Corporation Growth and Economic Growth and Stability

John B. Guerard, Anureet Saxena () and Mustafa N. Gültekin
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John B. Guerard: McKinley Capital Management, LLC
Anureet Saxena: McKinley Capital Mgmt, LLC
Mustafa N. Gültekin: University of North Carolina Chapel Hill

Chapter Chapter 20 in Quantitative Corporate Finance, 2022, pp 587-596 from Springer

Abstract: Abstract Economic growth is usually defined as the rise in total measurable economic output over a given period, i.e., such as in the growth in real GDP modeled in Chaps. 12 and 13 . This is a definition of gross growth. However, if the population increases significantly in the same period, output per capita may remain constant or even decline. The average citizen of the country is no better off than before, and thus in one very relevant sense, no economic growth has taken place. A net concept of growth (closer to welfare criteria) can be developed by using the increase in average output per capita. Another problem of measuring growth arises if society shows a desire for an increase in leisure. If the average output does not decline while the workweek shortens and vacations lengthen, growth has taken place, although its fruits have been absorbed as an increase in leisure. Growth is difficult to discover between the dips and rises of the business cycle. The national per capita output at a peak period may appear to have grown very rapidly compared to that of a preceding recession in business activity. Actually, the potential output of the recession period, the output possible were the economy operating at capacity, might be relatively high. Growth should thus be measured from one equilibrium period to another, or, if possible, measured in terms of increases in potential capacity product per capita. If a nation’s economy falls significantly from its capacity, the problem is essentially one of economic stability and not of economic growth.

Date: 2022
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DOI: 10.1007/978-3-030-87269-4_20

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