A comparison between the economic growth of china and india using the solow swan model

March 25, ; Accepted: May 17, ; Published: This is due to much importance of economic growth itself. All these theories have been directed to the two central questions:

A comparison between the economic growth of china and india using the solow swan model

Gross domestic product The economic growth rate is calculated from data on GDP estimated by countries' statistical agencies. The rate of growth of GDP per capita is calculated from data on GDP and people for the initial and final periods included in the analysis of the analyst.

Determinants of per capita GDP growth[ edit ] In national income accounting, per capita output can be calculated using the following factors: Productivity improving technologies economic history Economic growth has traditionally been attributed to the accumulation of human and physical capital and the increase in productivity and creation of new goods arising from technological innovation.

Increases in productivity are the major factor responsible for per capita economic growth — this has been especially evident since the midth century.

Most of the economic growth in the 20th century was due to increased output per unit of labor, materials, energy, and land less input per widget. The balance of the growth in output has come from using more inputs. Both of these changes increase output.

Examine aspects of the Solow-Swan model of economic growth and identify whether capital accumulation has been the cause for growth in the cases of South Korea and Australia. The Solow-Swan Model in brief. The model shows how growth in capital stock (KM) and labour (L) affect economic growth (Y). Solow Model- Growth Potential for China and US “Using the Solow model, compare the growth potential for the US with that for China. Using the Solow growth model again, we can make some predictions about the overall economic growth of China. To start off we can see that China has a . We attempt to fill this gap by utilizing panel data on countries over the period to examine the extent to which the growth difference between China and other countries can be explained by the augmented Solow model.

The increased output included more of the same goods produced previously and new goods and services. During the Second Industrial Revolutiona major factor of productivity growth was the substitution of inanimate power for human and animal labor.

Also there was a great increase in power as steam powered electricity generation and internal combustion supplanted limited wind and water power.

Other productivity improvements included mechanized agriculture and scientific agriculture including chemical fertilizers and livestock and poultry management, and the Green Revolution. Interchangeable parts made with machine tools powered by electric motors evolved into mass productionwhich is universally used today.

Real food prices fell due to improvements in transportation and trade, mechanized agriculturefertilizersscientific farming and the Green Revolution. Great sources of productivity improvement in the late 19th century were railroads, steam ships, horse-pulled reapers and combine harvestersand steam -powered factories.

By the late 19th century both prices and weekly work hours fell because less labor, materials, and energy were required to produce and transport goods.

A comparison between the economic growth of china and india using the solow swan model

However, real wages rose, allowing workers to improve their diet, buy consumer goods and afford better housing. New goods and services included television, air conditioning and commercial aviation aftercreating enough new demand to stabilize the work week.

Productivity in the United States grew at an increasing rate throughout the 19th century and was most rapid in the early to middle decades of the 20th century.

Demographic changes[ edit ] Demographic factors may influence growth by changing the employment to population ratio and the labor force participation rate.

Women with fewer children and better access to market employment tend to join the labor force in higher percentages. There is a reduced demand for child labor and children spend more years in school. The increase in the percentage of women in the labor force in the U.

A comparison between the economic growth of china and india using the solow swan model

Spending wave Other factors affecting growth[ edit ] Political institutions, property rights, and rule of law[ edit ] See also: These included new laws favorable to the establishment of business, including contract law and laws providing for the protection of private property, and the abolishment of anti-usury laws.

Enforcement of contractual rights is necessary for economic development because it determines the rate and direction of investments. When the rule of law is absent or weak, the enforcement of property rights depends on threats of violence, which causes bias against new firms because they can not demonstrate reliability to their customers.

Thanks to the underlying homogeneity of its land and people, England was able to achieve a unified legal and fiscal system since the Middle Ages that enabled it to substantially increase the taxes it raised after Many of these intermediate level institutions relied on informal private-order arrangements that combined with public-order institutions associated with states, to lay the foundations of modern rule of law states.

The Solow-Swan Model of Economic Growth – Explained!

In many urban areas the poor "invade" private or government land to build their houses, so they do not hold title to these properties.

Much unregistered property is held in informal form through various property associations and other arrangements. Reasons for extra-legal ownership include excessive bureaucratic red tape in buying property and building. In some countries it can take over steps and up to 14 years to build on government land.

Other causes of extra-legal property are failures to notarize transaction documents or having documents notarized but failing to have them recorded with the official agency.In the ongoing debate over early retirement, frugality, investing, and simple living, one point is often brought up by our detractors.

It usually goes something like this: Well, maybe spending less and investing more works for you, but if everybody did it, society would collapse! Our economy is. Firstly, conditional convergence, the basic property of the Solow model, has considerable explanatory power for the growth difference across countries, ranging from 21% between China and South Asia to 93% between China and the high-income economies.

significantly to growth differences between China and other countries. Lastly, the low population growth rate resulting from the restrictive population policy makes an important contribution to China's growth performance relative to many other developing countries.

The remainder of the paper is organised as follows. Intermediate Macroeconomics: Economic Growth and the Solow Model Eric Sims University of Notre Dame Fall 1 Introduction We begin the course with a discussion of economic growth.

Deconstructing China’s and India’s Growth: the Role of Financial Policies Jahangir Aziz 1. Introduction Much has been written about China and India’s recent economic performance.

And why not? With a third of the world’s population and nearly two-thirds of the world’s.

Review of Growth Models in Less Developed Countries

The Solow Growth Model Robert Solow (), T.W. Swan (). Assumptions Savings and investment decisions are exogenous (no individual optimization). Factor accumulation and technological growth are also exogenous. Production function, with physical capital K, labor L and knowledge or technology A: Y t .

Solow–Swan model - Wikipedia