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Piętak, Łukasz

Article
Review of theories and models of economic growth

Comparative Economic Research

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Institute of Economics, University of Łódź

Suggested Citation: Piętak, Łukasz (2014) : Review of theories and models of economic growth,
Comparative Economic Research, De Gruyter, Warsaw, Vol. 17, Iss. 1, pp. 45-60,
http://dx.doi.org/10.2478/cer-2014-0003

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Comparative Economic Research, Volume 17, Number 1, 2014
10.2478/cer-2014-0003

ŁUKASZ PIĘTAK∗

Review Of Theories And Models Of Economic Growth

Abstract

The subject of this article is a review of the theories and models of

economic growth. In the first section, the author analyzes the theories of
economic growth, such as Schumpeter’s, Lewis’s and Rostow’s theory. In the
second part there is a review of the models of economic growth. In this part the
author divides models into two groups: exogenus models and endogenus
models. The article finishes with conclusions concerning the issues discussed.
The method used in writing the article is an analysis of the English and Polish
literature on the subject.

Keywords: economic growth, theories of economic growth, models of economic

growth, balanced growth

1. Introduction

Economic growth is one of the most important notions in the global

economy. Despite the criticism that the level and rate of growth does not always
reflect the real level of a population’s living standards, it remains the primary
measure of prosperity. However, as a measure describing the dynamics of

∗
Ph.D., University of Łódź, Faculty of Economics and Sociology, Departament of World
Economy and European Integration
46 Łukasz Piętak

economic processes in the country it has some drawbacks. First, it does not
record the volume of production obtained from the informal market, known as
the "black market", which means that not all economic transactions are included
in the total volume of generated output. In addition, economic growth does not
take into account changes in the amount of time spent on work, which obviously
affects the welfare of society. Also the measure of economic growth does not
include the negative processes associated with economic activities, such as
environmental pollution, its progressive degradation, or noise pollution.
However, despite all these drawbacks economic growth remains the primary
measure of the socio-economic conditions of the citizens of a country.

2. Economic growth in the historical perspective

In terms of sustainable development, a turning point took place in the late

1980's, when for first time a definition for it was given, emphasizing that
development had to meet present needs without the risk that future generations
will not be able to meet their needs. In 1992, at the United Nations Conference
on "Environment and Development" in Rio de Janeiro, representatives from 176
countries signed Agenda 21, which determined the principles of sustainable
development and laid out a strategy for its achievement (Bokajło 2008).
In the economic literature one can find also the notion of harmonious
growth. According to Adam Smith, there are natural harmonies in economic
life. Smith describes them as the force of the invisible hand, which stabilizes the
market (Smith 1954, p. 46). On the other hand according to Frederic Bastiat, in
spite of the conflicts of interest, God created a harmony in the world, which the
intellect can not discover (Bastiat 1850). Pierre Proudhon points to the
economic contradictions that may contribute to the destruction of production or
cause tension in the process of its formation (Proudhon 1846).
The problem of economic growth raises the question of the driving forces
that determine growth and economic development. If economic growth is
a dynamic process, will the same factors in the same proportions determine its
strength in the future? Classic economists saw the determinants of economic
growth in investments and improving productive capacity. In the first half of the
twentieth century neoclassical economics identified three factors of economic
growth: land, capital and labor. This was enough to explain the causes of
economic growth in capitalist countries. The more these factors were utilized,
the greater was the economic growth.
 Review Of Theories And Models… 47

