Question

What distinguishes the staples theory from the neo-classical growth model?

Answer 1

Staple theory - This theory is related to economic growth which gives importance to staple goods or traditional products and their effect on the economy to make it rich in resources.This theory was mainly the result of growth in Canada due to exports but now it can be used for any country which has high export level in the economy. According to this theory, staple means those goods which influence the exports of the economy and the goods must be comparatively unprocessed.Eg wheat,flour, fish, timber etc are taken as staple goods of Canada.It supposes that with only export of staple goods and import of manufacturing goods , can an economy based on staple products earn top level of material.The success of this type of economy rely on its ability to change staple goods into exports which are cheaper than others specially through variables of supply side.

Neo classical growth model - In this theory, growth rate in economy is reflected as outcome of mixture of 3 factors technology, labour and capital.It says that these three factors are important for the economic growth.Equilibrium in short period is achieved by fluctuating values of capital and labour in production function.Technology advancements also plays a major role in growth.This says that collection of capital in the economy and its way of usage by people is important for the growth of economy.The relation of labour and capital shows the output level. The third factor technology is used to increase the productivity of labour and their capabilities.So the production function of this theory help to know the development and equilibrium level in the economy.Its presented as

Y= AF(K,L)

where Y- GDP ; A- technology level ; K- capital share ; L- unskilled labour

So,staple theory is different from neo classical growth model because staple theory focuses on staple goods which are comparatively unprocessed for economic growth whereas neo classical growth model focuses on 3 factors - labor, capital and technology for economic growth.