Traditional Growth Theory Research Articles

Input–output structure and growth in China

The fast and steady economic growth in China during the 1990s has attracted much international attention. Using the three most recent Chinese input–output tables, this paper investigates industry structure and inter-industry relationships and the relationship of both to economic growth. The input–output tables contain intermediate demand and final demand for six broad industries, namely, Agriculture, Industry, Construction, Transportation, Post and Telecommunications, Services, and Others, for 1992, 1995 and 1997, which enables computing of input–output coefficients for three time periods. As direct and indirect input–output coefficients characterise industry structure during a particular time period, changes over time reflect the patterns in industry structure evolvement. Furthermore, output growth in a particular industry can be analysed from two different sources, namely the changes in input–output coefficients that reflect technological change, and the change in final demand. This paper sheds light on four different issues over the five-year period from 1992 to 1997: (1) Was growth driven by technological changes or final demand increases? (2) As a result of the interdependence of industries, how did an increase in final demand in one industry affect growth in another? (3) How has the bottleneck of an insufficient capability in the transportation, post and telecommunications sectors to cope with demands from other sectors been affected during this period? (4) Has the industry structure of the economy been shifting in conformity with traditional growth theory, namely, with a decline in the agricultural sector and a rise in the modern industrial sector?

Growth Rate of Spherulites in Thin Films: Direct Evidence of Failure of Traditional Growth Theory

Growth rates of PPS and PVDF spherulites in very thin films were measured. The growth rates change by about four orders of magnitude within the crystallization temperature ranges examined in this work. Film thickness at the position of the spherulite for which growth rates were determined was measured; the film thickness was deduced from retardation in the spherulite. In the light of the criterion we proposed, film thicknesses more than several tens of microns are required for the growth rate to change by four orders of magnitude. However, the thickness of the thinnest film examined experimentally was less than 1 μm. This discrepancy between theory and experiment is large and violates the framework of the traditional growth model unrecoverably.

Investment-Specific Technology Growth: Concepts and Recent Estimates

The strength of the U.S. productivity growth in the recent years has been attributed to technological improvements that are, in some sense, embodies in new types of capital equipment. However, traditional growth theory and growth accounting techniques—which emphasize the role of disembodied, neutral technological progress—are deficient in explaining this phenomenon.

Endogenous technology and environmental quality in economic models

The debate on the relationship between the economy and the environment focuses on the question whether there is a trade-off between economic growth and environmental quality. In order to enable a quantification of this essentially empirical question, it is necessary to integrate the environment into economic models. This article considers the integration of the environment in models of economic growth. According to these models, technical progress constitutes a major driving force for economic growth. First, we give a short survey of the theory of endogenous growth, where, unlike in traditional growth theory, the pace of economic growth may depend on economies of scale in the production process. Furthermore, it is discussed how the concept of sustainable development can be made operational within the framework of models of economic growth. Next, we give an example of both a theoretical model of endogenous growth which integrates the environment, and of an empirical model based on the theory of economic growth. Finally, mechanisms of structural change are described that may be exploited by policy makers in order to enhance environmental quality in a growing economy.

Capital as Embodied Knowledge: Some Implications for the Theory of Economic Growth

Capital goods are embodied knowledge of how to produce. Therefore, capital development is a learning process, through which knowledge gets embodied in new capital goods. Because the necessary knowledge is dispersed among many people who must interact to communicate their particular, often tacit knowledge, capital development is a social process. Because this interaction takes time and continually changes the capital structure, capital development is an on-going process. Capital development is a social learning process. Neither traditional nor "new" growth theory illuminates how the capital structure evolves. Traditional growth theory, by modeling capital as single variable in the production function, ignores the heterogeneity of capital goods and their varied structural relationships of complementarity, substitutability, feedback, and feed-forward. New growth theory, while accounting for technological change, still treats capital as aggregable and thus implicitly homogeneous. That capital development is a learning process suggests that growth rates can increase. What prevents exponential growth is neither diminishing returns nor upper bounds to human capital, as growth models assume. It is the constant challenge of maintaining capital complementarities in a world of incomplete and rapidly changing knowledge.

The consumer as a social and environmental actor

This paper explores the implications for ecological economics of the idea of consumption as a social activity. Consumers are regarded as skilled social agents organizing ‘consumption activities’ and capable of introducing innovations into the process of life-enjoyment. An analytical framework for analyzing production and consumption interaction is introduced and in this way a comparison with the results of traditional growth theory is made possible. Since consumers are skilled social agents, it follows that social structures and social relations are important in determining the amount and the quality of the environmental impacts deriving from economic activities. Therefore, the analysis of social relations plays a fundamental role in ecological economics and in policy proposals. In particular, the question of skills and structural externalities is addressed, along with the question of the social and institutional preconditions for the development of service markets.

