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 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. 3.
    Cf., for instance, P. T. Bauer and B. S. Yamey, The Economics of Underdeveloped Countries (Cambridge University Press, 1957).Google Scholar
  2. Moses Abramovitz, ‘Resources and output trends in the United States since 1875’, American Economic Association, Papers and Proceedings, May 1956.Google Scholar
  3. 2.
    A. K. Cairncross, ‘The place of capital in economic progress’, in Economic Progress, papers and proceedings of the 1953 Round Table Conference held by the International Economic Association, edited by L. H. Dupriez, p. 235.Google Scholar
  4. 3.
    Jan Tinbergen and J. J. Polak, The Dynamics of Business Cycles (London, 1950), pp. 127–8.Google Scholar
  5. 4.
    The Consultative Committee of the Colombo Plan for Co-operative Economic Development in South and South-east Asia, Seventh Annual Report, Seattle, Washington, November 1958, p. 19.Google Scholar
  6. Simon Kuznets, ‘International Differences in Capital Formation and Financing’, in National Bureau of Economic Research, Capital Formation and Economic Growth, 1955, p. 21.Google Scholar
  7. 3.
    Cf. Richard B. Goode, ‘Adding to the stock of physical and human capital’, American Economic Association, Papers and Proceedings, 1959Google Scholar
  8. and United Nations Economic Commission for Asia and the Far East, ‘Problems of Social and Economic Development in the Countries of Asia and the Far East’, in Economic Bulletin for Asia and the Far East, December 1959 ; especially pp. 26–8.Google Scholar
  9. 4.
    Government of Pakistan, National Planning Board, The First Five-Year Plan, 1955–1960, December 1959, p. 62.Google Scholar
  10. See, for instance, P. T. Ellsworth, The International Economy (Macmillan, 1958), chap. 6.Google Scholar
  11. 2.
    See, Harold G. Moulton, Controlling Factors in Economic Development (The Brookings Institute, 1949), chap. 1Google Scholar
  12. L. M. Lachmann, Capital and Its Structure (London, 1956), p. 5 and chap. v.Google Scholar
  13. 3.
    Cf. Henry C. Wallich, ‘Some notes towards a theory of derived development’, a paper presented at the third Meeting of Central Bank Technicians of the American Continent, Havana, 1952Google Scholar
  14. Henry J. Bruton, ‘Growth models and under-developed countries’, The Journal of Political Economy, August 1955.Google Scholar
  15. James S. Duesenberry, Income, Saving and the Theory of Consumer Behaviour (Harvard University Press, 1949).Google Scholar
  16. 2.
    Raymond W. Goldsmith, A Study of Saving in the United States, (Princeton University Press, 1955) vol. i, pp. 12–14.Google Scholar
  17. Cf. W. Arthur Lewis, The Theory of Economic Growth (George Allen and Unwin Ltd., 1955), chap. vGoogle Scholar
  18. and W. W. Rostow, ‘The take-off into self sustained growth’, Economic Journal, March 1956.Google Scholar
  19. C. C. Liang, ‘Mobilization of Rural Savings With Special Reference to the Far East’, in ECAFE, Mobilization of Domestic Capital: Report and Documents of the First Working Party of Experts, 1953, p. 148.Google Scholar
  20. 2.
    See D. K. Rangnekar, Poverty and Capital Development in India (Oxford University Press, 1958), p. 53.Google Scholar
  21. 3.
    Cf. Motokazu Kimura, ‘Fiscal Policy and Industrialization in Japan, 1868–1895’, The Science Council of Japan, Division of Economics, Commerce and Business Series, No. 17, (Tokyo, March 1958)Google Scholar
  22. Bruce F. Johnston, ‘Agricultural productivity and economic development in Japan’, Journal of Political Economy, December 1951.Google Scholar
  23. 4.
    Chao Kuo-Chun, Agrarian Policies of Mainland China: A Documentary Study (1949–1956) (Harvard University Press, 1957), p. 150.Google Scholar
  24. 2.
