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Essay On Economic Growth

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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 .
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