CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This chapter looks critically at relevant literature to the study. In achieving the stated objectives of this study, it is vital to understand the concept of economic growth with relation to electricity consumption. The different definitions of economic growth by authors and scholars will be taken to consideration.
Economic debates that have surrounded the research have not explicitly linked the relationship between energy consumption and economic growth to theories although empirical evidences have stated results for about two decades. Also, research evidences have discovered a certain correlation between electricity use and wealth creation (Ghosh 2002; Shiu and Lam 2004; Morimoto and Hope 2004; Jumbe 2004; Wolde-Rufael 2004; Narayan and Smyth 2005; Yoo 2005).
2.2 Review of Definitional Issues
2.2.1 What Is Economic growth?
Economic growth is the increase in the market value of the goods and services produced by an economy over time. It is conventionally measured as the percentage rate of increase in real gross domestic product, or real GDP. Of more importance is the growth of the ratio of GDP to population (GDP per capita), which is also called per capita income. An increase in per capita income is referred to as intensive growth. GDP growth caused only by increases in population or territory is called extensive growth.
Growth is usually calculated in real terms – i.e., inflation-adjusted terms – to eliminate the distorting effect of inflation on the price of goods produced. In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e., production at "full employment".
Since economic growth is measured as the annual percentage chan...
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...ocess should be explained. The Cobb-Douglas production function fails this test. (Nick Wilkinson 2005)
The various theories discussed in this section simply shows that there exist a relationship between the amount of input, which in some cases are labour and capital, and the amount of output produced and this leads to a certain level of economic growth, in different countries at different times.
The role that the manufacturing industry plays in growth and development is also seen in these models and the electric power sector has a major part to play in the contribution of increasing or decreasing the activities of the industrial sector. Infrastructure led development is the most permanent development because as the investment in certain key infrastructure increases the productivity level of the industrial sector increases and then growth will automatically kick in .
Explain how the neoclassical growth model can be extended to enhance our understanding of economic growth.
Economic growth could be defined as the increasing in value of goods and the service, which is produced by economy. The increase is realized by increasing investment and the number of investment is depends on savings.
When real Gross Domestic Product (GDP) increases or fluctuates in a given period, it shows either the economic growth rate is expanding or contracting as the real Gross Domestic Product (GDP) is being used to calculate the economic growth
“In 2010, the prestigious Nemmers Prize in Economics, awarded biennially to recognize work of lasting significance, was given to Helpman for fundamental contributions to the understanding of modern international economics and the effects of political institutions on trade policy and economic growth” (Clement, 2012). “The Mystery of Economic Growth” that was written by Elhanan Helpman provides a non-technical description of growth economics over the last half of a century. This paper will connect theory to data of four major countries United States, French, Australia, and Japan. The principle that emerges from “The Mystery of Economic Growth” is that long term growth comes from innovation and adoption of technology in an economy. Four
The economy concept or theory related to the article is the Gross Domestic Product. Gross Domestic Product (GDP) measures the commercial value of the final goods and services that are produced in a country within a given period of time. It calculates all of total of the output such as goods and services that are produced only inside the border of one country. GDP includes only goods and services that are produced for a purpose which is to be sold in the market. However, it does not include items that are produced at home and also is used or consumed at home and never enter any economy market. It also does not included illicit and illegal goods and services such as illegal drugs and items in the market. For example, work
Traditionally economic growth has been regarded as the most important objective for economic management. Economic growth can be defined as an increase in a country
To build long-term economic growth, there has to be an increase in real GDP growth which is seen in an increase in 2 sources: aggregate hours and labour productivity. Aggregate hours are the total number of hours worked by employees, which are affected by population growth. But to increase real GDP per person, labour productivity is essential and dependent on 3 factors: physical capital growth, human capital growth and technological advances.
income economies. Economic growth is used to judge the ability of an economy to produce goods and
Every year there is a ‘league table‘ published showing the level of economic growth achieved by each country. The comparison is made using each countries Gross Domestic Product, or GDP. An important factor to look at is the difference between actual and potential economic growth. Actual economic growth increases in real GDP. This increase can occur as result of using previously unemployed resources, or reallocating resources into more productive areas or improving existing resources. Whereas potential economic growth is the productive capacity of the economy. For example, it can be shown by the predicted ability of the country to produce goods and services. This changes when there is an increase in the quantity or quality of the resources. All countries have different ways of achieving this with the resources they have available to them. For this reason it party answers the question of why some countries are richer than others. It is widely thought that the productive capacity of an economy will increase each year largely due to improvements in education and technology. This will obviously differ from country to country. For example, in the UK the quality of fertilizer could be improved, hence forth increase the years fruit and vegetable output.
Economic growth in developing countries is impeded by frequent inefficiencies arising from poor infrastructure, inadequate institutional structures e.t.c. because endogenous theory overlooks these influential factors, its applicability for the study of economic development is
2. Human capital (knowledge, skills and training of individuals) and the production of new technologies are essential for long run growth.
Economic growth focuses on encouraging firms to invest or encouraging people to save, which in turn creates funds for firms to invest. It runs hand-in-hand with the goal of high employment because in order for firms to be comfortable investing in assets such as plants and equipment, unemployment must be low. Hereby, the people and resources will be available to spur economic growth.
Economic development is fundamentally about enhancing the factors of productive capacity, such as land, labor, capital, and technology, of a national, state, or local economy, as stated by the U.S. Economic Development Administration. Economic development influences growth and restructuring of an economy to enhance economic well-being. We experience economic growth when our standard of living is rising. Rather than being a simplistic process, economic development typically is a range of influences aimed at achieving objectives like creating jobs and wealth and improving the quality of life. It incorporates coordinated initiatives targeted at expanding infrastructure and increasing the volume and/or quality of goods and services produced by a community. A common measure of economic development is a country’s gross national ...
In order for any country to survive in comparison to another developed country they must be able to grow and sustain a healthy and flourishing economy. This paper is designed to give a detailed insight of economic growth and the sectors that influence economic growth. Economic growth in a country is essential to the reduction of poverty, without such reduction; poverty would continue to increase therefore economic growth is inevitable. Through economic growth, it is also an aid in the reduction of the unemployment rate and it also helps to reduce the budget deficit of the government. Economic growth can also encourage better living standards for all it is citizens because with economic growth there are improvements in the public sectors, educational and healthcare facilities. Through economic growth social spending can also be increased without an increase of taxes.
Economic growth is one of the most important fields in economics. In current generation economic is developing well. Economic growth is really important to country and for the world as well. Economic are one of the identity for country because it shows a country development and attraction for other countries (F, Peter. 2014). For example well economic develop such as Singapore, Dubai, New York, and Japan. These countries are well develop and maintaining their economic growths. Economic growths are really important because higher average incomes enables consumers to enjoy more goods and services. Then, lower unemployment with higher output and positive economic growth firms tend to utilize more workers creating more employment. Enhanced public