Purpose: The authors analyse a growth model to explain how economic fluctuations are primarily driven by productive capacities (i.e. capacity utilization driven by innovations and know-how) and productive inefficiencies. Design/methodology/approach: This study’s methodology consists of the combination of the economic growth model, à la Solow–Swan, with a sigmoidal production function (in capital), which may explain growth, poverty traps or fluctuations depending on the relative levels of inefficiencies, productive capacities or lack of know-how. Findings: The authors show that economies may experience economic growth, poverty traps and/or fluctuations (i.e. cycles). Economic growth is reached when an economy experiences both a low level of inefficiencies and a high level of productive capacities while an economy falls into a poverty trap when there is a high level of inefficiencies in production. Instead, the economy gets in cycles when there is a large level of the lack of know-how and low levels of productive capacity. Originality/value: The authors conclude that more capital per capita (greater savings and investment) and greater productive capacity (with less lack of know-how) are the economic policy keys for an economy being on the path of sustained economic growth.

Economic growth, poverty traps and cycles: productive capacities versus inefficiencies

Grassetti, Francesca
;
2022-01-01

Abstract

Purpose: The authors analyse a growth model to explain how economic fluctuations are primarily driven by productive capacities (i.e. capacity utilization driven by innovations and know-how) and productive inefficiencies. Design/methodology/approach: This study’s methodology consists of the combination of the economic growth model, à la Solow–Swan, with a sigmoidal production function (in capital), which may explain growth, poverty traps or fluctuations depending on the relative levels of inefficiencies, productive capacities or lack of know-how. Findings: The authors show that economies may experience economic growth, poverty traps and/or fluctuations (i.e. cycles). Economic growth is reached when an economy experiences both a low level of inefficiencies and a high level of productive capacities while an economy falls into a poverty trap when there is a high level of inefficiencies in production. Instead, the economy gets in cycles when there is a large level of the lack of know-how and low levels of productive capacity. Originality/value: The authors conclude that more capital per capita (greater savings and investment) and greater productive capacity (with less lack of know-how) are the economic policy keys for an economy being on the path of sustained economic growth.
Economic growth modelling, long waves, long-level equilibrium and traps, endogenous fluctuations
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/20.500.11770/341204
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