In 1957, Robert M. Solow demonstrated, in his article, the insignificant

share of land, capital and labor in the economic growth of the United States, and
pointed to the technical progress as a source of growth in the U.S. economy
(Solow 1957). On the other hand, professor Xavier Sala-i-Martín distinguished
the following elements that determine the economic growth (Sala-i-Martin 2001):
1. accumulation of physical capital, human capital and education,
2. diversity of institutions favorable to the economy,
3. free movement of capital, technology, ideas, foreign investment and the
free flow of information.
Thus, based on the above opinions regarding the factors of economic
growth reflect, disagreement can be observed. X. Sala-i-Martin pointed to
several factors, while Solow narrowed the problem to technical development.
The main works on economic growth are from the twentieth century.
In the era of bullionism and mercantilism the problem was unexplored; the
wealth of a nation was identified with ores and the volume of them owned
(Cameron 2004, pp. 144-151). After mercantilism came the physiocrats. They
glorified agriculture as the sector of the economy which gave the "pure”
product. The physiocrat Quesnay created an economic table that described
socio-economic relations, and it showed the essence of the pure product.
(Quesnay 1928, p. 303). The words "laissez faire, laissez passer" (let me work,
let me go ahead), spoken at one of the meetings of Physiocrats, gave birth to
economic liberalism, represented by Adam Smith, David Ricardo, Thomas
Malthus and Karl Marx (Smith 1954; Ricardo 1957; Malthus 1925; Marks
1951). Common views on economic growth can be extracted from among the
classics. For example, Smith and Ricardo determined economic growth by
production, sharing the "Law of markets” developed by Jean-Baptiste Say (Say
1960, p. 211). According to Smith, an increase of production will affect the size
of the market, more specifically its enlargement (Smith 1954, p. 304). On the
other hand, Ricardo considered money as merely a medium of exchange used in
the process of buying and selling goods and services (Ricardo 1957, pp. 335-336).
Identical views on the role of supply in the process of economic growth
were presented by Marx, who recognized its crucial role in an economy.
However, in contrast to Smith and Ricardo, he did not agree with Say’s "Law of
markets". According to Marx, if the capitalist economy is experiencing regular
crises of overproduction, the conviction that supply would supposedly generate
demand had no logical justification (Marks 1951).
Different views on the determinants of economic growth were presented
by Malthus, who made dependent it on effective demand. Therefore, he shared
the views of Keynes (Stankiewicz 2000, pp. 176-177).
48 Łukasz Piętak

In addition, the classics had different views on the productivity of

production factors. For example, Smith differed from Ricardo and Malthus. He
was optimistic and assumed increasing returns of private inputs (Bronfenbrenner,
Sichel 1987, p. 63). Malthus and Ricardo were pessimists (Czuma 2007, p. 168).
They assumed decreasing returns of the factors involved in the production
process. A similar opinion was presented by Marx, who saw the process of
increasing capital’s organic composition as a cause of decline profit rates.
However, Smith’s assumption of increasing productivity of inputs is not
consistent with the rules of a competitive market. Conditions of perfect
competition require equality between the price level and marginal cost. Alfred
Marshall attempted to explain the incompatibility proposed by Smith. He
introduced the differentiation between internal economies and external
economies. According to Marshall, reduction of production costs is the result of
both extending the size of the company itself, as well as the overall development
of the industry. Thus, the presence of external economies allows for the
reconciliation of perfect competition with the increasing productivity of
production factors. (Marshall 1925, pp. 312-321).
The problem of the presence of external economies was undertaken by
other economists. R. Nurkse examined the impact of industry’s development on
other sectors of the economy (Nurkse 1962, pp. 27-33). Niels Hansen linked the
opportunity of private entrepreneurs with the presence of external economies
(Hansen 1968, p. 8). On the other hand, in the opinion of Mauricce Dobb
a primary analysis of static equilibrium showed a tendency to treat the external
economies as benefits accruing to some companies that work in a determined
industry (Dobb 1963, pp. 14-15).
The name of Adam Smith is associated with the concept of division of
labor as the main factor of economic growth. According to Smith, the division
of labor is a result of capital accumulation and gradual expansion of the market
(Smith 1957, p. 304). Moreover, Smith appreciates the role of technological
innovation in the process of economic growth. However, as noted by Brewer,
technical progress in Smith’s concept is not independent and only passively
follows the accumulation of capital (Brewer 1991). On the other hand,
according to Lionel Robbins, it is owing to Smith that, for the first time in the
history of economic thought, product per capita and not the total production
volume was considered as a criterion of welfare (Robbins 1969, p. 28).
Smith also recognized the negative consequences of division of labour.
He pointed to the psychological and human costs associated with production
(Smith 1957, T. 2, p. 782). J.S. Mill spoke in a similar vein. According to him,
dealing with only one thing has a bad effect on intelligence, and the real losses
caused by that situation outweigh the gains (Mill 1909, p. 133). One hundred
 Review Of Theories And Models… 49

