File Name: economic development and economic growth .zip
This overview considers the past, the present, and the future of economic development.
House of Representatives. Chairman Brat, Ranking Member Evans, and other members of the Committee, thank you for this opportunity to testify today about the causes of economic growth, the benefits associated with economic growth, and current limits on economic growth in the United States.
Faster growth in gross domestic product GDP expands the overall size of the economy and strengthens fiscal conditions. But GDP is not meant to be a measure of economic welfare, and other considerations are important in fully assessing the costs and benefits of policy changes. Estimates from both the Office of Management and Budget and CBO suggest that faster economic growth would improve the fiscal outlook.
They find that a 0. Either can increase the overall size of the economy but only strong productivity growth can increase per capita GDP and income. Productivity growth allows people to achieve a higher material standard of living without having to work more hours or to enjoy the same material standard of living while spending fewer hours in the paid labor force. GDP measures the market value of goods and services produced in the country, but it captures only market activity and is not designed to be a measure of economic welfare.
A parent in the paid labor force contributes to GDP; one who stays home to take care of children or an aging family member does not, but, if the family hires someone to perform these same duties, that labor would contribute to GDP. Health, safety, and environmental regulations can impose costs on businesses that may slow measured GDP growth, but any such costs must be compared with the benefits of better health, safer workplaces, and a cleaner environment that may not be captured in GDP.
Finally, a full assessment of the benefits of economic growth requires consideration of how widely Americans share in that economic growth. CBO projects that, under current laws and policies, the economy will grow 2. Businesses can readily meet the rise in demand for their output by hiring unemployed workers and more fully utilizing productive capacity that had been idled by the recession. Growth in potential GDP is determined by growth in the potential labor force the number of people who want to be working when the labor market is strong and growth in potential labor productivity.
Improvements in labor quality due to education and training can also boost productivity, as can improvements in managerial efficiency or technology that allow businesses to produce more with the same amount of labor and capital.
Well-conceived tax, regulatory, and public investment policies can complement labor force growth and private investment in expanding potential GDP. They can also reap public benefits that GDP does not necessarily capture, such as distributional fairness and health and safety protections. Poorly conceived policies, of course, can impede growth and hurt national economic welfare. Actual GDP falls short of potential GDP in a recession, when aggregate demand is weak; it can temporarily exceed potential GDP in a boom, when aggregate demand is strong.
The Great Recession produced a large output gap between actual and potential GDP, which narrowed only slowly over the next several years as the economy recovered from the recession.
CBO projects that the remaining gap will be closed by the end of and that the major constraint on economic growth going forward will be the growth rate of potential output rather than weak aggregate demand. About 0. These projections of labor force and productivity growth are each lower than those that produced 3. Conditions are different now. The population is aging and, without more immigration, the potential labor force will grow much more slowly than when baby boomers were flooding the labor market.
Trump policies would have to produce some combination of stronger labor force participation and productivity growth totaling 1. Exaggerated claims for the economic growth benefits of large tax cuts have been around since the emergence of supply-side economics in the late s and persist to this day. Compare, for example, changes in employment and economic growth following the Bush tax cuts of with those following the Clinton tax increases on high-income taxpayers in , which supply-siders were certain would lead to slower growth and large job losses see Figure 2.
Small business job-creation was also more robust under Clinton. After the Bush tax cuts for the very highest-income households expired at the end of , the economy continued to grow and add jobs steadily. When Kansas enacted large tax cuts overwhelmingly for the wealthy, Gov. These simple relationships are not controlled experiments to isolate the effect of tax cuts on growth, but they are a warning against credulous acceptance of supply-side claims.
Careful economic research reinforces that conclusion. They are likely to hurt growth if they increase deficits or are paired with cuts to investments that help working families and the economy. CBO, which aims to provide objective, impartial, and non-partisan analysis reflecting expert opinion, finds that even tax cuts that increase incentives to work, save, and invest with potentially positive effects on growth are a net drag on growth if they increase the budget deficit.
Financing tax cuts for the rich by cutting productive public investments that help support growth, such as education, research, and infrastructure, are also harmful. Finally, a growing body of research suggests that investments in children in low-income families not only reduce poverty and hardship in the near term, but can have long-lasting positive effects on their health, education, and earnings as adults.
The Tax Foundation, to whose analysis supply-siders gravitate, is an outlier with respect to dynamic scoring. About half of pass-through income flows to the top 1 percent of households, while only about 27 percent goes to the bottom 90 percent of households.
