Economic%20Growth

1
Economic Growth

• An increase in productive capacity or an outward
  shift in the production possibilities frontiers
  (PPF).

2
Causes of Economic Growth

• Capital Accumulation
• An Increase in the Size of the Labor Force
• Population Growth
• An Increase in Labor Force Participation
• Technological Progress
• Neutral Technological Progress
• Capital-Saving Technological Progress
• Labor-Saving Technological Progress

3
Types of Economics Growth

• Balanced Growth
• Anti-Trade Biased Growth (Import-Replacing
  Growth)
• Pro-Trade Biased Growth (Export-Expanding Growth

4
Balanced Growth

• A proportional increase in the countrys
  endowments of factors of production such that the
  following ratios remain the same
• Capital to labor ratio
• Land to labor ratio and
• Land to capital ratio.

5
Effects of Balanced Growth

• Balanced growth results in neutral production,
  consumption and the volume-of-trade effects.

• With constant returns to scale, as the endowments
  of factors of production increase proportionally,
  so do production, consumption and the volume of
  trade.

6
Effects of Anti-Trade Biased Growth

• Anti-trade biased growth cuts trade, yet brings
  gains to the country itself.

• If the increase in the endowments of factors of
  production is biased toward the import-competing
  industry, the countrys ability to make the
  importable goods grows faster than its ability to
  make the exportable goods.

7
Effects of Pro-Trade Biased Growth

• If the increase in the endowments of factors of
  production is biased toward the exporting
  industry, the countrys ability to make the
  exportable goods grows faster than its ability to
  make the importable goods.

• Pro-trade biased growth (export expanding growth)
  brings gains to the country by increasing the
  volume of trade.