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Long Run Growth

 

LABOUR FORCE

·        Increase in population can stimulate growth by expanding domestic market.

·        Rise in participation rates among population of working age

·        Quality of the labour force - human capital - conducive to high productivity & real output

 

ENTREPRENEURSHIP

·        Entrepreneurial ability - organises and combines other resources to make a profit.

·        The quantity of entrepreneurs - forces which encourage entrepreneurial talent include:

·        A well-developed capital market, infrastructure & favourable social & political climate

·        Quality of entrepreneurs improved by increasing education & government assistance to business.

 

CAPITAL STOCK

·        Importance of gross and net investment

·        Quality of investment as important at quantity

·        Positive externality effects from higher investment (increasing returns to scale?)

 

Government Policies And Economic Growth

  1. Open markets - internal and external competition in markets for goods and services
  2. Promotion of liberal capital market providing a flow of liquidity to finance investment
  3. Protection of private property rights
  4. Scale of government spending - possible crowding out of the private sector if government spending is too
  5. Efficiency of the tax and benefit system - may create disincentives which constrains the active labour supply
  6. Incentives for entrepreneurial activity
  7. Investment in human capital - active labour market policies
  8. Macro-economic stability and credibility of macro economic policy

 

Young, 1994, Asian tiger's success resulted from:

·        Rapid accumulation of capital (through high investment)

·        Labour (through population growth and increased labour-force participation)

·        Government policies of encouraging education, opening economy to foreign technologies, promoting trade, keeping taxes low & encouraging savings (30% of GDP in 'tiger' economies)

Small state - government spending around 20% of GDP compared to over 50% in Europe

 

 

E-mail Steve Margetts