capital accumulation
capital accumulationThe process of increasing the stock of man-made means of production. This is one of the main sources of economic growth in the short and medium run. Whether capital accumulation can raise long-run growth is a matter of controversy. Solow-style growth models hold that in the long run the growth rate is set by population growth and the rate of technical progress: capital accumulation raises output levels but is subject to decreasing returns, a tendency which is accentuated by the fact that much of the extra output is required for replacement of the capital stock as it wears out. Endogenous growth models hold that the long-run growth rate can be increased through higher savings rates which permit more rapid capital accumulation.
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