Forging Ahead and Falling Behind: The Rise and Relative Decline of the First Industrial Nation

This paper considers Britain's failure to maintain its lead in economic growth in the face of overtaking by the United States. Recent cliometric research is reviewed and it is argued that early nineteenth century Britain had a low growth potential by twentieth century standards and that the American growth of the early twentieth century was of a quite different kind. Neither traditional nor new growth theories can encompass this experience and it is suggested that natural resource endowments, location-specific learning processes, and the international migration of factors of production were central aspects of American overtaking of Britain.

A multiregional perspective on growth and environment: The role of endogenous technology and trade

Until recently, the interaction between environmental quality, economic activity and growth is predominantly considered in an a-spatial context. Traditional neoclassical growth theory following Solow/Swan has mainly addressed questions about environmental and resource limits to growth. Recently, much attention is also devoted to the environment-growth interface from an endogenous growth perspective. However, an important element that is missing in both the neoclassical and endogenous growth approaches is a multiregional perspective. The present theoretical study tries to present one of the first attempts to fill this gap. The analysis is based on a model of two interactive regions, with possible interaction between the regional environments via the global environment. The implications of this type of analysis are manifold. One is that endogeneity of growth is not only due to technology and knowledge formation but also to the effects of trade, resource scarcity and environmental degradation. Another implication is that a coordinated environmental policy of regions should address long-term sustainability, and take account of the positive technological and negative environmental dynamic externalities.

Innovation and Growth in the Global Economy.

Traditional growth theory emphasizes the incentives for capital accumulation rather than technological progress. Innovation is treated as an exogenous process or a by-product of investment in machinery and equipment. Grossman and Helpman develop a unique approach in which innovation is viewed as a deliberate outgrowth of investments in industrial research by forward-looking, profit-seeking agents.

Financial markets and growth: An overview

The last five years have witnessed a resurgence of interest in the relationship between financial intermediation and economic growth. This issue had been extensively studied nearly two decades earlier by Goldsmith (1969), McKinnon (1973), Shaw (1973) and others, who produced considerable evidence that financial development correlates with growth. But their work, though insightful, lacked analytical foundations. In traditional growth theory, financial intermediation could be related to the level of the capital stock per worker or to the level of productivity, but not to their respective growth rates. The latter were ascribed to exogenous technical progress. The recent revival of interest in the link between financial development and growth stems mainly from the insights and techniques of endogenous growth models, which have shown that there can be self-sustaining growth without exogenous technical progress and that the growth rate can be related to preferences, technology, income distribution and institutional arrangements. This provides the theoretical underpinning that early contributors lacked: tinancial intermediation can be shown to have not only level effects, but also growth effects. The resulting models have offered important insights into the effect of financial development on growth and vice versa. They have also provided new impetus to empirical research on these issues. This paper reviews the ground covered so far on the theoretical and empirical front and points to some still unresolved issues.

Conceptions and renewal in Swedish construction companies

The authors argue that the renewal process in organisations originates in the mental structures and capacities of its members. Starting out with experiences from a case study on renewal in a Swedish construction company, they analyse reasons for the apparent consensus in the construction sector that ‘renewal’ is likely to be very slow within that sector. At the same time, it seems that shared ‘conceptions’ about the construction business are very strong among people in that trade. The authors also explore possible relations between this feeling of the unlikely event of ‘renewal’ and such strong ‘shared conceptions’ involved in construction. One conclusion is that strong ‘conceptions’ appear natural for an industry where the main resource is people, the knowledge embedded in them, and in the way they organise work. Any ‘renewal’ attempt might be seen as a threat against those strong ‘conceptions’. Such ‘conceptions’ condense the experience and the tacit knowledge of the organisation and are the cement of the loose organisation of the construction industry. The lack of the real capital hardware (machinery) makes the knowledge embedded in individuals and organisations, expressed by ‘conceptions’, the key factor in the renewal process. This conclusion is quite remarkable if one refers to traditional economic growth theory, where capital accumulation and technical change is the prime motor in the renewal process.

Politics and Economic Growth

Traditional growth theory viewed economic growth as a resultant of economic factors, in particular capital investment. Development economics implied a broader approach, emphasizing social structure change and human capital. Finally, it was also hinted that political factors could influence the rate of change in the development of the economic system. Testing various theories of economic growth we find that institutional sclerosis is the basic political factor that is related to the process of economic growth. The next step is to analyse how political structures and public policy have an impact on the basic factor in economic growth, viz. investments.