    H. S. Tang and S. C. Hsieh, ‘Land Reform and Agricultural Development in Taiwan’, a paper contributed to the Conference on Landlord Tenure, Industrialization and Social Stability: Experience and Prospects in Asia, organized by Marquette University, U.S.A., in 1959.Google Scholar
  25. 3.
    FAO, Documentation prepared for the Centre on Land Problems in Asia and the Far East, held in Bangkok, 1954, p. 202.Google Scholar
  26. 4.
    Ragnar Nurkse, Problems of Capital Formation in Under-developed Countries (Oxford, 1955), chap. ii.Google Scholar
  27. United Nations, Economic Survey of Asia and the Far East, 1957, p. 112.Google Scholar
  28. (See United Nations, Yearbook of National Accounts Statistics, 1958.)Google Scholar
  29. 2.
    See Elizabeth E. Hoyt, ‘Want Development in Un-developed Areas’, the Journal of Political Economy, June 1951.Google Scholar
  30. 3.
    United Nations, Economic Survey for Asia and the Far East, 1957, chap. 6.Google Scholar
  31. 2.
    M. Abramovitz, ‘Savings and Investment: Profits vs. Prosperity?’, American Economic Reviews, June 1942.Google Scholar
  32. Irwin Friend and Irving B. Kravis, ‘Entrepreneurial income, saving and investment’, American Economic Review, June 1957, p. 270.Google Scholar
  33. 3.
    V. V. Bhatt, ‘Savings and Capital Formation’, Economic Development and Cultural Change, vol. vii, No. 3, Part I, April 1959.Google Scholar
  34. Albert O. Hirschman, The Strategy of Economic Development, Yale University Press, 1958, p. 38.Google Scholar
  35. 2.
    Computed from data published in United Nations, Yearbook of National Accounts Statistics, 1958.Google Scholar
  36. H. K. Mazumdar, Business Saving in India (J. B. Wolters’ Publishing Co., Holland, 1959); p. 212 (pre-publication copy).Google Scholar
  37. 3.
    Cf. W. Galenson and H. Leibenstein, ‘Investment criteria, productivity and economic development’, Quarterly Journal of Economies, August 1955.Google Scholar
  38. Benito Legarda Jr., ‘Our Growing Entrepreneural Class’ Central Bank of the Philippines, Central Bank News Digest, vol. xii, No. 6, 9 Feb., 1960.Google Scholar
  39. 2.
    H. T. Parekh, The Future of Joint-Stock Enterprise in India, Jaico Publishing House, 1958, pp. 59–61.Google Scholar
  40. 3.
    Gustav Ranis, ‘Factor proportions in Japanese Economic Development’, American Economic Review, September 1957, p. 595, Table I.Google Scholar
  41. Chotaro Takahashi, Dynamic Changes of Income and Its Distribution in Japan (Tokyo, 1959), pp. 146–7, Tables 1–2.Google Scholar
  42. 2.
    William W. Lockwood, The Economic Development of Japan (Princeton University Press, 1954), pp. 271–80.Google Scholar
  43. United Nations, Economic Survey for Asia and the Far East, 1957, pp. 101, 107.Google Scholar
  44. 2.
    For a brief account of the various concepts and measurements, see S. C. Yang, ‘Deficit Financing for Development and Its Inflationary Impact’, Ekonomi dan Kenangan Indonesia, May/June 1959.Google Scholar
  45. ‘Fiscal Policy and Taxation’, United Nations, Economic Bulletin for Asia and the Far East, November 1956.Google Scholar
  46. 2.
    Federation of Indian Chambers of Commerce and Industry, The Third Five-Year Plan, A Tentative Outline, New Delhi, 1959, p. 23.Google Scholar
  47. H. Kitamura and S. C. Yang, ‘Domestic Stability and Development: A critique of Nurkse’s Scheme’, Kyklos, vol. xii, 1959, Fasc. 3.Google Scholar

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

Personalised recommendations