Chapter

Growth Concepts

Maurice FitzGerald Scott

in A New View of Economic Growth

Published in print June 1991 | ISBN: 9780198287421
Published online November 2003 | e-ISBN: 9780191596872 | DOI: http://dx.doi.org/10.1093/0198287429.003.0001

Series: Clarendon Paperbacks

 Growth Concepts

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In a completely static economy, expenditures would be needed to maintain and replace assets (required maintenance) and the whole of income would be consumed. When part of income is spent on making improvements, and/or when employment grows, the economy will change and grow. Typically, real wage rates will then grow, and this shift of income from capitalists to workers will cause capital to depreciate, but that will not reduce output. It is then that cumulative (gross) investment expenditures, along with employment growth over a period, explain growth in that period, and not changes in the capital stock, as generally defined. There is no role for the production function.

Keywords: capital stock; consumption; depreciation; income; investment; production; required maintenance

Chapter.  18695 words.  Illustrated.

Subjects: Economic Development and Growth

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