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Countries Grow at Different Rates Because They Accumulate Capital at Different Rates. Explain

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“Countries grow at different rates because they accumulate capital at different rates.” Is this true? Explain.

Economic growth can be explained as the process by which a country’s wealth increases over time. It is mainly brought about by increases in productivity. It is possible that countries grow at different rates because they accumulate capital at different rates for a number of reasons. The accumulation of capital can be seen by an increase in wealth through concentration and comes about by investment in order to increase production. It is also adequate to include human capital as investing in education and training can improve productivity and thereby create capital accumulation in an economy.
Both kinds of capital accumulation mentioned are generally essential for economic growth.

Investment is crucial for physical capital to be maintained as without it, capital would change over time due to depreciation. The neoclassical growth model helps us to examine how capital accumulation leads to economic growth. It assumes that a country’s resources are used efficiently and that there are diminishing returns to capital and labour when the two increase. This brings about conditional convergence. If we take two economies to have the same level of technologies and have the same value of parameters for savings, depreciation and population growth, the country that starts with a lower level of output per capita will have a higher growth rate of output per capita. This will mean that there exists a convergence of income per capita over time as the poorer economy catches up with the richer one.
Conditional convergence is when an economy’s growth rate is greater the further away it is from its steady-state level or balanced growth path.

The above diagram includes a horizontal line which does not change with the growth rate…...

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