In the very general view economic growth means a quantitative and qualitative change in the results of production and its factors (their productivity). Economic growth finds its expression in an increase in potential and real gross national product(GNP), ascending economic power nation, country, region. This increase can be measured by two interrelated indicators: growth over a period of time real GNP or growth in GNP per capita.
A growing economy has a greater ability to meet new needs and solve socio-economic problems. Necessity economic growth is determined by the increase in the population and the desire of the country to actively participate in the global economy. The main goal of economic growth is to improve the standard of living of the entire population.
The main indicators for measuring economic growth are:
1. Growth coefficient - the ratio of the indicator of the study period to the indicator of the base period.
2. Growth rate - growth rate multiplied by 100%.
3. Growth rate - growth rate minus 100%.
There are two types of economic growth - extensive and intensive.
With the extensive type, economic growth is achieved through the use of a larger number of factors of production: labor, capital and land, while maintaining its former technical basis.
An intensive type of economic growth is characterized by an increase in the scale of output, which is based on the widespread use of more efficient and qualitatively improved factors of production. Growth in the scale of production, as a rule, is ensured through the use of more advanced technology, advanced technologies, advances in science, more economical resources, advanced training of workers. Due to these factors, an increase in product quality, an increase in labor productivity, resource saving, etc. is achieved. The process of economic growth includes the interaction of its factors.
The analysis of economic growth inevitably had to lead to the creation of its models, without which it is impossible to effectively predict economic growth and its consequences.
Modern models of economic growth were formed on the basis of two sources: Keynesian theory macroeconomic equilibrium and neoclassical production theory. These two sources led to the emergence of two main directions in theoretical studies of economic growth - Keynesian (later neo-Keynesian) and classical (later neoclassical).
Keynesian models of dynamic equilibrium
After World War II, the followers of D. M. Keynes set themselves the task of creating a new model capable of explaining various states of dynamic equilibrium. The most famous are the neo-Keynesian models of economic growth by R. Harrod (England) and E. Domar (USA), which are based on two premises: growth national income is only a function of capital accumulation, and all other factors (an increase in employment, the degree to which the achievements of scientific and technical progress are used, an improvement in the organization of production) that affect the growth of capital productivity are excluded. Thus, the models of Harrod and Domar are one-factor models. It is assumed that the demand for capital depends only on the growth rate of national income, does not depend on the ratio of prices of production factors, but is determined only by specifications production.
The main factor in economic growth and its pace, according to neo-Keynesians, is the growth of investment. Investments in the considered model play important role: on the one hand, they contribute to the growth of national income, on the other hand, they increase production capacity. Increasing income, in turn, increases employment. Since investment increases productive capacity, income growth must be sufficient to balance society's increasing productive capacity without allowing underutilization of enterprises and unemployment.
In a formalized form, the Domar model is the equation:
where dI is the increase in net annual investment;
I -- net annual investment;
K - capital productivity or potential productivity of capital investments;
C is the average propensity to save.
Thus, the growth rate of capital investment, which provides full employment labor resources and full load production capacity, should be equal to the potential productivity of investment multiplied by the share of savings in national income. Harrod's model, which compares actual savings with estimated investments, is described by two equations:
where G is the growth rate of national income;
S is the share of savings in national income;
C - capital intensity;
2) Gw x Cr = S,
where Gw is the required, more precisely, guaranteed growth rate;
Cr is the required value of capital intensity.
Since the constant guaranteed growth rate in countries market economy is not achieved automatically, the Keynesians came to the conclusion that state regulation of the economy is necessary to achieve dynamic equilibrium.
Coursework on economic theory on the topic
Completed by student: Dulikov A.G., Group: 3212.
Moscow State Industrial University
Faculty of Economics, Management and Information technologies.
Moscow 1999
The economic growth.
