What are some determinants of economic growth?
1 Answer
This is a prolific and really up-to-date discussion in Economics, so many theories have been proposed and many have been confirmed, at least for some contexts and periods.
Economic growth can be delivered by high (or escalating) levels of investment (productive investment, not financial applications, beware!), which can bring about more productivity for industries, which can generate more competitive goods and services and thus conquer markets, expanding its activities and possibly profitability, which will demand expansion, which, in turn, will be possible via creation of new job posts and even valuation of the related (already hired) workers, what, in the end, will deliver higher income per capita, less unemployment and steadier growth. Of course this is a theoretical proposition, but the logic fits reality in most cases. There's just the need of adaptation.
When growth is delivered, let's say, by expansion of consumption, it's not a steady growth but rather a temporary one, once consumption does not signify improvement neither in production capacity nor in quaification of labor market. Thus, after a boom of consumption NOT accompanied by investment growth, the economy is prone to return to a low growth rate state or even recession - as Brazil in 2015/2016.
Another important variable is qualification. This was studied by economist Robert Lucas, Nobel Prize winner of 1990. In a nutshell, Lucas argued that the more time people invest in qualifying themselves (i.e. acquiring new knowledge, new degrees, etc.), the more productive the economy will tend to be and thus, more development will be delivered with the same amount of labor force as before the qualification, for example.
For further and a bit more complex reading on development, I suggest you check Solow, Romer and Harrod-Domar's growth models, as they're the basic start for studying both economic growth and development.
