What is the recipe for economic growth? To begin with, many roads lead to Rome. There are many successful strategies on the road to self-sustained economic growth. Britain, for example, became the world economic leader in the 1800s by pioneering the Industrial Revolution, inventing steam engines and railroads, and emphasizing free trade. Japan, by contrast, came to the economic-growth race later. It .made its mark by first imitating foreign·technologies and protecting domestic industries from imports and then developing tremendous expertise in manufacturing and electronics.
Even though their individual paths may differ, all rapidly growing countries share certain common traits. The same fundamental process of economic growth and development that helped shape Britain and Japan is at work today in developing countries like China and India. Indeed, economists who have studied growth have found that the engine of economic progress must ride on ‘-:he same four wheels, no natter how rich or poo~ the country.
Over the last century, major high-income’ countries like the United States, Gallantry. France,unroll japan have grown rapidly. Output ha’ growl J fa,l…- than insulin’ of !.Thor, affecting increases in capital angel technological advance.[Source laceration. Inflow of Capistrano! Development (Oxford, 19R2)’ uproar-d be authors from data from Madison, the World Bank, and other publications.
These four wheels. or factors of growth. are;
• Human resources (labor supply, education, discipline.motivation)
• Natural resources (land. minerals. fuels, environmental quality)
• Capital formation (machines. factories. marks)
• Technology (science, engineering. management entrepreneurship)
Often, economists write the relationship in terms of an aggregate production [unction (or ,.\PF) , which ‘relates total national output to the inputs and technology.Algebraically. the .~PF is
Q = i\F(J\. L, R)
where Q = output, K = productive services of capital,L = labor inputs. R = natural-resource inputs, A represents the 11″1’1o” of technology in the economy. and F is the production function, As the inputs capital, labor, or resources rise, we would expect that output would increase, although output will probably show diminishing Brett, to additional inputs of production factors. an think of the rule of technology as augmenting the productivity of inputs, Productivity denotes the ratio of output to a weighted leverage of’ inputs. As technology (.1) improves through new inventions or the adoption of technologies from abroad. this advance allows a ‘to produce more om put with the, dune level of inputs. Let’s now see how each of the four factors Coil tributes 10 growth.
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