Conjunctuur, structuur en economische groei

Summary

In cross section analyses of economic growth, based on the Cobb-Douglas production function, only a minor part of the differences between the growth rates of the countries is explained by changes in the volumes of labour and capital input. In this article an effort has been made to reduce the unexplained residuals with the help of a simple growth model, containing four new elements as compared with the traditional analyses, based on the application of the Cobb-Douglas production function only.

Firstly, to the concept of investment has been added a qualitative dimension, which represents its more or less traditional or “progressive” character, with which is meant the extent to which the latest technological findings have been applied in it.

Secondly, the change in volume and quality of capital input has been considered as an endogenous variable. Thirdly, thefluctuation in economic growth has been introduced,via the investment equation, as an explaining variable of thepace of economic growth. The underlying philosophy is that the entrepreneurs base their quantitative and qualitative investment decisions on the pace of economic growth, corrected by the extent to which they fear set-backs in that growth. This fear is assumed to be founded on their past experience in this respect, as represented by a fluctuation-index. Finally, the sectorial structure of the economy has been introduced into the aggregate production function as an explaining variable of the autonomous trend of gross national product.

The model has been tested in a cross section analysis for 17 Western European and North American countries, with the least squares method. The result was very satisfactory.