years later, a different opinion on the division of labor was presented by Alfred
Marshall. In his opinion, performing the same work does not have a negative
impact on the mental development of the employee, and the damages caused by
the mechanical performance of work are neutralized by the social atmosphere at
the workplace (Marshall 1935, p. 255).
While the classical thought on economic growth was linked with supply,
Keynes considered demand to be the most important. The experience of the
Great Crisis of 1929 did not confirm the existence of an autonomous strength
that helped an economy to achieve a stable state. The Great Depression of the
1930s led to a dramatic economic collapse in world. John Steinbeck, in his book
"The Grapes of Wrath" described the situation in the United States, ruined by
the crisis of 1929 (Steinbeck 1971, pp. 43, 194-195, 291, 285, 348-349). The
biggest collapse took place there, where industrial production decreased by
44.7% and gross domestic product decreased by 28%. The countries affected by
the deep recession also included Austria, Germany, Italy, Czechoslovakia and
Poland. The crisis least affected countries such as The Netherlands, Romania,
United Kingdom and Scandinavian countries (Snowdon 1998, p. 16)
The experience of the Great Depression influenced Keynes. He said that
capitalism by its nature tended to imbalance. In his work he openly criticized
classical economics (Keynes 1985, pp. 42-43). Keynes did not accept Say’s
"law of markets", comparing such reasoning to the natural economy of Robinson
Crusoe (Keynes 1985, p. 46). In addition, he considered classical economy’s
assumption that an economy achieved a steady state in the long run as
unrealistic. According to Keynes, the economic mechanism by its nature tends
towards imbalances and unemployment (Keynes 1985, p. 60).
Keynes, in contrast to the classics, was convinced of the unbalanced
nature of economic growth. In his short-run model the main factor of growth is
investments. However, the model developed by Keynes does not take into
account the passage of time. His successors, in the persons of Harrod and
Domar, tried to dynamise the so-called keynesian model, seeking a balance in
the long run.

3. Theories of economic growth

Analysis of the theory of economic growth begins with the name Joseph
Schumpeter. Contrary to the classics, Schumpeter did not consider the
accumulation of capital as the main driving force of economic growth. He
assigned great importance to the concept of the entrepreneur-innovator, calling
50 Łukasz Piętak

him a "hero of development". In his opinion, the innovation and creativity of

entrepreneurs determined economic development. Schumpeter was convinced of
the unbalanced nature of economic growth. and he attributed that process to the
nature of the ‘jump’. (Schumpeter 1934, p. 65). Following the introduction of an
innovation an entrepreneur receives great profits, but over time the competition
copies the invention and the profits begin to decline.
The theory of economic growth proposed by Schumeter is based on the
assumptions of private property, a competitive market. and the efficiency of
financial markets that could support the production of new inventions. However,
in countries lacking a democratic system, these conditions frequently are not
fulfilled. Thus, Schumpeter's theory is addressed to the democratic and economically
developed countries.
Another theory of economic growth was developed by Arthur Lewis.
In his work he dealt with the problem of poor countries, but with a rich labor
force (Lewis 1954, p. 3). Lewis shared the overall vision of classical
economists, but did not always agree with their diagnoses and methods. The
model proposed by Lewis assumes maintaining a low level of life in the short
run. The savings thus obtained will increase the stock of capital, which in the
long run will lead to the appearance of income growth. Thus, Lewis’s model
implies enlargement of the differences between countries in the short run as
a condition for equalization of income levels in the long run (Lewis 1956, pp. 7-22).
Simon Kuznets developed a theoretical support for the Lewis’s theory
called “Kuznets’s curve” (Kuznets 1955, pp. 1-28). Empirical studies confirmed
the existence of economic disparities in the early stages of growth. Initially,
when labor begin to abandon agriculture for industry, the differences were the
greatest. However, as the concentration of factors of production took place in
industrial centers, the differences tended to disappear. In addition, Kuznets
noticed a positive association between the dynamics of economic growth and the
increasing share of urban population in the total population (Kuznets 1976, p. 32).
Nonetheless Lewis’s theory contains assumptions which are difficult to
accept. The problem of poverty can not be postponed until an unspecified
future. After all, the increased accumulation of capital would be achieved by
reducing consumption, and this would most affect the poorest people.
A few years later, Walt Rostow created another theory of economic
growth. Rostow, like Lewis, made economic development dependent on the
accumulation of capital, and distinguished five stages of development (Rostow
1960, pp. 4-16). According to Rostow, the biggest problem for poor countries is
to achieve the third stage, called “take off”. Poor countries have a problem with
the interruption of the “vicious circle” established through the years. Rostow
proposed to break it by accumulating capital. However he realized that in cases
 Review Of Theories And Models… 51

