Economic Growth & Economic Development

Economic Growth

It means an increase in real national output

Economic Development

Means an improvement in the quality of life and standard of living. For example measures of the literacy, life expectancy and healthcare

Economic Growth

• increase in real GDP

• Higher national output

Economic Development

• Economic growth

• increase in living standards

• increase in educational standards

• improved healthcare

• improved infrastructure

• Diversification

Captia GDP

Is a measure of economic growth. This basically measures the total volume of goods and services produced in an economy

There are 3 main factors that drive economic growth:

• Accumulation of capital stock

• Increases in labour inputs (workers or hours worked)

• Technological advancements

Growth accounting measures the contribution of each the 3 factors to the economy

Thus a country’s growth can be broken down by accounting for what percentage of economic growth comes form capital, labour and technology

It has been shown both theoretically and practically that technological progress is the main driver of long run growth

This explanation is very straightforward holding other input factors constant the additional output obtained when adding extra unit input of capital or labour will eventually decline according to the law of diminishing returns

As a result a country can’t maintain it’s long run growth by simply accumulating more capital or labour. So the driver of long run growth has to be technological progress