Capital Inflow, Saving, and Economic Growth

Abstract

In Part II, we analysed the various factors explaining the fast rate of growth in the economies of this study. Specifically, we have examined such supply factors as technical progress, scale economies, factor inputs, capital-labour substitution, and such demand factors as the growth in exports. In Part III, we will examine some other elements of economic growth. In this chapter, we shall look at the relationships between savings and growth, in the following the relationship between income distribution and growth. The part played by saving and income distribution poses an identification problem when their relationships with growth are being studied. This is because it is often difficult, if not impossible, to ascertain the direction of causation when relating growth to such economic variables. It can be argued, on the one hand, that saving and the pattern of income distribution are crucial factors affecting the rate of growth. On the other hand, it is equally plausible that the rate of growth to a greater or lesser extent affects the rate of saving and the pattern of income distribution.