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Xavier asked in Social ScienceEconomics · 2 months ago

Evaluate the view that savings gaps in developing countries are the most significant constraint on economic growth. ?

2 Answers

  • 2 months ago

    Economic growth is fueled by corporate fixed investments. In order for companies to set up new factories, production lines and hire people, there is a need of funds. These funds are provided by the banks or financial markets which play an intermediary role between those who need fund and those who have an excess of funds and place them in banks and/or financial markets.

    If economic actors don't save sufficiently, this might constrain the amount of investments and therefore limit the economic growth

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  • Oiy
    Lv 6
    2 months ago

    It's a Solow's model in which the growth rate depends on a saving rate of the country when technology is kept exogenous. It's still in the mode of diminishing returns. It has contradicted to the new growth theory

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