At the end of the twentieth century, the problem of economic growth around the world is put forward in a number of priority problems. economic development. The fate of any country now depends on the mechanism of economic growth, which allows the most efficient use of the achievements of scientific and technological progress. World economics a long time ago began to study the trends of economic growth. This topic is of particular relevance for today's stage. economic reforms. Any measures to reform the economy should fit into the general trend of economic growth of industrialized countries at the turn of the 20th and 21st centuries. Economic growth has become a constant phenomenon that despite some declines in output and even a deep decline in production that has occurred in many developing countries ah in the 80s, the long-term development trend in the economy of most countries of the world is steadily ascending. The average annual growth rate of production per capita in 1820 - 1980. in industrialized countries amounted to 1.6%. During the same period, the population increased by 1% annually. Analyzing the origins of the modern ER, E. Maddison divided the last fifteen centuries into 4 stages: agrarianism, developed agrarianism, commercial capitalism and capitalism. It is indicative that the growth rate up to the fourth stage remained very low. And only in the phase of modern capitalism did a sharp leap occur. S. Kuznetsov also believed that the acceleration of the rate of ER in England, Germany and the United States arose during the prom. revolution, that is, when capitalism becomes the leading economic system. In the process of ER, important evolutionary changes in the structure of the economy take place. Home distinctive feature modern growth is the decline in the relative share of the agricultural sector in total output and employment. Another feature modern ER is urbanization, as a consequence of the prosperity of the industry. The problem of ER acquired particular relevance after the Second World War, and the boom in the development of these theories falls on the 50s-60s, although the first attempt to give a holistic view of the mechanism of functioning and development of the national economy was made by J. Schumpeter in the 20s-30s of the twentieth century.
Economic growth (ER) is usually understood as a change in the results of the functioning of the productive forces of society and consumed resources. Economic growth determines the nature of functioning national economy.
Economic growth is defined and measured in two interrelated ways: as an increase in real GNP over a period of time, or as an increase over a period of time in real GNP per capita. Both definitions can be used. When comparing standard of living population in individual countries ax and regions, the second definition is preferred. Based on any of these definitions, economic growth is measured by the annual growth rate in %. Economic growth itself is contradictory.
An increase in the social product per capita means an increase in the standard of living. The growth of a real product entails an increase in material abundance. A growing economy has a greater ability to meet new needs and solve socio-economic issues domestically and internationally.
The issues of economic growth have become particularly acute for the world community as a result of the fact that a contradiction has been revealed between the production of material goods and unbridled depletion. natural resources accompanied by environmental pollution. Thus, a new approach to understanding the essence of economic growth is important not only from the point of view of destroying the contradiction between production and consumption, but also from the point of view of the survival of mankind.
Contradictions "" production - consumption "" is closely related to economic growth. With the development of commodity production, the contradiction between production and consumption develops, it manifests itself in crises of overproduction, the formation of a deficit. certain types products. The deepening contradiction slows down the pace of economic growth.
Economic growth makes sense when it is combined with social stability and social optimism.
AT modern conditions the manifestation of the contradiction between production and consumption is expressed, first of all, in the irrationality of the development of production forces, accompanied by environmental pollution. Nature puts a limit to the unrestrained growth of production. A further increase in production is thus hampered by consumption itself.
Today, economic growth is an important feature modern world. The population grows, the scale of production and employment, the national product, the standard of living, the free time from work increases - economic growth occurs.
Types of economic growth.
There are two main types of economic growth: extensive and intensive.
Extensive economic growth means a purely quantitative increase in the volume of production of goods and services with the qualitative invariance of production factors.
Extensive factors of economic growth are: growth in the volume of consumed raw materials, materials, fuel; increase in employed workers; increasing the volume of investments while maintaining the existing level of technology. Extensive growth is historically the original way of expanded reproduction. Therefore, it has a number of negative characteristics, which are a consequence of the imperfection of this type. The extensive path, due to the involvement of more and more labor in production, helps to reduce the unemployment rate and ensure the greatest employment of labor resources. Reasonable Restoration and Maintenance Program full time is an indisputable means of accelerating growth rates.
Intensive economic growth is due to the fact that the increase in the production of goods and services is provided by an increase in the efficiency of production factors. This type of production leads to overcoming the limited production resources, promotes the technological process.
Intensive factors of economic growth are: improved use of fixed and circulating assets; professional development of employees; acceleration of scientific and technical progress (first of all, the introduction of new equipment and technologies through the renewal of fixed assets); improvement of the organization of production. In reality, two opposite types of economic growth can interact, exist together, since the intensive use of some types of production resources is often achieved through the extensive use of others. Depending on which factors prevail, one speaks of predominantly extensive or predominantly intensive types of economic growth. Intensive development is more successful than extensive.
In the study of economic growth, as in the study of most economic problems, the time factor plays a significant role. Over time, intensive growth factors can become extensive.
