Innovation and Entrepreneurship
Module code: BUSN09034
CRN:14152
Lecture Two (b)
Growth: Its importance and its measurement
Steve Talbot
Room G314
UWS Business School, Paisley Campus
Tel: 0141 848 3380
[email protected]
The growth accounting framework (UK)
Separate growth into three subcomponents:
1. labour;
2. investment in physical capital; and
3. total factor productivity (TFP)
(TFP can be thought of as a measure of the efficiency
with which capital and labour inputs in the economy
are being combined)
Growth empirics: Factor accumulation vs. production efficiency
Possible explanations for the correlation between
capital per worker and production efficiency:
1. Production efficiency encourages capital accumulation.
2. Capital accumulation has externalities that raise
efficiency.
3. A third, unknown variable causes capital accumulation
and efficiency to be higher in some countries than others.
The growth accounting framework (UK)
Analytical framework used in the UK to understand issues of
growth
Determinants of Productivity Growth
Market failure
Where does market failure come from?
Key sources are:
1. Externalities
2. Market power
3. Information failure
4. Public goods
Source: Secular Stagnation: Facts, Causes, and Cures A VoxEU.org eBook ISBN: 978-1-907142-77-2
Secular Stagnation: Facts, Causes, and Cures A VoxEU.org eBook ISBN: 978-1-907142-77-2