Economics » Economic Growth » Components of Economic Growth

Key Concepts and Summary

Key Concepts and Summary

Over decades and generations, seemingly small differences of a few percentage points in the annual rate of economic growth make an enormous difference in GDP per capita. Capital deepening refers to an increase in the amount of capital per worker, either human capital per worker, in the form of higher education or skills, or physical capital per worker. Technology, in its economic meaning, refers broadly to all new methods of production, which includes major scientific inventions but also small inventions and even better forms of management or other types of institutions. A healthy climate for growth in GDP per capita consists of improvements in human capital, physical capital, and technology, in a market-oriented environment with supportive public policies and institutions.

Glossary

capital deepening

an increase by society in the average level of physical and/or human capital per person

infrastructure

a component of physical capital such as roads, rail systems, and so on

physical capital

the plant and equipment used by firms in production; this includes infrastructure

special economic zone (SEZ)

area of a country, usually with access to a port where, among other benefits, the government does not tax trade

technology

all the ways in which existing inputs produce more or higher quality, as well as different and altogether new products

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