Measuring Economic Growth
Economic growth is measured either as an increase in some indicator of the volume of national production (GNP, GDP, NNP) for certain period time, or as an increase in this indicator per capita. Both methods of determining economic growth are used depending on the goals set, but in any case we are talking about growth rates (% per year).
Economic theory differs from other sciences in that all concepts and definitions are very versatile. This fully applies to the measurement of economic growth. The two main methods for measuring ER are necessary but not sufficient.
Economic growth is defined as a multifaceted concept that reflects the change in reproduction in space and time. ER is characterized by quantitative and qualitative indicators, has a socially - economic result the growth of national wealth and is aimed at increasing prosperity.
Economic growth rates
Economic growth is defined as the percentage growth in national output per capita or per capita at a given point in time. Therefore, there are high and low rates of economic growth.
In prosperous countries, the growth rate does not exceed 2-3% per year, but if these rates are maintained for at least 10 years, then this trend will further strengthen national economy.
But it also happens that the general trend of economic growth is violated. An example is the post-war growth of the German economy. After the end of the Second World War, the economy of this country was destroyed, but over the next few decades, this country raised its national economy to the level of economic superpowers.
The deterioration in the structure of the labor force affects the decline in economic growth.
Forecasts and prospects for economic growth
In this period of time, the state of the world economy is determined by the development of leaders - the United States, Japan and Western Europe. The US economy, which experienced a noticeable decline in the early 1990s, in 1997 achieved a very good GDP growth rate (5%).
The lack of special prospects for accelerating economic growth in the West makes experts think about the possibility of a radical redistribution of roles in the world economy by the beginning of the next millennium. Observed so far steadily high rates growth in the economies of East Asia is leading to the idea that developing countries in general have much greater growth prospects. For example, leading economists believe that in the next 10 years the GDP growth rate of developing countries will be almost twice as high as that of industrialized nations.
There are many theories of economic growth, which can be conditionally classified in the following way:
- · Neo-Keynesian theories of economic growth
- Neoclassical theories of economic growth (R. Solow model)
- Empirical theories of economic growth
- New theory of endogenous growth
- Neo-Keynesian growth theories of E. Domar and R. Harrod
These theories arose as a result of the development and critical revision of the Keynesian theory of macroeconomic equilibrium. Based on such economic values as national income, consumption, savings and investment, J. Keynes developed a theory designed to explain changes in the level economic activity. He proved that during economic downturn and rising unemployment as a result of reduced income, consumption and savings are reduced, as well as investment. Therefore, according to J. Keynes, in the absence of a market lever to increase aggregate demand to revive business activity the government should intervene in the economy, carrying out macroeconomic fiscal policy by cutting taxes or increasing government spending.
Neo-Keynesian theories of economic growth were formulated by Polish-born American economist Yevsey Domar and English economist Roy Harrod. The results obtained by them turned out to be so close to each other that they later became known in science as the Harrod-Domar theory.
The main postulate of the neo-Keynesian theory of J. Keynes - aggregate demand. The increase in effective demand acts the most important factor economic growth that raises the standard of living and improves the quality of life of people.
Limitations of the theory Harrod-Domar is defined by:
- economic growth depends only on the increase in investment, and this dependence is a linear function;
- economic growth does not depend on the increase in the use of labor force;
- The theory does not take into account technological progress.
- Neoclassical growth theories (R. Solow model)
The fundamentals of R. Solow's growth model are outlined in his article "Contribution to the Theory of Economic Growth". R. Solow came to the conclusion that the main reason for the instability of the economy in the Harrod-Domar model is a fixed value of capital intensity, reflecting a rigid ratio between the factors of production - labor and capital (K/L). In accordance with the principles of the neoclassical theory, the proportions between capital and labor must be variable (this is precisely the neoclassical nature of R. Solow's theory of growth) . They are determined by cost-minimizing producers depending on the prices of these factors of production. Therefore, instead of a fixed K/L R. Solow included a linearly homogeneous production function in his model:
Y= F(K, L).
Dividing all terms into L and denoting income per worker ( Y/L) across y, a capital intensity K/L across k, we get:
y=LF(k,l)=Lf(k).
As in the Harrod-Domar model, the population is assumed to grow at a constant rate i, and investment is a constant share of income determined by the saving rate y.
