Economic Growth and Sustainable Development: Theories and Applications

This report provides a comparative analysis of economic growth and sustainable development, focusing on Italy and Tanzania. It begins with an introduction to the concept of sustainable development and its relationship to economic growth, highlighting key economic components such as GDP, capital levels, and technology. The report then delves into a theoretical overview, exploring economic theories like the Solow growth model and Malthusian population theory, and illustrating them with data on capital formation. The analysis extends to government intervention and technological advancements, examining their impact on production and employment. Furthermore, the report applies modern theories, analyzing investment trends, technological upgrades, and the influence of government policies. The report concludes with recommendations for fostering sustainable economic growth in both countries, considering social and environmental issues and the importance of resource management.

Running head: Economic growth and sustainable development
ECONOMIC GROWTH AND SUSTAINABLE DEVELOPMENT
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Economic growth and sustainable development
Table of Contents
Introduction................................................................................................................................3
Theoretical Overview.................................................................................................................4
Application of modern theories..................................................................................................8
Recommendation......................................................................................................................13
Conclusion................................................................................................................................15
Reference list............................................................................................................................17

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Introduction
The term sustainable development is closely related with the economic growth of any
country. The term economic growth considers the growth in the GDP, reduction in the
population, increase in the capital level, and improvement in technologies. Most of developed
nations like Australia, Italy, Austria and other countries are increasing their production rate
so that the sustainable development is possible to bring in. The main aim of this study is to
identify the economic components and has taken Italy as the richest country and Tanzania as
the poorest country. Through the analysis of the economic component the study will identify
the development and application of various economic theories such as Solow growth model,
growth of population taking Malthusian model, the impact of government intervention and
the consequences of upgraded technologies on the production rate. The study will also
identify various social and environmental issues that are closely related with the economic
growth. The identification will help in the development of government policies that will not
only increase the future growth of economy but will also indulge in better sustainability. The
economic growth analysis of the above mentioned countries will help the study in applying
the theories taking realistic examples.
Application of modern theories like Solow growth will determine the pros and cons of
Solow growth model and how the above-mentioned countries are incorporating the growth
rate and the technology rate and the capital growth. Through the incorporation of the capital
and technology growth rate the economy of the above mentioned countries will allow the
improvement in the production rate. The Study will incorporate the Solow model and will try
to identify the fact that are affecting the development of capital and technology at the rate of
n+g. On the other hand, the introduction of Malthusian theory, the study will allow the study
to identify the effects of population growth on the growth of economy. Through the
sustainability of economic growth, the economy of Italy and Tanzania will allow the resource

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Economic growth and sustainable development
development. This will identify the future aspects of the economic growth and economic
sustainability that will not only induce development in the development but also
channelization will increase. Taking the help of various government articles and journals, the
study will analyse the data for last 20 years and will identify the impact of key variables like
GDP per capita and expenditure on health and education by the people living in the above
mentioned countries in order to increase the quality of labour force.
Part A: Theoretical Overview
Taking into consideration the theoretical approaches and theoretical overview it will
be easy for the study to highlight the incorporation of applications. Considering the theories
like Solow growth will allow the study to identify the growth of the economy.
Solow growth model
The Solow growth models shows the relationship among output Y, capital (K) and
technology (A). The mathematical relationship is claiming the relationship as Y=Af (K). Now
this is one of the important aspects in the sense that country Italy and Tanzania will be able to
identify the base of resources.
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Capital formation
Capital formation Italy Capital formation Tanzania

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Figure 1: Gross capital formation of Italy and Tanzania
(Source: Gross capital formation (% of GDP), 2019)
The above diagram is showing the fact that gross capital formation of Tanzania is
more compared to Italy during the period of 1995-2017. The huge growth of capital in the
economy of Tanzania is mainly because of huge rate of growth in the mining industry. The
Diamond is one of the mineral in South Africa that is actually creating demand and supply of
whole economy (Abel, Barakat, Samir & Lutz, 2016). On the other hand, the major concept
of the Solow model is the growth of economy through technology and capital. According to
the report published by the World Bank, the new Tanzanian government is mainly looking to
increase the investment on the infrastructure and curbing corruption. The growth rate of
Tanzania is high and yet it failed to accelerate the job market (Assembly, 2015). Even the
poverty rate is too high in the Tanzania and even about 12 million Tanzanian are living well
below the poverty level and every year 800,000 young graduates are entering the job market
every year. Taking the help of the Solow Growth model, the economy of Tanzania is mainly
looking to increase the capital growth rate that will increase both human and capital
resources.
Malthusian population theory
The theory of population was penned by Malthus in the year back in 1979 and some
of the modifications were made in 1803. The main agenda of this theory is that the food
production grows at the arithmetic progress and the population grows at the rate of GP. This
is one of the important aspect for both rich and poorest country in the sense that population
growth have a significant impact on the capital growth of the economy (Costanza et al.
2016). Moreover, keeping this theory in mind, the both rich and poor country like Italy and
Tanzania will be looking to minimise the population pressure. Both the country will be

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aiming to take government intervention in order to increase the population control measures.
Through the incorporation of better improvement in the growth of the capital, the level of
investment will definitely increase. This increased level of investment is going to increase the
job opportunity that will increase the rate of migration of labourers from rural to urban areas.
Most of the developed nations like Italy will stop the growth rate of the population because of
the fact that the main focus of the economy is to increase per capita income and per capita
level of consumption of the country (Gupta & Vegelin, 2016).
Figure 2: Malthusian model
(Source: Created by Author)
This will increase the development of resources and will increase the internal demand
of the economy. Through the improvement in the government intervention, the poorest
economy will be having better opportunity to grow and develop. On the other hand, it is
important for the economy to indulge in strong rules and regulations that will not only
increase the channelization of resources but will also increase the resource allocation.

