Determinants of Economic Growth

Like China, Dubai has

experienced significant

growth. In this

presentation we will briefly

examine the factors of

economic growth.

• Increases in the quantity and quality of natural resources

• Increases in the quantity and quality of human resources

• Per-Worker Production Function

• Capital Goods

• Technology

• Demand Side of Economic Growth

• Efficiency

What Determines Economic Growth

Increase in Quantity of Natural Resources

Natural resources are used to produce goods

and services. The more natural resources we

have the more we are able to produce.

Increase in Quantity of Natural Resources

How do we get more natural resources?

• We can discover more

• Conservation

Exploring for petroleum

Conserving Resources

Fracking is a new drilling technique that allows us to get more oil from

wells that were not productive using older techniques.

Increase in Quality of Human Resources

Human resources, or human capital, are the knowledge and

skills that make a person productive.

Increase in Quality of Human Resources

Human capital involves improvements in workers (learning new skills) that will increase output. The more productive a worker is the more they will add to output.

Human capital is improved by:On the Job TrainingEducation

On the Job Training

Formal education or other types of training will increase the

productivity of the workforce.

Increase in Quantity and Quality of Capital

The more capital that workers have access to, the more goods and services that can be produced.

Scythe allowed 3 acres a day Reaper allowed 15 acres a day Combine allows 100 acres a day

Per-Worker Production Function – impact of capital

The per-worker production function shows the relationship between the amount of capital per worker and the output per worker.

Any point on the production function shows how much output per worker can be produced for a given amount of capital per worker

When there are k units of capital per worker, average output per worker in the economy is y.

The per-worker production function basically shows that as workers are given capital, they are able to produce more – too a point

k

y

Capital per worker

y shows output per worker

Production Function

Technology

Technology is a huge drive in productivity and thus economic growth.

Technology allows workers to produce more, even with the same amount of

physical and human capital.

The use of google glass can allow workers to be more productive.

Demand Side of Economic Growth

In order for economic growth to occur, there must be a

demand for the goods and services produced.

Productive Efficiency

The last ingredient necessary for economic growth is productive

efficiency. That is we don’t waste the resources we have.