Economic Influence On Economic Growth

902 Words4 Pages
The Influence of Innovations on the Economic Growth While analyzing impact of innovation activity on the economy as a whole, it should be emphasized that the significance of a given issue was first revealed in the 20th century. Thanks to the rapid development of technologies and globalization, which promoted industrialization and knowledge exchange, the researchers concluded that the correlation of economic growth and prosperity and the innovation activity is rather high. There are two main approaches to innovations in modern economic science: neoclassical and neo-institutional patterns that determine the role of innovations and describe features of their implementation. The Solow-Swan Neoclassical Model At…show more content…
As a growth rate it depends first of all on a technological progress that plays the most significant role in acceleration of economic growth (Solow 1956). Other factors contribute to development and growth too, however, in a less substantial manner. For instance, an increase of labor force can lead to economic growth in general, but the GDP per capita index will decrease, so the economic prosperity will be in question. Another example concerning this issue shows that even capital endowment influences only the level of economic growth, but not accelerates the growth rate. Thus, it is technological progress that facilitates economic development of the country and the world as a…show more content…
Besides, the importance of institutional factor should be substantiated to achieve deeper understanding of significance of institutions in the economy in general. First of all, it should be highlighted that the market as one of the most influential parts of the economy has a quiet complicated institutional structure. Conventional theory of Chang (2002) argues that markets are highly involved in political processes and, therefore, are influenced by state. So, market is inseparable from state and the policy constitutes its vital component that impacts market’s creation, change and activity. Such informal institutions as, for instance, social agreements and self-regulated institutions of private sector take part in the process of market formation alongside with the state and formal rules and

More about Economic Influence On Economic Growth

Open Document