Question

In: Economics

What would be the effect on economic growth if increasing the size of the labor force...

What would be the effect on economic growth if increasing the size of the labor force through population growth while keeping physical and human capital constant?

Solutions

Expert Solution

Increasing the labour force as the population grows affects economic growth adversly.

As population increases, the skilled humans also increases even if the physical and human capital is constant.

Economic growth increases rapidly when the capital is used as a substitute for human input.

It has been noticed that increase in capital may not have any effect on the economic growth but increase in population has lead to increase in the labour force which has caused large economic developments.

Increase in labour force tends to increase productivity.

This shows that the growth of output increases with the rate of growth of population while keeping the capital constant.

As the population growth increases drastically the number oof unemployed individuals has also increased.

These has lead to the increase in the size of labour force.

The unemployed individuals become ready to work even for less wages. This has lead to a drastic effect on economic growth as the capital is still constant but the number of workers has increased.

These people will be more skilled and experienced that they can work physically without the use of any machineries.

So, the people who hire these labour forces do not have to spend any extra capital on buying the machineries rather than the human capital.

Hope this was helpful!


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