ABSTRACT
The previous chapters have analyzed the world markets for goods and for factors of production. This chapter continues the global economic view, looking at the way growth processes take place in the world economy. The historical record of the last two centuries shows a continuous upward movement in income per capita interrupted by two world wars and the hyper-inflation of the 1920s and the Great Depression of the 1930s (section 4.1). Growth processes overlap with cyclical movements (section 4.2). The driving force of economic growth is the augmentation of production factors, comprising capital accumulation, population growth, and technological progress. Institutions defining incentives and constraints are an important factor (section 4.3). Capital exports and imports play a decisive role in the growth processes of open economies (section 4.4). We discuss why openness is important (section 4.5). Localization factors are surveyed (section 4.6). Empirical evidence suggests the relevance of capital accumulation for growth (section 4.7). An intensely discussed topic is whether economic processes are characterized by divergence or convergence (section 4.8). Economic growth is a process with many features different from the neoclassical approach (section 4.9). To conclude, some special aspects of the world economy’s growth process such as resource scarcity are dealt with (section 4.10).
