15
CHAPTER OUTLINE
I. This chapter provides a nontechnical overview of economic growth. The main
questions posed are why are some countries rich and others poor, and why do
some countries grow quickly and others grow slowly? The chapter broadly
observes the per for mance of groups of countries and divides their growth into
the following categories: negative, slow, moderate, and rapid.
II. The authors then describe the basic mechanisms of economic growth and
break them down into factor accumulation and productivity growth. They
describe the basic features of the production function and the concept of
diminishing returns. The key ideas and implications of the Solow growth
model are presented in a nontechnical manner— however, the basic equation
for his model is introduced in this chapter.
III. The idea of total factor productivity (TFP) is introduced. The authors then trace
the results of the empirical work on sources of growth from Solow to Collins
and Bosworth (who nd that developing countries rely more on capital accumu–
lation). The voluminous empirical growth literature is summarized in terms of
the ve main characteristics of rapidly developing countries: macroeconomic
and po liti cal stability, investment in health and education, effective governance
and institutions, favorable business environment, and favorable geography.
Using the latest available data, the text explains the idea of structural change.
Boxed Examples
Box 3–1: Botswana’s Remarkable Economic Development
Box 3–2: Calculating Future Values, Growth Rates, and Doubling Times
Box 3– 3: Institutions, Governance, and Growth
Economic Growth: Concepts
and Patterns
CHAPTER 3
16 | Chapter 3
There are three boxed examples. The rst describes the economic wonder of
Botswana. The second, using Senegal as an example, illustrates how to calculate
future values, growth rates, and doubling times. The third box discusses the role
of institutions and governance in supporting and sustaining economic growth.
In the New Edition
In a thorough updating from the sixth edition, the seventh edition of the text
explores the basic empirical data on economic growth, the concepts underlying the
leading ideas of what causes growth, and some of the changing economic structures
that accompany growth. This leads to a current discussion of the reasons why
some countries have moved forward eco nom ical ly, while others have stagnated or
fallen behind.
Class Notes
This chapter has been rigorously updated. Statistics for developing countries dis-
cussed within this chapter have been reor ga nized and made current. Speci cally,
this chapter looks at divergent patterns in growth— with special emphasis on Thai–
land and Zambia. Students should also take care, when examining the key country
characteristics most closely associated with rapid growth, to think of what combi-
nation of forces impact the development of the countries in the discussion— from
the Democratic Republic of the Congo to China.
QUESTION BANK
Concept Map
Divergent Patterns of Economic Growth Since 1960
Factor Accumulation, Productivity, and Economic Growth
Saving, Investment, and Capital Accumulation
Sources of Growth Analysis
Characteristics of Rapidly Growing Countries
Macroeconomic and Po liti cal Stability
Investment in Health and Education
Favorable Environment for Private Enterprise
Trade, Openness, and Growth
Favorable Geography
Economic Growth: Concepts and Patterns | 17
Multiple- Choice Questions
1. Countries with slow growth include all of the following EXCEPT:
a. Madagascar.
b. Nigeria.
c. Kenya.
d. Venezuela.
2. Countries with rapid growth include all of the following EXCEPT:
a. Indonesia.
b. South Korea.
c. Botswana.
d. Chile.
3. Which of the following is NOT much of a problem in Botswana?
a. unemployment
b. HIV/AIDS
c. in e qual ity
d. corruption
4. Economists think that economic growth depends fundamentally on all of the
following EXCEPT:
a. factor accumulation.
b. in e qual ity.
c. ef ciency.
d. technological change.
5. In the Solow model, investment comes from:
a. outside lenders.
b. the government.
c. saving.
d. the capital stock.
6. Diminishing returns to capital means that as you add more capital:
a. output falls.
b. the additional contribution to output eventually declines.
c. labor usage falls.
d. output rises.
7. A country’s labor force grows 1.2 percent and its capital stock grows 3
percent. Assume that labor share of output is 0.25. If the economy grows 4.55
percent, how much does total factor productivity grow?
a. 0.5 percent
b. 1 percent
c. 1.5 percent
d. 2 percent
8. Economists Barry Bosworth and Susan Collins found that capital accumula-
tion accounted for about two- thirds of total growth in:
a. South America.
b. sub- Saharan Africa.
c. East Asia.
d. Eastern Eu rope.
9. Since 1980, GDP per capita has grown more than sevenfold in:
a. India.
b. China.
c. Egypt.
d. Uruguay.
10. Economist Stephen Radelet has demonstrated that, by stabilizing economic
and po liti cal problems in the mid- 1990s, 17 sub- Saharan African countries
experienced an annual average total factor productivity growth rate of:
a. 0.25 percent.
c. 2.75 percent.
d. 7.75 percent.
11. While Robert Solow established the model for the study of modern economic
development, this economist’s research in the early 1990s had set the con-
temporary stage for explaining the variance in growth across countries:
a. Milton Friedman.
b. Walter Williams.
c. Ayn Rand.
d. Robert Barro.
12. Between 1990– 2002, this nation’s growth and development per for mance was
the worst in the world at −7.2 percent:
a. Demo cratic Republic of the Congo.
b. Mexico.
c. Argentina.
d. Benin.
13. Malaysia’s growing life expectancy over the past generation can be largely
attributed to:
a. new hybrid crops.
b. a serious reduction in the incidence of malaria.
c. the widespread production and consumption of organic foods.
d. the eradication of tuberculosis.
14. In order for sustained economic growth to be successful, the centerpiece to
the growth pro cess in most countries must be its:
a. agricultural policies.
b. export policies.
c. industrial production methods.
d. military strength.
15. The empirical relationship between trade and growth is:
a. strong.
b. weak.
c. strong for natural resource- based exports only.
d. non ex is tent.
16. Being landlocked means that:
a. growth is impossible.
b. there will be great challenges in the development of external trade.
c. foreign aid is needed.
d. new advances in technology are not bene cial.
IDs and Paired- Concept Questions
These terms can be used individually as short- answer identi cation questions, or
they can be used in pairs. In the latter case, ask students to explain (1) the meaning
and signi cance of each of the two terms and (2) the relationship between them.
2. Botswana, natural resources
4. Saving, Solow model
6. Institutions, growth
8. China, India
10. Bostwana and Uganda, Chad and Niger