Introduction
Economic growth is a fundamental concept in macroeconomics that measures the increase in the production of goods and services in an economy over time. This article explores the key determinants of economic growth and their interrelationships.Factors of Production
The main factors that contribute to economic growth are:- Human Capital
- Physical Capital
- Technology
- Natural Resources
The Role of Productivity
Productivity growth is crucial for long-term economic development. Consider the following production function:\[Y = AF(K,L)\]
Where:
- Y represents output
- A represents total factor productivity
- K represents capital
- L represents labor
Policy Implications
Investment in Education
Human capital development through education and training is essential for economic growth. The relationship between education and productivity can be expressed as:\[h = e^{\phi(s)}\]
Where h is human capital and s represents years of schooling.
Technological Innovation
Innovation drives productivity growth through:- Process innovations
- Product innovations
- Organizational innovations