Question

Explain why productivity growth, saving and new technologies are crucial for maintaining economic growth.

Describe how immigration and property rights influence economic growth

Answer 1

1. Increases in inputs raise costs on society: rising labor means less leisure time; rising capital expenditure means decreasing current consumption; and increasing commodity inputs reducing natural resource reserves. Growth in productivity is our chance to increase production without increasing inputs and incurring these costs. Historical or "time-series" data on production and hours worked demonstrate the importance of labor productivity increases to US economic development. With productivity growth, an economy will produce-and consume-more and more goods and services for the same amount of work.

The most important factor which determines the rate of economic growth is technological change. It plays an significant role compared with the development of capital. It is the technological change that will bring about a continuous increase in production per population head. So it is the prime mover of economic development.

2. The rights to wealth and to property are inextricably connected. The value of getting property rights well-defined and strongly secured is now widely recognized among economists and policy-makers. A system of private property grants people the exclusive right to use their wealth as they see fit. The authority over what is theirs causes property owners to take full account in a particular way of all the advantages and costs of using such services. The balancing cycle of costs and benefits yields what economists call productive results. This is translated into higher living standards for everyone.

Nevertheless, it is only over the last few decades that economists have taken on the value of property rights. The topic has been given short shrift for much of the history of modern economics. Also stalwart market economy supporters glossed over the subject. Not surprisingly, the negligence resulted in much bad development policy. Even though policymakers in developed countries and international organizations now understand the vital role a private property system plays in economic growth, they are constrained in what they can do to help developing countries develop a system of this nature.