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Growth of technology
Technology growth is important in the sense that through the improvement in the
technology, the relationship between level of investment and the employment opportunity.
Both Italy and Tanzania are having their resources plenty and using them in an efficient
manner will automatically increase the level of the investment. Through the increased level of
the investment within the economy of both Italy and Tanzania will both aiming to increase
the rate of investment within them so that economy will be aiming to increase their resources
allocation and it will definitely allow the economy to indulge in better use of technology will
indulge the development of the better learning process for their human resources (Jasovský,
Littmann, Zorzet & Cars, 2016).
Price
Supply curve
P0
P1 Demand curve
0 Q0 Q1 Quantity
Figure 3: Shift of demand curve due to technological upgradtaion
(Source: Created by author)
On the other hand, through the improvement in the technology the poorest country
will be able to reach the required level of GDP. Not only this, the growth of technology will
increase the employment opportunity as firms will be willing to increase the development of

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resources. It is highly important in the sense that through the development of better
employment opportunity that will increase the real wage that will increase the demand of the
customers that will increase the rate of goods and services that are produced within economy.
Moreover, the growth of the economy of Italy and Tanzania will be willing to bring in
foreign direct investment so that the country can increase the investment based on their
comparative advantages. This will increase the involvement of resources that will not only
increase the resources navigation but will also channelize the resources into productive ways.
Government intervention
Public choice theory of government intervention is important in the sense that through
the development of resources, it has been seen that government intervention is important in
order to increase the efficiency rate of the economy. On the other hand, through the improved
level of resources and effective rate of government intervention, the development of the
economy will highlight the importance of government policies. Settlement of both fiscal and
monetary policy will finally induce the economy to increase the flow of investment by
igniting the variables of investment (Le Blanc, 2015). The new government of Tanzania and
Italy will be aiming to increase the effect of the fiscal policy that will not only increase the
growth rate but will also minimise the corruption level. Government intervention in the
economy affects the behaviour of both producers and consumers. For example, tax
implementation is one of the policy that will have an impact on the behaviour of both
producers and consumers. The theory of welfare economics penned by Pareto is one of the
theory that will increase the resource development (Panayotou, 2016). Moreover, the
development of government intervention has seen that in order to increase the welfare of one
country or individual the other country or individual will have to sacrifice. Now in order to
make the sacrifice meaningful the government intervention is required.

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Part B: Application of modern theories
The following theories is showing amount of investment that has been done by both
the government of Italy and Tanzania is investing in the research development. The increase
in the investment in the research & development will automatically increase the technology
that will automatically increase the development of resources. According to Pelinescu (2015)
through the improvement in the research development both the economy will be aiming to
increase the development of resources. On the other hand, Italy is increasing its investment in
the research technologies from the year 1995. As opined by Pradhan, Costa, Rybski, Lucht &
Kropp (2017) the amount of investment is increasing in the economy of Italy regarding the
research and development of new technologies. Moreover, on the other hand, through the
development of better economic research & development, the economy will be moving into a
better position. On the other hand, the economy of Tanzania is having three sets of
investment only in three years namely 2007, 2010 and 2013.
Application of Solow model
Taking the help of Solow model, the growth of the country Italy and Tanzania will be
willing to identify the development of economy. Italy is having huge opportunity of
employment. The growth of Italy is highly significant among all the European Union. Among
the development of the business, the Italy is mainly dealing with hospitality and tourism
industry, mainly fine chocolates and sports cars. Now most of the companies doing business
in Italy is looking to incorporate the technologies that are being imported from abroad
(Stafford-Smith et al. 2017). On the other hand, through the development of technology is
going to bring more amount of foreign direct investments in the economy. This is actually
helping in increasing employment opportunity to the economy. On the other hand, the
economy of Tanzania is having huge potentiality in their growth potentiality but they are
unable to utilise their resources due to lack of government intervention that will not only

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increase the development of technological up gradation but will increase the development of
better economy.
Figure 4: Solow Model
(Source: Created by Author)
From the development of the Solow Model, both the economy like Italy and Tanzania
will include growth factor g in different manner. Italy will mainly focus on improvement in
the technology along with the increase in the investment. On the other hand, the economy of
Tanzania will be aiming to increase the development of resources that will not only increase
the resource development. The Italian economy is going to increase the development of
resources, and it is aiming to indulge the development of better trade and commerce
regulations. On the other hand, through the development of better policy, the Italian economy
will be able to highlight better trade off. On the other hand, the Tanzanian economy will be

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mainly aiming to increase the development of resources and they will be aiming to increase
the GDP growth rate at first.
Application of Malthusian theory
The application of Malthusian economy is going to increase the development of
resources and the impact of population is posing significant threat in the whole economy. On
the other hand, using the resource utilisation, the economy like Italy and Tanzania will be
able to increase their rate of growth.
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Populati on growth
Population growth Italy Population growth Tanzania
Figure 5: Population growth
(Source: Data.worldbank.org, 2019)
The population growth of the Italian economy is growing at a constant rate from the
period of 1995-2017. On the other hand, the population growth of Tanzanian economy is
showing a huge leap in the growth of population. This huge growth in the population is
showing problems for the Tanzanian economy. As the economy is poor and is having lack of
resource distribution techniques, huge level of population will engulf the GDP that will make
the economy much slower. In spite of having huge growth potentiality in the form of