ECONOMIC GROWTH, INTENSIVE

Increases in aggregate economic activity, or growth, may be generated by adding more labor and capital or by improving skills and technology. Development economists call the latter "intensive growth" because labor and capital work harder. Growth is driven by enhanced productivity (higher output per unit of input) rather than augmented factor supplies. Theory predicts that all growth in a steady-state, long-run equilibrium will be attributable to technological progress (intensive growth). Developing nations may initially grow faster than this "golden mean" rate, benefiting both from rapid capital accumulation (capital deepening) and technological catch-up, but must converge to the golden mean thereafter. During the 1970s many Marxist economists hypothesized that socialist economies were not bound by these neoclassical principles. They forecasted that extensive growth (increased factor supply) would be replaced by socialist–intensive methods ensuring superior performance, but they were mistaken: Growth fell below zero in 1989, heralding the collapse of the Soviet Union two years later.

See also: economic growth, extensive; economic growth, soviet

bibliography

Abramowitz, M. (1986). "Catching Up, Forging Ahead, and Falling Behind." Journal of Economic History 46: 385–406.

Domar, Evsei. (1957). Essays in the Theory of Economic Growth. New York: Oxford University Press.

Krugman, P. (1994). "The Myth of Asia's Miracle." Foreign Affairs 73:62-78.

Solow, R. (1957). "Technical Change and the Aggregate Production Function." Review of Economics and Statistics 39 (3):312-320.

Steven Rosefielde