” Investopedia, 2020,

www.investopedia.com/terms/n/neoclassical-growth-theory.asp.

Corporate Finance Institute. “Theories of Growth.” Corporate Finance Institute, 2 Feb. 2021,

corporatefinanceinstitute.com/resources/knowledge/economics/theories-of-growth.

Gavilan, Jodesz, and Michelle Abad. “IN NUMBERS: What You Need to Know about the Philippine Labor

Sector.” Rappler, 30 Apr. 2018, www.rappler.com/newsbreak/iq/facts-labor-sector-philippines.

“Philippines Market Capitalization, 1960–2020 - Knoema.Com.” Knoema, 20 Sept. 2021,

knoema.com/atlas/Philippines/topics/Economy/Financial-Sector-Capital-markets/Market-capitalization.
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