Economic Growth: Why Are There Rich and Poor Countries?

Abstract

Oikawa, KokiSustainable economic growthEconomic growth is one of the main goals of SDGs. To achieve this goal, we need to know what drives the long-run dynamics of the wealth of nations. In this chapter, we first learn how to measure the level of a country’s wealth and its growth from data, as well as some widely observed facts such as steady growth in some developed countries, the huge international difference in economic growthEconomic growth, and so forth. Next, we develop theoretical models to explain those observations. We present a basic theory of growth with capital accumulationCapital accumulation as the driving force and check the consistency with the observed data. Further, we consider firms’ investmentsInvestment into research and developmentResearch and Development (R &D) (R &D) and see how innovations drive economic growthEconomic growth. It also tells us the effects of growth policies. Lastly, we discuss other factors that create international difference in economic growthEconomic growth such as educationEducation, institutionInstitution, and misallocationMisallocation of resources. This chapter contributes to Goal 8 (economic growthEconomic growth) and 9 (innovation) in SDGs.