How The Accumulation Of Capital Affects Economic Growth

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Essay 1. “Countries grow at different rates because they accumulate capital at different rates.” Is this true? Explain your answer.
Word Count: 969 words.
Economic growth, in simple terms, is the increase in an economy’s potential output over time. It is no secret, different countries grow at different rates. Is the cause of this difference that countries accumulate capital at different rates? In order to answer this question, it is necessary to start by examining how the accumulation of capital affects economic growth. Moreover, is capital accumulation the only factor responsible for the fact that countries grow at different rates? We will then look into other possible factors, which may affect a country’s economic growth. “Capital”, can fall into two categories: physical capital and human capital. By physical capital, broadly speaking, we mean machines and buildings that are used in the production of GDP. On the other hand, human capital can be measured as an index that captures the effect that education and training have on a worker’s productivity. The reason that both education and training can be interpreted as capital is that they can both be accumulated. It is possible to create capital accumulation in an economy by investing part of the economy’s GDP in improving the education of the population and the amount of training received by workers.
In order to explain how capital accumulation causes an economy to grow, we will use Solow’s neoclassical growth model. The
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