For a country to have a Gross Domestic Product (GDP) that is in tune with the current economic scenario, it is of utmost importance that there should be growth in both terms of population as well as labor productivity. For bring about this growth in labor productivity, it is important that both physical and human capital as well as technology needs to advance and grow in accordance.
Now it is of utmost importance to check out as to how these factors interact with each other as well as how theories of growth address such issues in accordance. It is based on these theories of growth that various factors, their way of influencing progress of an economy as well as future results associated with that economy is taken into consideration.
What is economic growth? What causes this form of growth? Why is there a variation in these growth rates? Though, certain alternative theories of economic growth provide a detailed analysis of these growth rates, however, there is no specific theory that answers these in detail.
To get a correct answer to this, it is of utmost importance that empirical theories along with current economic scenario should be studied and then further derivations can be made. Also, it is necessary that correct theories are followed to get the correct answer.
3 primary theories of economic growth:
- Neoclassical theory of growth
- New growth theory
- Classical theory of growth
A detailed study of these is of utmost importance.