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Capital: Capital Supply and Economic Growth: Sources of Savings

In: Economic Development with Special Reference to East Asia

Author

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  • Shu-Chin Yang

    (United Nations Economic Commission for Asia and the Far East)

Abstract

Economic growth is customarily defined as the growth of output per head of population. Among the factors which account for the growth of output, capital has usually been accorded the key role. This is especially so in the case of under-developed countries where the factor endowment reveals the scarcity of capital.2 Theoretically, the attribution of high importance to capital and saving in economic development appears to be, to some extent, due to the popularity of the Harrod-Domar model, which has spread especially through its application to economic development in under-developed countries. One way of such application is to use this model as a simple tool for over-all development programming especially for the estimation of the capital requirements, on a given capital-output ratio, for achieving a certain rate of growth. Another way of applying this model and one which involves broad policy recommendations, is to determine the extent to which, by raising the rate of saving, or by reducing the capital-output ratio, or by doing both, a country can (aside from capital inflow) achieve a higher rate of growth than otherwise.

Suggested Citation

  • Shu-Chin Yang, 1964. "Capital: Capital Supply and Economic Growth: Sources of Savings," International Economic Association Series, in: Kenneth Berrill (ed.), Economic Development with Special Reference to East Asia, chapter 0, pages 71-97, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-00074-6_4
    DOI: 10.1007/978-1-349-00074-6_4
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