Friday, September 28, 2012

The Future Of Economic Growth In The US and Other Industrialized Countries

Solow's theory of economic growth gives a lot of weight to growth in productivity. Industrialized economies may have extracted as much productivity as possible out of the major innovations that enabled rapid growth in per capita income.  If we also subtract other variables that affect economic growth out of the equation, the US and other industrialized countries may experience much lower rates of growth in per capita income.  The other variables include demographics, income inequality, education, globalization, energy and debt reversal   that will reduce income growth for the bottom 99% in the US, and other industrialized countries.  Of course, emerging economies, that are just beginning to benefit from innovations that contribute to productivity and economic growth, will experience greater increases in per capita income.

There is a lot of conjecture in this analysis but it raises many interesting questions about the limitations to growth in countries that have gained the most from innovations and rising productivity.  Other innovations that might contribute to productivity and growth might alter the equation but they remain unknown.

No comments:

Post a Comment