Capital: Capital Supply and Economic Growth: Sources of Savings

  • Shu-Chin Yang
Part of the International Economic Association Series book series (IEA)


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.


Capital Formation Land Reform Demonstration Effect Saving Ratio United Nations Economic Commission 
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Copyright information

© International Economic Association 1964

Authors and Affiliations

  • Shu-Chin Yang
    • 1
  1. 1.United Nations Economic Commission for Asia and the Far EastThailand

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