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The Rationale for Government Incentives

An investment incentive is a policy executed by the government to promote the establishment of new businesses or to encourage existing firms to expand or venture into markets abroad. An investment incentive can be financial. In such a case, it…

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Convergence Hypotheses

Convergence refers to a situation where countries with low per capita incomes grow faster than countries with high per capita incomes. Consequently, with time, the per capita income for the developing countries and that of developed countries converge. Types of…

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Theories of Growth

There are three growth theories based on the per capita growth in an economy: The classical growth theory. The neoclassical growth theory. Endogenous growth theory. The Classical Theory (Malthusian Theory) The classical growth theory, developed by Thomas Malthus in 1798,…

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Effects of Investment in Physical Capital, Human Capital, and Technological Development on Economic Growth.

Human Capital Human capital is the amassed knowledge and skills that the labor force reaps from education, training, or life experiences. In other words, human capital is the “labor quality of the labor quantity.” Better educated and skilled workers will…

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Effects of Demographics, Immigration, and Labor Force Participation on the Rate and Sustainability of Economic Growth

Labor Supply As seen in the production function, economic growth is mainly affected by increased labor and capital. The size of labor is measured using the total number of hours available for work. The labor force is the proportion of…

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Effect of Natural Resources on Economic Growth

A simple form of the production function, which concentrated on labor and capital inputs, was used in the previous reading. The production function can be extended to include other factors of production, such as: Human capital (H). Raw materials (N)….

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Growth Accounting Relations

The growth accounting relations is a quantitative model developed by Robert Solow in 1957 used to measure the effects of different factors of economic growth and indirectly estimate the technological progress of an economy. In other words, it is a…

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Capital Deepening and Technological Progress

Capital deepening is a situation where the capital per worker (capital-labor ratio) in the economy is rising. It is measured by the rate of change in the capital stock per labor hour. On the other hand, technological progress is the…

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Effects of Potential GDP Growth Rate on Equity and Fixed Income

One of the uses of the GDP is the control of the effects of inflation on the economy. If the real GDP growth is higher (lower) than the potential growth rate, then the inflation rate will increase (decrease), affecting the…

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Relationship Between Long-run Rate of Stock Market Appreciation and Sustainable Growth Rate

Potential economic growth is vital to investors. Potential GDP is used to measure the productive capacity of an economy. Investors are concerned if the earnings growth is related to or limited by the GDP growth rate. The growth earnings exceed…

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