According to the text, economic outcomes measured by economic growth is affected by a number of factors. Also, hundreds of empirical studies on economic growth across countries have highlighted the correlation between economic growth and a variety of variables.
Claims regarding the determinants of economic growth are conditional, and the findings depend on the variables used. However, the availability of physical capital or infrastructure, government consumption, terms of trade, macroeconomic stability, the rule of law, regulatory quality, government effectiveness, foreign direct investments, population size, and natural resource availability are the most consistent findings of empirical studies on economic growth.
- Review the literature on economic growth and provide a summary of how:
- Investment affects economic growth
- Govt_Expenditure affects economic growth
- Trade affects economic growth
- FDI affects economic growth
Note: The answers you provide to each of these sub-questions should not be more than 15 sentences.
Also note that because this is a literature review you must cite credible sources; avoid using news articles.
The examples below should serve as a guide
Example 1: The example below shows how inflation affects investment in a study of the effect of inflation on investment.
The destabilizing effect of inflation on investment has been a major source of debate in economic and business literature. Generally, inflation is often considered a sign of macroeconomic instability and the inability of government to control macroeconomic policy, both of which contribute to an adverse investment climate (Fischer, 2013; Greene & Villanueva, 1991). However, the empirical evidence is still far from convincing. While some authors claim positive effects of inflation on investment, others hold that inflation poses a “stealth” threat to investments. For example, Greene and Villanueva (1991) argue that high rate of inflation adversely affects private investment activity by increasing the riskiness of long-term investment projects. Also, Fischer (2013) observed that inflation uncertainty is associated with substantial reduction in total investment. On the contrary, McClain and Nicholes (1993) found that investment and inflation are positively related to each other.
Example 2: The example below shows how natural resource endowments affects income inequality in a study of the determinants of income inequality.
The nexus between natural resource endowments and income inequality has also been widely debated and has inspired a long history of research in both economics and political science (see, for example, Fum and Hodler, 2010; Goderis and Malone, 2011; Leamer, Maul, Rodriguez, and Schott, 1999; Carmignani, 2013; Parcero and Papyrakis, 2016; Bourguignon and Morrisson, 1998). For example, Anderson et al., (2004) argue that natural resources endowment provide a plausible explanation as to why the observed levels of inequality are significantly higher in both sub-Saharan Africa and Latin America (with predominantly high ratios of natural resources to other factors) than they are in either South or East Asia (with predominantly low ratios of natural resources relative to other factors). The intuition is that, natural resources are prone to rent-creation that are easily captured by the ruling elite who are intransigent to redistribute towards the lower class, which in turn exacerbates the income gap between the ruling class and the poor majority (Nikoloski, 2009).
***These examples are from my own publications***
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