CHAPTER 13 (2014)Apunte Inglés
Vista previa del texto
ECONOMICS. CHAPTER 13
THE LONG RUN AND THE ECONOMIC GROWTH
RULE OF 70: THE SOURCES OF LONG-RUN GROWTH.
Long-run economic growth depends almost entirely on LABOR PRODUCTIVITY.
EXPLAINING THE GROWTH IN PRODUCTIVITY.
Three factors: 1-PHYSICAL CAPITAL: Human-made resources (buildings and machines) 2-HUMAN CAPITAL: Improvement in labor created by the education and knowledge.
3-TECHNOLOGY: Technical means for the production of goods and services.
Aggregate production function —> Hypothetical function that shows how productivity depends on the quantities of physical capital per worker as well as the state of technology.
Y/L —> GDP per worker K/L —> Physical capital per worker H/L —> Human capital per worker T —> Technology GROWTH ACCOUNTING: Estimates the contribution of each major factor in the aggregate production function to economic growth.
TOTAL FACTOR PRODUCTIVITY: Amount of output that can be achieved with a given amount of factor inputs.
ECONOMICS. CHAPTER 13 WHY GROWTH RATES DIFFER? -An economy increases physical capital trough investment spending, and this money comes from savings (Domestic households / Foreign households).
-One reason for differences in growth rates is because countries add different amounts of physical capital because they have different rates of savings and investment spending.
1- INCREASE HUMAN CAPITAL —> EDUCATION.
2- EXPERIENCES RAPID TECHNOLOGICAL PROGRESS.
-Scientific advances -Translation these scientific knowledges into useful -Technological progress can be made by the government or by the private sector.
THE ROLE OF GOVERNMENT IN PROMOTING ECONOMIC GROWTH.
The government can play an important role in promoting the 2 sources of long-run economic growth.
There are 2 WAYS: 1-Increasing directly the economy’s growth rate through 4 main channels: -Government subsidies to infrastructure -Government subsidies to education -Government subsidies to R&D -Maintaining a well functioning financial system 2-Creating indirectly an environment that fosters growth.
-Protection of property rights -Political stability & good governance *The world’s economy has different examples of success and failure in the effort to achieve longrun economic growth.
IS WORLD GROWTH SUSTAINABLE? -Long-run economic growth is sustainable if it can continue in the face of the limited supply of natural resources and the impact of growth in the environment.
1-How large are the supplies of key natural resources? -This is something geologists must answer, but there are wide disagreements.
2-How effective will technology be at finding alternatives to natural resources? -This is something engineers must answer —> Mainstream — Alternatives.
3-Can long-run economic growth continue in face of resource scarcity? -This is something economists must answer — If the price of resources increases, there will be an incentive to develop alternatives.