In relation to neoclassical growth theories, the initial level of income assesses evidence of conditional convergence across countries (Barro and Sala-i-Martin 2004). This concept predicts that an economy's growth rate tends to slow as it approaches steady state growth. A negative partial correlation is, therefore, expected between economic growth and the initial level of income; that is, growth tends to be higher for economies started at lower income per capita (Pritchett and Summers 2014).
Human capital development matters to growth, especially in the long term. Trade openness, the export-led growth model, and, arguably, the significance of globalization are well-researched growth determinants. Inflation primarily affects growth through consumption and production. But the overall effect of inflation tends to be ambiguous because key economic actors behave differently with higher general prices. Here, households tend to consume less, but producers have an incentive to produce.
The role of government can negatively affect economic growth if it distorts private sector decisions and mismanages public finance (Barro and Sala-i-Martin 2004). A higher value of the government consumption ratio leads to a lower steady-state level of output per effective worker and, hence, to a lower growth rate for given values of state variables. Financial development is another well-researched determinant of economic growth. Economies with developed financial systems experience higher growth in relation to their ability to raise funds to support economic activities, notwithstanding their capacity to channel funds for better use.