The Impact of Production Factors and Economic Structures on Economic development/Gamybos Veiksniu Ir Ekonomikos Strukturu Itaka Ekonominiam Vystymuisi

By Tvaronaviciene, Manuela; Lankauskiene, Toma | Business: Theory and Practice, March 2013 | Go to article overview

The Impact of Production Factors and Economic Structures on Economic development/Gamybos Veiksniu Ir Ekonomikos Strukturu Itaka Ekonominiam Vystymuisi


Tvaronaviciene, Manuela, Lankauskiene, Toma, Business: Theory and Practice


Introduction. Sustainable economic growth: emphasis on driving Forces and a mode of economic growth

The scientists investigating economic growth devote close attention to production factors affecting the development of national economies (e.g. Bond et al. 2010; Sarkar 2007; Briec, Cavaignac 2007; Kosempel 2004) and focus on fluctuations in the sectors of economy (e.g. Jaimovich 2011; Halkos, Tzeremes 2008; Tanuwidjaja, Thangavelu 2007; Sonobe et al. 2004). An ongoing discussion generates how different factors affect economic growth, sustainable development and transformation of separate sectors of the taken economies (e.g. Karnitis 2011; Grybaite 2011; Staficzyk 2011; Korsakiene et al. 2011; Balkyte, Tvaronaviciene 2011; Tvaronaviciene, Lankauskiene 2011; Tvaronaviciene 2012; Tvaronaviciene, Grybaite 2012; Kazmierczyk 2012). Since the variety of approaches and theories coexist, have a look at the genesis of the main theories to identify the interrelation of economic growth (partly sustainable development), production factors and economic structures. Economic growth is unanimously measured by percentage change in GDP or GNI per capita from one year to another. Economic development acquires an additional dimension specifically necessary to sustain the standard of living through changing driving forces and a mode of economic growth. To put in other words, economies raising their GDP or GNI per capita through exploiting their national natural resources are not considered as sustainably growing. Sustainable economic growth nowadays is associated with an increase in living standards through economic progress, the development of knowledge based and innovation susceptible sectors, but not with exploiting nonrenewable natural resources, which as a rule, are controlled by the limited groups of societies. Hence, at present, economic growth is being analyzed in light of aims for sustainable development, despite the goal of economic development remains the enlargement of asset creation speed (Clark 1990) and acceleration of competitive human well-being creation (e.g. Balkyte, Tvaronaviciene 2010; Lankauskiene, Tvaronavicien? 2011). It can be claimed that difference between economic growth and sustainable economic development lies in an adopted approach--purely quantitative or considering qualitative changes (e.g. Pisani, Jacobus 2006; Ciegis, Ramanauskiene 2009; Ruchi 2009; Lankauskiene, Tvaronaviciene 2012).

1. Genesis of theories about economic growth

The concept of sustainable economic growth emerged much later in comparison with the area of research on economic growth. One of the most prominent classics of economic growth theory was Adam Smith whose famous book An Inquiry into the Nature and Causes of the Wealth of Nations was issued in 1776. He argued that the enlargement of production rather than the trade sector would create greater wealth in the country. Market forces, named "an invisible hand of the market", are better regulators than the state (Willis 2005). Smith considered work specialization as proxy for increasing productivity. Hence, according to Smith, economic development can be related to the process of specialization and diversification of the economic sector. Later, Allyn Young (1928) wrote that "industrial differentiation was and remained the type of a change characteristically associated with the growth of production" (Lankauskiene, Tvaronaviciene 2012). Similarly, Landes (1969) claimed that the most evident effects brought about by the Industrial Revolution were an increase in the variety of products and occupations and gains in productivity (Jaimovich 2011). Another classic was David Ricardo. He introduced the concept of a "comparative advantage" of countries. According to his theory, countries should concentrate on producing and then selling goods to have advantage in producing their assets such as land, mineral resources, labour, technical or scientific expertise. Ricardo suggested that in comparison with producing everything such a way was more beneficial to national economic growth (Lankauskiene, Tvaronaviciene 2012). …

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