The main goal of any country is to achieve stable growth in the economy. Stimulating economic growth is a top priority for the government. After all, a high level of the economy is the accumulation of we alth in the country, as well as an increase in the welfare of citizens. At the same time, there are two ways to achieve this goal - intensive and extensive growth.
Definition
Extensive factors of economic growth are conditions that affect the economy through a quantitative increase in resources. For example, this can happen by increasing the number of employees of the enterprise or factory workers. But at the same time, the value of labor productivity of an individual worker does not change. It was this technique that was used at most domestic enterprises in the early and mid-90s. But now the economy is increasingly moving away from such methods of growth in favor of more productive methods.
Researchers have deduced a pattern: extensive factors are characterized by a decrease in the return on a resource with its increase. If the manager increased the number of employees in the enterprise, thenhe can expect a decline in the quality and productivity of their work. That is why it is very important to have an understanding of the factors that influence the growth or decline of the economy. Economists around the world are developing various mathematical models that could describe all stages of economic development under various conditions.
Key Features
What are the main characteristics of extensive factors? In general, their main feature is the increase in production without any emphasis on quality indicators.
- Employees can be hired into the organization, but their real qualifications are not given due attention. Some experts note that this indicator can characterize both intensive and extensive factors. Even the most developed companies at the beginning of development may have difficulties in recruiting, hiring really qualified employees. These companies have to hire as many workers as possible first, thereby boosting extensive growth.
- When the number of staff increases, production capacity begins to run out. Production consumes several times more resources than is actually necessary. At the same time, the real efficiency of the enterprise remains at the same level, in some cases sometimes even becoming lower.
- The owners of the enterprise are gradually coming to the conclusion that it is necessary to attract third-party financial resources. However, these funds are not used to introduce newtechnologies that could optimize production.
- The same thing happens with the productivity of the staff: it can either remain at the same level or fall even more.
Extensive development aspects
Scientific and technological progress is the basis of extensive development. Specialists separately identify the following factors of this type of growth, which are based on the technological improvement of production:
- Increased production time.
- Increasing the duration of the main production assets of the enterprise.
- Increase in the turnover of production assets.
- Elimination of unproductive use of means and objects of labor, as well as labor force.
- Optimizing the process of using production resources.
Factors of Extensive and Intensive Growth: Key Differences
The main difference between intensive economic growth is that the ability to absorb resources sharply increases at the enterprise. Labor productivity is greatly improved. Unlike extensive growth, intensive growth involves the active introduction of new technologies. Some economists believe that this is the main definition of intensive growth - the introduction of new manufacturing technologies into the daily life of an organization.
With intensive growth, unlike extensive, there is a gradualimprovement of the internal structure of the enterprise. Links with existing suppliers are being strengthened and new ones are being created. The management apparatus is becoming he althier, and those managers who have not proven themselves well are gradually being fired. With extensive growth factors, there is an increased consumption of resources. With intensive - on the contrary: the output of finished products increases, and the consumption of resources remains the same, or even decreases. Employees of those enterprises that have chosen the second path of economic development for themselves usually grow in well-being very quickly.
Development: extensive or intensive?
Economists believe that all those factors that ultimately affect the process of improving the productivity of the enterprise can be divided into three broad categories: supply, demand factors, and distribution. But in reality, the attention of the management of the enterprise is always more focused on supply factors. After all, they allow you to influence the activity of buyers. Therefore, whether an enterprise chooses the path of intensive rather than extensive development is influenced by the following factors:
- Increase or decrease in the price of basic inputs.
- Changes in performance metrics.
- Adoption of new laws governing industrial relations.
Economic reality
Of course, in practice it is very rarely found "in its pure form"one type or another. More often, extensive factors are combined with intensive ones. For example, if the latter are characterized by the adjustment of production, the purchase of more modern and technological machines, then often the enterprise is forced to hire a larger number of employees, not all of whom are quite qualified. On the other hand, the use of new equipment may require additional training even for those workers who have good experience. During training, productivity will inevitably decline.
