Economic Growth Essay -- Economy, Neoclassical Model

According to the New Classical Model, frugal growth can be achieved by accumulating labor, enceinte and other factors of production. Since all these factors experience diminishing fringy returns, the economy can only achieve a steady labyrinthine sense income through continuous increase in saving and investment funds merely at the identical conviction reduce population growth. However, a indemnity that helps to increase both savings and investment but at the same time reduce population growth especially in ontogeny countries is difficult to be implemented. This was supported by Blomstrom and Kokko (2003) who claimed that developing countries have low-income that croak to low savings with higher population growth rates.Solow (1956, 1957) also recognise the importance of technical fare as a determinant of economic growth. Technology is an exogenous factor. Per capita income cannot be increased to a steady convey or even to a high take income economy unless these technolog ies be converged. The modern growth theory also supported the importance of proficient progress because it can convert diminishing returns to increasing returns. Technological progress can take place in the form of education, training and interrogation & development (R&D). With this, developing countries have the potential drop to grow faster. Blomstrom and Kokko (2003) confirmed that the potential of converting this knowledge of technology depends on the economic level of capital.The economic level of capital in a nation is determined by deuce sources. One is the domestic capital and the other is the foreign capital. Domestic capital is obtained through domestic savings made by the public and unavowed sectors. Meanwhile, the foreign capital is obtained through the inflow of foreign dire... ...ious transmit that pull in location advantage. Thus, location advantage can be obtained through channels like financial development, human capital development and environmental conditi on.In contrast, Chakraborty and Nunnenkamp (2008) claimed that economic growth influenced by location advantage does not unavoidably bring positive equal but also negative impact to the economy. This supported the study by Li and Liu (2004). When foreign at once investment inflow takes place it can create job opportunity, economic growth, pull in indebtedness and transfer technology but at the same time it can also create negative impacts like deficit in the balance of payment, pollution, economic dependence and social problems. Kugler (2005) also claimed that foreign direct investment can also affect industry negatively as well as positively, where it is usually underestimated.