Productivity as the Key to Economic Growth and Development

Abstract

One of the most important lessons in economics is that productivity is key to economic growth. Productivity is defined in economic theory as the ratio of output over input. Productivity is mainly driven by four components: innovation, including the creation of new technologies: education to spread these new technologies and develop the capacity of the workforce, efficiency to promote the effective and flexible allocation of resources for production in various sectors; and infrastructure, both physical (transports, energy supply, and telecommunication systems) and intangible (public institutions and macroeconomic environment) to support private activity. These four components are interrelated and influence one another. This Research Policy Brief discusses each component and illustrates them by analyzing six countries in Asia and Latin America, Malaysia, Singapore, and Vietnam and Chile, Mexico and Peru. These six countries are members of a free trade agreement recently signed on February 2016, the TransPacific Partnership (TPP).

Keywords: Macro-Fiscal Policy, Economic Theory & Research, Taxation & Subsidies, Economic Adjustment and Lending, Industrial Economics, Public Sector Economics, Primary Education, Educational Sciences, International Trade and Trade Rules, Economic Growth, Public Finance Decentralization and Poverty Reduction