where there was an absence of opportunities to increase internal accumulation,

external support would be necessary. Also, according to Rostow, reconstruction
of the economy from agricultural to industrial would allow for the diffusion of
economic growth over the entire country. In 1971 Rostow added a sixth stage of
economic development, called “quality” - characterized by the continuous
improvement in the quality of goods and services (Rostow 1971).

4. Models of economic growth

Since the process of economic growth is based on great variety of factors

that change over time, models of economic growth necessarily apply some
simplifications. These simplifications consist in classification and aggregation
of the causes of economic growth. Mostly, in models of economic growth
a depreciation rate for capital and growth of population are exogenous. In the
case of the savings rate, the models can be divided into two groups. In the first
group, the savings rate is exogenous, for example in the Harrod and Domar
model, models that use the production function AK, and the neoclassical models
of Solow and Uzawa.
The second group includes models with an endogenous savings rate, like
the neoclassical model of Ramsey and the models of Kaldor and Pasinetti,
which are based on the scientific achievements of Keynes. Models can be also
divided according to the capital ratio. The Models of Harrod–Domar and the AK
models assume its constant value. In turn, the ratio of capital/production in
neoclassical models can change over time.
Models of economic growth also can be divided according to the criterion
of time. Long-term models are primarily used to determine the path of
sustainable growth. They characterize a pattern according to which the economy
should grow (Woźniak 2008, pp. 145-146).
Short-term models refer to the scientific achievements of Keynes. Their
main purpose is to identify the possibility of having the level of actual
production approach the level of potential output (Woźniak 2008, pp. 145-146).
Roy Harrod and Evsey Domar developed a model that sought the possibility
for sustainable growth. They extended the short-term Keynesian model, that
assumes the instability of the capitalist economy (Harrod 1939; Domar 1946).
In the model of Harrod-Domar growth is sustainable if three growth rates
are equal: the actual growth rate, guaranteed growth rate, and natural growth
rate. Harrod called such a situation the "golden age", whereby the achieved
macroeconomic balance ensures the full use of capital and labor. However,
52 Łukasz Piętak