This would produce a substantial loss in revenue, while providing no benefit to the vast majority of small businesses, whose tax rate would be unaffected see Figure 3. They include hedge fund managers, consultants, and investment managers, who are among the pass-through business owners currently in the Kansas Gov.
Sam Brownback exempted pass-through income from all state income taxes as part of his aggressive supply-side tax cutting in Two bond rating agencies have downgraded the state due to its budget problems.
The Kansas legislature recently passed bipartisan legislation to close the loophole, although Gov. Brownback vetoed the bill. In broad strokes, well-designed tax reform could spur growth by eliminating or scaling back inefficient tax subsidies and raising additional revenues to invest in national priorities and reduce deficits. At a minimum, it must not lose revenues. This research shows that the age of a business matters more than its size as a contributor to job growth, although new companies are typically small to start with.
Every year there is huge turnover in the population of small businesses as firms fail or go out of business and new firms start up. To quote one of the pioneers in this research:. But a small fraction of surviving young businesses contribute enormously to job growth.
A challenge of modern economies is having an environment that allows such dynamic, high-growth businesses to succeed. Samwick and William G. Burman et al. April 27, By Chad Stone. PDF of this testimony 8 pp. More on this topic Blog. Chart Book. My testimony makes four essential points: Growth matters both for fiscal stabilization and for raising living standards. Economic growth over the next decade will be much closer to the 2 percent average annual rate the Congressional Budget Office CBO projects than to the 3 percent or better the Trump Administration is promising.
Why Growth Matters Faster growth in gross domestic product GDP expands the overall size of the economy and strengthens fiscal conditions. Topics: Economy. More from the Authors. Chad Stone. Areas of Expertise Federal Budget. Stay up to date.
Economic growth is an increase in the production of goods and services over a specific period. To be most accurate, the measurement must remove the effects of inflation. Economic growth creates more profit for businesses. As a result, stock prices rise. As more jobs are created, incomes rise.
PDF | Mankind today is crossing a difficult, challenging period. After having Keywords: economic growth, development, crisis, liberalization.
The purpose of this paper is to examine the relationship between financial development and economic growth for five major emerging economies: Brazil, Russia, India, China and South BRICS during to using banking sector and stock market development indicators. To begin with, the study first examined some of the principal indicators of financial development and macroeconomic variables of the selected economies. Next, using generalized method of moment system estimation SYS-GMM , the relationship between financial development and growth is investigated.
Metrics details. For decades, African economies have embarked on financial sector reforms. However, the empirical implications of these reforms have been divergent. This paper investigates the impact of financial development on Economic growth using time series data in Cameroon. Using the Auto Regressive Distributive Lag ARDL technique of estimation, it was discovered that there exist a short-run positive relationship between monetary mass M2 , government expenditure and economic growth, a short run negative relationship between bank deposits, private investment and economic growth equally exists.
Barro, R. Economic growth, advanced series in economics. Bende-Nabende, A.
Economic development is a critical component that drives economic growth in our economy, creating high wage jobs and facilitating an improved quality of life. The business development team at the Orlando Economic Partnership works to attract, and retain jobs for the Orlando region. While the work of economic developers often falls under the radar, creating and sustaining jobs for a region is a critical component to a successful economy and community. Economic developers provide critical assistance and information to companies that create jobs in our economy. We help to connect new-to-market and existing companies with the resources and partners they need to expand, such as CareerSource Central Florida, utilities, and county and city partners. A large percentage of jobs in the Orlando economy are created by existing companies that are expanding their operations. Our economic development team executed 73 business retention and expansion visits to local companies just last year to assist with their operational needs.
In the economic study of the public sector , economic and social development is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and objectives. The term has been used frequently in the 20th and 21st centuries, but the concept has existed in the West for far longer. Whereas economic development is a policy intervention aiming to improve the well-being of people, economic growth is a phenomenon of market productivity and increases in GDP ; economist Amartya Sen describes economic growth as but "one aspect of the process of economic development". Economists primarily focus on the growth aspect and the economy at large, whereas researchers of community economic development concern themselves with socioeconomic development as well. The precise definition of economic development has been contested: while economists in the 20th century viewed development primarily in terms of economic growth , sociologists instead emphasized broader processes of change and modernization. Economic development implies economic growth plus progressive changes in certain important variables which determine well-being of the people,e. The concept, however, has been in existence in the West for centuries.