The ratio between the growth rate of the product and the change in the volume of factors of production may be different depending on the type of economic growth. In theoretical terms, two main types of economic growth can be distinguished: extensive and intensive.
With an extensive type of economic growth, the expansion of the volume of material goods and services is achieved through the use of a greater number of direct supply factors: workers, means of labor, land, raw materials, fuel and energy resources, etc. With extensive growth, constant proportions remain between the growth rate of real production and the total costs of its creation. For example, if it is necessary to double output, then along with the existing enterprise, they build a constant proportion between the growth rate of real production and the total costs of its creation. For example, if you want to double output, then along with the existing enterprise, they build the other is of about the same capacity, with the same equipment, with the same composition of the workforce.
With extensive development, if it is carried out in its pure form, the efficiency of production remains unchanged. So, in our example, with a doubling of output, the number of employees and production assets will equally increase. As a result, output per employee will remain the same. So, labor productivity has not changed.
When a society has free untapped resources, it can increase the production of goods and services in an extensive way.
But, as you know, the resources of society, including labor, are not unlimited. Therefore, an intensive type of economic growth is more preferable, in which an increase in the production of goods is achieved through a more perfect technical base, an increase in labor productivity, and a more efficient use of all factors of production. With an intensive type of economic growth, they take not by number, but by skill, discipline, and higher organization. Raw materials and materials are used rationally. The number of labor force in material production decreases with intensive development. To double the output, it is no longer necessary to build another enterprise. This result can be obtained through the reconstruction and technical re-equipment of the same existing enterprise. In this case, the growth rate of real output will exceed the rate of change in real total costs.
In accordance with the allocation of types of economic growth, direct growth factors are divided into two main groups: extensive and intensive.
In reality, extensive or intensive types of economic growth in their pure form do not exist. Quantitative improvement of growth factors, carried out on the basis of the implementation of the achievements of NTP, always requires investment in the means of production or labor. In turn, the growth of labor and means of production is accompanied by a change in their qualitative characteristics. Therefore, when analyzing real economic growth, rather than its theoretical models, predominantly extensive and predominantly intensive types of growth are distinguished.
At present, it is customary to classify economic growth as one or another type depending on the share of real GNP growth (PEP) due to intensive growth factors. If the share of real GNP obtained due to intensive growth factors exceeds 50%, then the economy is characterized mainly by an intensive type of growth. Conversely, if the share of real GNP growth due to intensive factors is less than 50% of the total increase in GNP, economic dynamics is characterized mainly by an extensive type.
Currently, there are no ideal methods for determining the proportion of extensive and intense factors in the increase in GNP. Nevertheless, approximate calculations carried out using different methods show that in the 70-80s, the increase in ND, due to intensive factors, in industrialized countries exceeded 50%, while in the former USSR it was at the level of 20-30%. This allows us to conclude that in a modern market economy, the dominant factor of development is the NTP, to which the market economy is much more susceptible than the administrative-command one.
According to the nature of the impact on changes in macroeconomic indicators that determine the ratio between labor used in production and capital, several types of NTP are distinguished.
If the NTP is developed in such a way that each fixed value of the capital-labor-labor ratio (K/L – const) corresponds to the same value of the ratios of marginal productivity of factors of production
– const for any t, then there is a NTP neutral on Hicks.
When, with a fixed capital-labor-labor ratio, the marginal productivity of labor grows faster than the marginal productivity of capital, the economy is characterized by labor-saving technological progress. With the inverse ratio of the growth rate of marginal labor productivity and capital (the latter is growing faster), there is a capital-saving type of NTP.
If, as the NTP develops, the fixed level of average labor productivity corresponds to the same value of the marginal labor productivity (with Yt / Lt-const, also ΔYt / ΔLt – const), then this type is called neutral according to Solow. And finally, technological progress is called neutral to Harrod if, at a constant marginal productivity of capital (ΔYt / ΔKt – const), its average productivity Yt / Kt is also constant.
It should be noted that economic growth makes it possible to allocate more funds to society in consumption and savings funds. In accordance with the distribution of national income between the “present and the future”, two opposite models of economic growth are distinguished:
“Spartan growth”, when the maximum possible amount of national income is directed into investment. In this case, the production of consumer goods is minimized. The country here can be rich in economic potential and very poor in terms of the standard of living of the population. The collapse of such an economic system is inevitable; “Sybaritic growth”, when they do not think about tomorrow, preference is given to today, festivities and pleasures. Here the main reference point is the production of consumer goods. Such economic growth ends in technical stagnation, a drop in production and a loss of statehood.
In determining the “model” of economic growth, it is necessary to resolve the contradiction between consumption and accumulation, to determine the optimal rates of accumulation in national income and the structure of investments. The rate of accumulation is the ratio of the accumulation fund to all national income, expressed as a percentage. It is believed that the optimal rate of accumulation for the modern economy is 20-24%. At the same time, investments in education and science are becoming more significant.