equilibrium requires equalization of savings, which are dependent on

households and investments that are in the hands of the capitalists. Hence, that is
difficult to fulfill. The savings rate is exogenous, i.e. established outside the
model, and the same applies to growth of population, dependent on its natural
dynamics. In addition, the model assumes a constant ratio of capital to labor,
implying no possibility of substitution of factors of production. Thus, there is no
mechanism to balance the three growth rates. Hence, the model of Harrod -
Domar reveals two problems. Firstly, the growth of a capitalist economy at the
guaranteed rate of growth with full employment is not possible. The process of
economic growth is always accompanied by involuntary unemployment.
Second, in a capitalist economy there is no convergence towards equilibrium.
Thus, Harrod and Domar, by perversely seeking a dynamic equilibrium path,
proved the unsustainable character of economic growth.
The economists grouped around Cambridge school of Economics tried to
remedy the pessimistic vision flowing from model of Harrod - Domar.
N. Kaldor and L. Passinetti introduced the functional distribution of income
between profits and wages into their models, and they proved the possibility of
economic growth with full employment of labor. They maintained the
assumption of a constant ratio of capital, but at the same time they abandoned
the assumption of a constant savings rate. In addition, Kaldor and Pasinetti
introduced different levels of the saving rate, which characterized every social
group. The savings of the capitalists was greater than the savings realized by
employees. The endogenous nature of the savings rate allowed for finding the
path of sustainable development, which they found did not run on a "knife-
edge”. In Kaldor’s model, if the savings rate of the employees is zero, the
national economic growth depends on the profit rate of the capitalists (Kaldor 1963).
In 1962, Italian economist Luigi Pasinetti further developed Kaldor’s
model. According to Pasinetti, if savings appear in the economy, their
possession is associated with the rate of profit. This means that savings of
employees generate interest, which is their income. In Pasinetti’s model, as in
the case of Kaldor’s model, the economic growth depends on the profit reached
by the capitalists. However, while Kaldor obtained this by introducing an
assumption of zero savings of workers, Pasinetti did not have to make that
assumption (Pasinetti 1962).
A good summary of the reflections on the models of Kaldor and Pasinetti
can be found in Kaldor’s statement that ‘capitalists earn what they spend, and
employees spend what they earn’ (Kaldor 1955-1956).
In turn, in Kalecki’s model the major role in the growth process is played
by investments, not the level of realized savings. This is why Kalecki's model is
 Review Of Theories And Models… 53

called "investment", because according to him investments decide on economic

growth in the long run (Kalecki 1956).
Analysis of the neoclassical models of economic growth begins with the
model of Solow - Swan. Robert Solow proposed a long term economic growth
model in response to the unsatisfactory results derived from the model of the
Harrod - Domar (Solow 1956). In the same year, American economist Trevor
Swan presented a similar model (Swan 1956), which is why the discussed model
is called the Solow – Swan model. Its main aim was to show that in the long
run, an economy achieved sustainable growth. Then, the growth rate of income
per capita was equal to rate of population growth. The two problems identified
by the Harrod – Domar model - instability of the economy and the impossibility
of full use of the labor – were solved in the Solow – Swan model by introducing
the assumption of substitution of factors of production, which in turn removed
the assumption of a constant ratio of capital/production.
In the early 1960s Japanese economist Hirofumi Uzawa presented
a model of economy composed of two sectors (Uzawa 1963). The first sector
produces consumer goods, and the other capital goods. The model is stable
when the ratio of capital/labor in the branch producing consumer goods is
higher than in the branches producing capital goods.
Another neo-classical growth model is based on the work of Frank
Ramsey, which concerned the problem of the optimal level of savings (Ramsey
1928). This was later developed by Cass and Koopmans and therefore is often
called the Ramsey - Cass – Koopmans model (Cass 1965; Koopmans 1965).
In the Ramsey model, the savings rate is endogenous and depends on the
decisions of consumers. In addition, Ramsey does not refer to the economy of
"Robinson Crusoe", where households are both producers and consumers of
production. In the Ramsey - Cass – Koopmans model the results on steady
steate growth rate are the same as these in the Solow-Swan model.
In another neoclassical model, Diamond introduced analysis of the finite
horizons. The life of households is divided into two periods. In the first period
households receive wages. They spend them on current consumption and
savings. In the second period, households do not earn. Current consumption is
financed by accumulated savings from the first period. In the long run an
economy reaches a stable state like in the Solow – Swan model (Diamond 1965).
Neoclassical models assume that the economy achieves equilibrium in the
long run. In addition, they confirm the existence of convergence, which means
faster development of poor countries in comparison with rich ones. The
convergence hypothesis says that countries differ from each other only in their
of capital/labor ratio, and they have the same steady state. Hence, the economy
with a lower level of income per capita will obtain a higher rate of growth.
54 Łukasz Piętak

