The standard growth theory tells us that economic growth in per capita basis comes from mainly two sources: capital deepening and total factor productivity growth, or TFP growth.
This quote succinctly highlights the fundamental components driving economic growth per person. Capital deepening involves increased investment in physical capital per worker, while TFP growth reflects improvements in technology and efficiency. Recognizing these sources allows policymakers to focus on strategies that enhance productivity and investment to foster sustainable growth. It also emphasizes that growth is not merely about accumulating more capital, but also about innovating and optimizing resource use. Understanding these components is crucial for shaping effective economic development policies.
