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What is Unbalanced Growth?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 14 September 2014
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Unbalanced growth is a situation in which the various sectors of a given economy are not growing at a rate similar to one another. Specific sectors of the economy will be growing at a rapid rate, while other sectors are either stagnant or experiencing a significantly reduced rate of growth. When economic growth patterns such as unbalanced growth appear, the phenomenon usually indicates that major shifts in the overall economy are about to take place.

There are a number of different theories about what produces unbalanced growth. Some opinions are based on an imbalance between imports and exports connected with the economy of the country. This understanding involves production that once took place within the country has now moved to another nation. While the goods are still available, they are now imported rather than produced domestically. The result is the elimination of jobs within a given industry, a rise in unemployment, and a reduction in disposable income. While imports rise, other economic segments of the consumer market fall. This creates an unbalanced overall growth.

Depending on the conditions surrounding unbalanced growth, the country may or may not have the resources to bring the overall growth back into some sort of balance. For example, the country may no longer have the production facilities to manufacture goods that are now imported regularly. Even if the facilities exist, the average production cost per unit may render the domestic goods unable to compete with the low cost associated with imported goods.

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Industry can sometimes make adjustments that will help restore a degree of balance to unbalanced growth patterns within an economy. This may include finding ways to cut production costs as a means of lowering prices and stimulating consumer purchases in depressed markets. While theorists disagree on what can be done about unbalanced growth, many do agree there is no one magic formula that will apply in all situations. This means that each incident must be addressed individually, the origins determined and appropriate steps taken to correct the situation.

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