There are a lot of studies and publications on the convergence process

between countries. Some of them confirmed the existence of absolute
convergence between the selected group of countries, while others confirmed
the conditional convergence between countries characterized by similar
parameters. The following Table cites the results of selected studies with their
various conclusions about convergence.
Table 1. The existence of the convergence according to selected research

The scope of Absolute Conditional

Author of the study
research convergence convergence
Sala-i-Martin (1996) 110 countries no yes
Barro (1991) 98 countries no yes
Mankiw, Romer, Weill (1992) 98 countries no yes
Barro, X. Sala-i-Martin (1992) 48 states of USA yes yes
22 countries
Mankiw, Romer, Weill (1992) yes yes
of OECD

Source: own elaboration.

The opposite of exogenous growth models are models of endogenous

growth. They set themselves the objective of explaining phenomena observed in
the global economy. First, models of endogenous growth try to answer the
question: why do the economies of individual countries produce much larger
quantities of goods than they did it a hundred years ago? For example,
according to P. Romer, this situation is the result of the increasing return on
labor (Romer 1990). Secondly, models of endogenous growth try to explain the
role of human capital in economic growth. Thirdly, they try to indicate the
reasons for the deepening divergence between countries.
In endogenus models, the main determinants of economic growth are
formed inside the model. The technical level of the economy is the result of
investment decisions. Returns to factors of production are at least constant.
Endogenous models use the AK production function, which is a linear function
of technology (Rebelo 1991). In the simple AK model per capita variables grow
at a fixed rate, regardless of the level of capital. Therefore there is no steady
state and the phenomenon of convergence between the economies doesn’t exist.
The first models of endogenous growth were developed by Marvin
Frankel and Kenneth Arrow. Frankel, in his model, tried to reconcile the
neoclassical production function with the AK production function. According to
Frankel, the neoclassical production function applies to individual companies.
However, the macro economy develops according to the AK function. This
assumption is based on the introduction - to the production function - of the
 Review Of Theories And Models… 55

factor of externalities that reflect the level of economic development of the

country (Frankel 1962).
On the other hand, Kenneth Arrow questioned the results derived from
neoclassical models. According to him, conditioning the economic growth on
exogenous variables is not very satisfying. Arrow assumes that the obtained
knowledge is the result of a process defined as “learning by doing”. Although,
as Sala-i-Martin noted, Arrow’s process would have better been called
“learning by investments” (Sala-i-Martin 2000). However, despite the use of the
production function with increasing returns to scale, Arrow's model does not
make long-term growth dependent on the level of savings (Arrow 1962). Similar
to the Solow – Swan model, economic growth in a steady state is determined by
exogenus variables.
Arrow's views on the importance of human capital in the process of
economic growth was shared by T.W. Schultz. In his article, Schultz criticized
those economists that reject the problem of investment in human capital as
a topic of economic analysis. Moreover, according to Schultz the costs for
education, health and professional development are investments in human
capital (Schultz 1961).
Another model of endogenous growth was presented by Paul Romer. He
introduced capital externalities into the neoclassical production function. Thanks
to this operation the production function is characterized by increasing returns to
scale of all factors of production and constant returns to scale of capital, and this
assumption lays the foundation for the existence of endogenous growth.
However, in Romer’s model the growth of the economy according to the AK
production function requires the fulfillment of certain conditions. First, the size
of externalities must be significant, otherwise the economy grows according to
the Cobb – Douglas function. Moreover, Romer’s model foresees the existence
of the “scale effect”, which is not confirmed by the data flowing from the
individual economies (Romer 1986). On the other hand, Lucas defined the value
of the “scale effect” as capital per capita. Therefore, in contrast to Romer, Lucas
did not have to make assumptions about the zero increase of labor (Lucas 1988).
Robert Lucas proposed a model of endogenous growth according to
which there are two sectors. According to Lucas, there are two types of capital
too - physical capital used in the production process and human capital that
affects the growth in productivity of both labor and physical capital. Thus,
a certain person with human capital equal h produces two times more goods
than a person with human capital h/2 and two times less than a person with
human capital 2h. Lucas also takes into account the existence of increasing
returns to scale, and like Romer refers to Arrow’s concept of “learning by
doing”. However, in the case of Romer's model, the source of externalities was
56 Łukasz Piętak

