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Growth Definition

Economic growth is the sustained increase in welfare of an economyÐnation, region, cityÐtogether with the ongoing changes in that economy's industrial structure; public health, literacy, and demography;and distribution of income. To measure economic growth is to quantify this increase in welfare and to endow with numerical precision these large-scale economic and social changes.

How to measure: Economic growth is the increase of per capita gross domestic product (GDP) or other measures of aggregate income, typically reported as the annual rate of change in real GDP. Difficulties of using GDP per capita as a measure of economic growth: Regional Variations in income and spending National GDP figures hide significant regional variations in output, employment and incomes per head of population. Within each region there are also areas of relative prosperity contrasting with unemployment black-spots and deep-rooted social and economic deprivation. Inequalities of income and wealth GDP figures on their own do not show the distribution of income and the uneven spread of financial wealth. Incomes and earnings may be very unequally distributed among the population and rising national prosperity can still be accompanied by rising relative poverty.

Economic growth and externalities Rising national output might have been accompanied by an increase in pollution and other negative externalities which have a negative effect on economic welfare. Leisure and working hours Rising national output might have been achieved at the expense of leisure time if workers are working longer hours The balance between consumption and investment

However. Innovation contributes to boosting per capita income. Its notable positive spin-off effects on growth make innovation one of the few areas where there is general agreement on the necessity of public action. land. Missing inputs: Human capital: Education and training and health Infrastructure: Transport. as measured by per capita GDP. but also through its indirect effects— innovation deepens the knowledge pool. not only through its direct effect on system and environment . population growth is less than 1% but it is much higher in the least developed countries. etc) similarly grow strongly. In rich countries. which in turn facilitates further advances and welfare improvements. improve when national output grows faster than population.Faster economic growth might improve living standards today but lead to an overexploitation of scarce finite economic resources thereby limiting future growth prospects. as opposed to just capital accumulation. The black economy and non-monetised sectors GDP figures might understate the true living standards because of the existence and growth of the black economy. sophisticated capital stock. raw materials. A rapidly expanding labour force can be consistent with strong GDP growth if other inputs (capital. The alternatives are borrowing. However. But these are typically inadequate and can make development even more difficult to achieve. foreign direct investment and aid. this is rarely the case in poor countries. Why some countries can’t grow as the other’s: Convergence: Population growth: Living standards.communication. Capital stock: Rich countries have access to a large. Key factors that drive economic growth:  lower population growth  higher savings ratios  lower rates of capital consumption (depreciation)  higher rates of technological progress [Expand these points from txt book ch 22 at the very beginning u’ll have all the major factors described] Top of Form partner-pub-3798 FORID:10 ISO-8859-1 Technological progress: Disscuss abt importance of innovation and productivity improvement: Economic theory increasingly stresses the importance of innovation as a driver of growth. implying a struggle to maintain even existing per capita GDP levels. subsistence living means that poor countries have few internally‐generated savings to accumulate capital.

property rights and history Missing Input Estimates Category Specific measure Impact* Human capital Education one extra year of schooling 0.Institutions : Market efficiency.Manufactured product export 4.FDI 2.2% * on annual growth in GDP per capita 20 Growth strategy: 1.8% Institutions Public consumption 10% higher ratio of GDP ‐0.Law.1 (scale of 5) 0.Commodity export 3.Foreign aid Exceptional china export led growth: Ch 27 Bottom of Form .6% Institutions Property rights improved index rating of 0.4% g Human capital Health 10yr increase in life expectancy at birth 0.