Chapter 11 Economic Growth This chapter examines the determinants of economic growth. A startling fact about economic growth is the large variation in the growth experience of different countries in recent history. Some parts of the world, like the United States or Western Europe | Chapter 11 Economic Growth This chapter examines the determinants of economic growth. A startling fact about economic growth is the large variation in the growth experience of different countries in recent history. Some parts of the world like the United States or Western Europe experienced sustained economic growth over a period of more than 100 years so by historical standards these countries are now enormously wealthy. This is not only true in absolute terms . GDP but also if we measure wealth as income per capita . GDP per person . In contrast there are countries where even today large parts of the population live close to the subsistence level much the same as Europeans and Americans did some hundreds of years ago. Also a group of countries that used to be relatively poor around the time of World War II managed to achieve even higher growth rates than the western industrialized countries so their per capita incomes now approach those of western countries. Most of the members of this group are located in East Asia like Japan Singapore Hong Kong and so on. It proves to be difficult to explain these different growth experiences within a single model. There are models that provide an explanation for the growth experience of the now industrialized countries but most of these models fail to explain why much of the world is still poor. Models that seek to explain the difference between rich and poor countries are less successful at reproducing the growth facts for industrialized countries. We will therefore approach the topic of economic growth from a number of different angles. In Section we present a number of facts about economic growth facts that we will seek to explain with our growth models. Section introduces the Solow growth model a classic in the theory of economic growth. This model is quite successful at matching a number of facts about growth in industrialized countries. Section introduces growth accounting an empirical application of