Rate of increase k then it can be written as
dk, = sf(k) - nk.
This so-called “fundamental equation” by R. Solow is expressed in words as follows: the increase in the capital-labor ratio of one worker is what remains of specific investments (savings) after it was possible to provide all additional workers with capital goods.
If sf(k) == nk, then the capital-labor ratio remains the same (dk = 0), i.e. the economy grows without any structural changes in the ratio between factors. This is balanced growth.
In R. Solow's model, in contrast to the Harrod-Domar model, the trajectory of balanced growth is stable. R. Solow shows this with next schedule(Fig. 1)
Straight nk This graph shows how much each worker must save and invest out of their income in order to provide future workers (including their own children) with capital goods.
Curve sf(k) shows what his actual savings are depending on achieved level capital-labor ratio. With the growth of capital-labor ratio A; the growth rate of investments/savings naturally falls. The vertical distance between the curve and the straight line denotes, in accordance with the fundamental Solow equation, the differential change in the capital-labor ratio dk. At the point k* it is equal to zero and there is a balanced growth. All points to the left k*(eg, k^) capital-labor ratio will grow, and at all points to the right k*(eg, k.) fall, so that the economy constantly shifts to the side k* and the balanced growth trajectory is sustainable.
In R. Solow's model, the savings rate s matters only until the economy enters the trajectory of sustainable development: the greater the value s, the higher the graph skn respectively level k*. But once growth has become balanced, its further pace depends only on population growth and technological progress.
"Golden Rule". It followed from R. Solow's model that the higher the savings rate, the higher the capital-labor ratio of an employee in a state of balanced growth and, consequently, the higher the rate of balanced growth.
Empirical theories of growth
Huge contribution to the formation modern theories economic growth have contributed empirical research. Target empirical research- assess the impact of various factors on economic growth. It should be emphasized that it was the factor analysis of the sources of growth that led researchers to a completely new vision of the role and importance of man in the economy.
One of the most prominent researchers in measuring the contribution of various factors to economic growth is the American economist Edward Denison. He divided the factors explaining economic growth into two categories. In the first he included the physical factors of production (labor and capital), in the second - the factors of growth in labor productivity.
To measure the influence of the human factor, Denison took into account not only the size of the labor force, but also the dependence of the return on labor on age and gender, the level of education and training. To measure the capital factor, he also made some qualitative adjustments: housing, equipment, industrial buildings, inventories, foreign investment. With this in mind, he then already determined the contribution of each of these elements to economic growth.
The main feature of more modern empirical studies of economic growth (R. Barro, Sala and Martin, V. Popov, V. Palterovich) is the allocation of such growth factors as improving the quality of human capital; efficiency state institutions; favorable investment climate; flexible strategy of macroeconomic regulation; depth of economic reforms (share of non-state property in GDP, indicators of economic openness and liberalization); reducing market distortions in resource allocation.
Theory of endogenous economic growth
A new round in the development of the theory of economic growth occurred in the 80-90s, which made it possible to speak of a "new theory of growth". It reflected the influence of imperfect competition and the role of possible changes in the rate of profit. And most importantly, scientific and technological progress (STP) began to be regarded as an endogenous, i.e., factor of economic growth generated by internal causes. For the first time in formalized economic and mathematical models American economists P. Romer and R. Lucas (USA) put forward a hypothesis about the endogenous nature of the most important production and technical innovations based on investments in technological progress and in human capital.
Theories of endogenous economic growth reject the neoclassical premise of diminishing marginal productivity of capital, allow for the possibility of economies of scale in production throughout the economy, and often focus on the impact of externalities on the return on investment. Positive externalities are the most important prerequisite. The meaning of these effects is as follows:
- § externalities arise as a result of employee training in the process production activities, contribute to the fact that technological progress acts as an internal factor in endogenous growth patterns;
- § externalities neutralize the decrease in the marginal product of capital, contributing to the long-term growth of per capita income;
- § External effects are manifested in the fact that increasing returns from scientific and technological innovations accrue not only to those who implement them, but to the whole society.
In endogenous growth theories, technological progress is not the only possible cause of economic growth in long term. The value of intensive and qualitative determinants in the theory of endogenous economic growth is determined using the following factors:
- · the quality of human capital depends on investment in human development (education, healthcare);
- · creation of necessary conditions and prerequisites for the protection of intellectual property rights in conditions of imperfect competition;
- · governmental support development of science and technology;
- · the government's role in creating a favorable investment climate and adopting new technologies.