the accumulation of physical capital, while in Lucas’s model the existence of

externalities was based on the accumulation of human capital (Barro, Sala-i Martin
2004). Lucas’s model explains the differences in economic development between
countries. Countries characterized by a low level of human capital grow more
slowly than countries with considerable resources in this respect.
In a further group of endogenous growth models, economic growth is
achieved by the endogenisation of technical progress, which is the result of
a functioning R&D sector. Endogenous technological progress can manifest
itself in two ways. Firstly, it can be expressed by increasing the number of
goods used in the production process. Second, endogenous technical progress is
reflected by improving the quality of existing goods.
Paul Romer presented the model according to which technical progress,
the main determinant of economic growth, is reflected in the increasing supply
of intermediate goods. In Romer’s model, economic growth is dependent on the
level of human capital. Countries rich in human capital can develop very
quickly, while the shortage of human capital can lead to economic stagnation.
Thus, the model does not confirm the phenomenon of convergence between
economies (Romer 1990).
In the model of Aghion - Howitt technical progress is reflected in
improvements in the quality of existing goods on the market. In contrast to Romer's
model, the appearance of improved goods automatically replaces the "old"
goods. Another innovation comes with a certain probability. Also, a country
with more resources of educated people will grow faster than a country with
a lower level of human capital (Aghion, Howitt 1992).
The further work of Becker, Murphy and Tamura tried to determine the
correlations between investments in human capital and population growth. They
argued that countries which are poor in human capital are characterized by the
presence of large families (Becker, Murphy, Tamura, 1990). Mark Rosenzweig
presented similar conclusions in his work. According to him, countries with
high income per capita are characterized by a low birth rate and a high level of
human capital (Rosenzweig 1990).

5. Conclusions

1. The analized theroies of economic growth are based on two convictions.

In the case of Schumpeter’s theory, the conviction is that economic growth
is unbalanced and depends on innovations, which can appear with certain
 Review Of Theories And Models… 57

probability. On the other hand, the models of Lewis and Rostow predict
balanced growth in long run, even if it’s unbalanced in short run.
2. Growth models can be divided in many ways. Firstly, we can classify them
by extracting one common assumption. For example it could be a constant
saving rate. You can also divide the model into two groups: exogenous
models and endogenous models. Exogenus models use the neoclassical
production function, with decreasing productivity of factors of production.
On the other hand, in endogenous models the productivity of factors of
production is at least constant.
3. Neoclassical models predict convergence between countries. The poorer
economies grow faster than richer ones. Unlike the neoclassical models,
endogenus models do not predict convergence. For example, countries with
a large stock of human capital will develope faster in long run than
countries with a deficiency in this respect.
4. Sometimes, the results derived from the models are not supported by
empirical data concerning the global economy. For example, the “scale
effect” of Romer’s model (1986) is not confirmed by the examples of
individual countries.

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Streszczenie

PRZEGLĄD TEORII I MODELI WZROSTU GOSPODARCZEGO

Celem artykułu jest przegląd teorii oraz modeli wzrostu gospodarzcego.

W pierwszej części autor dokonuje analizy teorii wzrostu gospodarczego autorstwa:
Schummpetera, Lewisa oraz Rostowa. W drugiej części opracowania zawarty jest
przegląd modeli wzrostu gospodarczego. Autor analizowane modele dzieli na dwie
grupy; modele egzogeniczne oraz modele endogeniczne. Artykuł kończy lista wniosków
dotyczących przeprowadzonych analiz. Autor przygotowując artykuł wykorzystał metodę
analizy literatury angielskiej i polskiej.

Słowa kluczowe: wzrost gospodarczy, teorie wzrostu gospodarczego, modele wzrostu

gospodarczego, zrównoważony wzrost gospodarczy