Theories of Growth and Regional Development: (a) Harrod-Domar Model: The Harroad-Domar model of economic growth is based on the experiences of advanced economies. It attempts to analyse the requirements of steady growth in advanced countries. The model discovers the rate of income growth necessary for a smooth and uninterrupted working of the economy. It revives the importance of investment for the growth of the economy. So, as long as net investment is taking place real income and output will continue to expand.
A major goal for developing countries is economic development or economic growth.However, the two terms are not identical. Growth may be necessary but not sufficient for development. This chapter gives a brief background on economic development. It also explains different methods of classifying countries according to United Nations and World Bank criteria. Economic development is usually measured using Gross Domestic Product (GDP), Human Development Index (HDI) and Purchasing Power Parity (PPP).
The neoclassical growth theory is likewise called the Solow-Swan growth model and is built upon the basic neoclassical frameworks of long run economic growth. This type of framework assumes a neo-classical production function with a constant return to scale, diminishing returns to each input (labour and capital) and an easy flexibility of substitution between the inputs. It explains economic growth using four main elements, namely, productivity, capital accumulation, population growth and technological progress. This theory states that the long run economic growth is exogenously determined, that is, economic growth is influenced by factors outside the basic model specifications. The basic building block of this theory is the production function which has constant labour (L) and capital (K) which are consistent.
4. What policy initiatives should be taken by the emerging economies to sustain their economic growth and further improve their productivity? 1.2 Objective of the Study: The objective of this study is to investigate the phenomenon of slow productivity growth of selected advanced countries and fast economic growth and rising productivity level of selected emerging economies so that we will be able to understand the phenomenon of economic growth in its real
Classical Growth Theory Adam Smith has founded the classical theory of economic growth based on the production inputs (Land, Labor and Capital). He has expressed his production function as follows: Y=f (L, K, T) Where Y stands for output, L in labor, K is capital and T is land. He considered savings as engine to growth hence it creates investment and also he released that the income distribution is major driven to the nation grow either fast or low. According to the classical theory, the variation in price level relates to its tax impact is not straight linked to the profit and output. The higher wage cost reduces the firm’s profit level and the relationship between inflation and output become implicitly negative (Gokal and Harfi (2004)).
Accounting practice in the post‐Enron era: the implications for financial statements in the property industry. Retrieved February 05, 2018, from http://onlinelibrary.wiley.com/doi/10.1002/bref.80/abstract Enron Case study. (n.d.). Retrieved February 15, 2018, from http://www.applied-corporate-governance.com/enron-case-study.html Gladwell. M. (2007, January 8).
The first term in the decomposition represents the “within” component of productivity growth. The second term “between” component captures the direct contribution of structural change to productivity growth. However, I modify equation (1) to be able to reflect growth rates in an economy by dividing the whole equation by labour productivity at t-1 Therefore, (∆Y_t)/Y_(t-1) =∑_(i=n)▒〖(∆y_(i,t) 〖(N_i⁄N)〗_(t-1))/Y_(t-1) +∑_(i=n)▒(∆(N_i⁄N)y_(i,t))/Y_(t-1) 〗
This theory did focus on the concept of full employment but focused on economic growth and stability. Neo-Keynesians proposed that Keynes were right in the short term and classical economists were correct in the long-term. According to this theory short term shocks may put markets out of equilibrium. However, in the long- term, free
There is always a tension between constraints regarding the initial conditions needed for industrialisation and the opportunities that accrue to an economy if they can successfully industrialise. The main point that Gerschenkron tries to put forward in “Economic Development in Historical perspective” that degree of backwardness of a country leads to a response such that an institution suited to its need arises and the instruments and channels too are suited according to the circumstances. Late industrialisers need not always need the same “initial conditions as that of early industrialisers as they have an added advantage of technology as well as labour saving capital. In Germany, banks emerged as a response to its lack of “initial conditions”. It not only helped overcome the lack of accumulated capital but also the lack of entrepreneurship.
What is development economics about? More than growth, Structural change, Institutional change. Least-developed country is not only have lower levels of per-capita income (productivity), but also lack institutions common to developed country is; e.g. law, property rights, administrative systems. The first step in defining economic development is distinguishing it from the concept of economic growth.