Growth Accounting Relations
Growth accounting relations is a quantitative model Robert Solow developed in 1957. It is used to measure the effect of different factors of economic growth. In addition, it indirectly estimates the technological progress in an economy. In other words, it…
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) Thomas Malthus developed the classical growth theory in 1798….
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…
Capital Deepening and Technological Progress
Capital deepening is a condition in which an economy’s capital per worker (capital-labor ratio) is rising. The rate of change in the capital stock per labor hour. measures capital deepening. On the other hand, technological progress is the innovation of…
The Rationale for Government Incentives and Growth in an Open Economy (2022 curriculum)
An investment incentive is a policy executed by the government to promote the start-up of new businesses or encourage existing firms to expand or not to move to another country. The incentive can be financial incentives such as reduced tax…
The Rationale for Government Incentives and Growth in an Open Economy
An investment incentive is a government-sponsored policy aimed at promoting start-ups or encouraging existing firms to either expand or not move to another country. The incentive can be financial interventions such as reduced tax rates, grants, infrastructural development, and free…
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 developing countries converges with that of developed countries. Types of Convergence…
Effects of Potential GDP Growth Rate on Equity and Fixed Income
GDP is important because it controls inflation’s effects on an economy. If the real GDP growth is higher (lower) than the potential growth rate, the inflation rate will increase (decrease), affecting the nominal rates and bond prices. Moreover, potential GDP…
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 always curious to know if earnings growth is attributable to the GDP growth rate. Equally, they are keen on…
Economic Growth in the Developed and Developing Economies
Economic growth is the increase in the production of goods and services of a country, compared to one time and another. GDP and per capita GDP are common indicators economists employ in the measuring the standard of living and the…