So, the theories of endogenous growth made it possible to formalize the relationship between the mechanisms of economic growth and the processes of obtaining and accumulating new knowledge, which then materializes in technological innovations (Fig. 2). These theories explore the causes of differences in the economic growth rates of individual countries, the effectiveness of certain measures of state scientific, technical and industrial policy, and the impact of international integration and trade processes on economic growth rates.
Fig.2.
The essence of the theory of endogenous growth lies precisely in the fact that a person is the driving force of economic growth and a means of achieving material prosperity. The main conclusion of the new theories of endogenous growth is formulated as follows: best strategy raising the national income is the accumulation of not physical, but human capital, i.e. human development. Moreover, this statement is fundamental to the concept human development. However, this thesis also clarifies the difference between the theory of endogenous growth and the concept of human development, the main postulate of which is that people are not just an effective means, but the goal of development.
The economic growth(Economic growth) - one of the main goals macroeconomic policy, the achievement of which ensures the outstripping growth of real output (GDP) in comparison with population growth in order to improve living standards.
Economic growth is a quantitative and qualitative change in the results of production and the productivity of production factors. Economic growth is characterized by the growth of potential and real gross national product, the growth of the economic power of the country and its regions, and the increase in the competitiveness of products, goods and services of enterprises in various industries.
Theories of economic growth:
- A. Smith: The Theory of Infinite Economic Growth. The condition of this economic growth is the absolute advantage of a certain country in costs, which allows it to export its goods;
- D. Ricardo: the theory of comparative costs. Economic growth is explained by success in trade and increased international specialization, which allows each country to use those resources in the cost of which (due to labor productivity) it has a relative rather than absolute advantage. Comparative advantage arises from differences in labor productivity across different countries due to differences in the environment;
- E. Heckscher, B. Ohlin: The Theory of Comparative Advantage. All countries have approximately the same technology, but are differently provided with factors of production, which gives rise to an unequal need for them. The country exports goods in the production of which the surplus factors of production are used most efficiently, and imports goods with a scarce factor of production. Conditions for the correctness of the theory: two countries, two goods and two factors of production (simplification 2*2*2); the supply of factors in each country is fixed, they are fixed between countries, but are mobile between sectors within the country; the relative endowment of countries with factors of production is different; technology in both countries provides consistent economies of scale;
- Keynesian models of dynamic equilibrium (R. Harrod, E. Domar). The growth of national income is only a function of capital accumulation, and capital intensity is determined only by the technical conditions of production, i.e. the determining factor of economic growth is the growth of investments;
- P. Douglas and C. Cobb: production function. Allows you to evaluate the contribution of various factors of production (the quantity and quality of natural resources; the quantity and quality of labor resources; the volume of fixed capital) to the increase in national income.
Disadvantages of neoclassical economic growth models:
1) are based on the patterns of economic growth, formed in the conditions of functioning of a full-fledged complex market mechanisms that determine the development of the state;
2) assume that the production technology is the same in all developed countries, and the complex of factors is stable.
- J. Schumpeter: the theory of innovative activity (theory of creative destruction). J. Schumpeter introduced the concept economic development based on the emergence of innovations;
- Neoclassicists (C. Cobb, P. Douglas, J. Tinbergen): taking into account the factor of scientific and technological progress in the production function. The study showed that for thirty years (1909 - 1949) 87% of the growth in labor productivity was provided by the use of technological progress and only 13% - by new investments;
- M. Porter: The Theory of Competitive Advantage. Economic growth is defined as the continuous increase in the productivity of an economy. The determining standard of living in the country is the productivity of the use of national resources - labor and capital, but at the same time, productivity depends on the quality characteristics of the products produced and the efficiency of their production.
- new theory of economic growth: investments in human capital and R&D are necessary but not sufficient for rapid economic growth, they depend on the processes of knowledge exchange in the environment of academic institutions and firms and learning processes;
- evolutionary economic theory: considers patterns and historical continuity in technological dynamics; introduces the concepts of techno-economic paradigm and technological trajectory;
- institutional economics: studies the development and coordination of institutions, the relationship between market and non-market institutions, institutional dynamics.
