LongRunGrowth

LongRunGrowth - 1 Long-Run Economic Growth Growth Facts...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1 Long-Run Economic Growth Growth Facts Growth Accounting Solow Model Economic Growth z Raise in real GDP (and other macroeconomic variables) 2 Economic growth in eight major countries, 1870-2005 Per-Capita GDP - Four European Countries (PPP - 2000 US dollars) $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 1 9 7 5 1 9 7 7 1 9 7 9 1 9 8 1 1 9 8 3 1 9 8 5 1 9 8 7 1 9 8 9 1 9 9 1 1 9 9 3 1 9 9 5 1 9 9 7 1 9 9 9 2 1 2 3 2 5 Greece Ireland Portugal Spain 3 Per-Capita GDP relative to the US (PPP) 0% 10% 20% 30% 40% 50% 60% 1 9 7 5 1 9 7 7 1 9 7 9 1 9 8 1 1 9 8 3 1 9 8 5 1 9 8 7 1 9 8 9 1 9 9 1 1 9 9 3 1 9 9 5 1 9 9 7 1 9 9 9 2 1 2 3 2 5 China Korea Small but persistent differences in growth rates lead to large income differences $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 1 9 1 9 6 1 9 1 2 1 9 1 8 1 9 2 4 1 9 3 1 9 3 6 1 9 4 2 1 9 4 8 1 9 5 4 1 9 6 1 9 6 6 1 9 7 2 1 9 7 8 1 9 8 4 1 9 9 1 9 9 6 2 2 2 8 3% 2% 1% 4 GDP per capita in 2006 (PPP) $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 L u x e m b o u r g U n i t e d S t a t e s N o r w a y S w i t z e r l a n d C a n a d a R o m a n i a T u n i s i a I r a n , I s l a m i c R e p . N a m i b i a C o l o m b i a I n d i a S i e r r a L e o n e To understand growth we have to understand the production function z Y : Gross Domestic Product z K : Physical capital (equipment, factories, machines, etc.) z N : Labor (number of hours worked in the economy) z A : Total Factor Productivity (efficiency with which the factor of productions are used) z a K : Elasticity of output to capital (for example a K =0.3) z a N : Elasticity of output to labor (for example a N =0.7) N K a a N AK N K AF Y = = ) , ( 5 Real GDP, Y St. Louis FRED database research.stlouisfed.org/fred2/series/GDPCA Capital, K Bureau of Economic Analysis www.bea.gov/bea/dn/faweb/AllFATables.asp Net stock of fixed private nonresidential capital Labor, N Bureau of Labor Statistics ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt Civilian employment Total Factor Productivity, A A=Y / K 0.3 N 0.7 Where do we get the data? The production function of the United States, 1983-2004 2.8 20.68 139.3 11249 10756 2004 1.6 20.13 137.7 11010 10321 2003 1.3 19.82 136.5 10841 10049 2002-0.1 19.55 136.9 10669 9891 2001 0.6 19.57 136.9 10392 9817 2000 2.1 19.44 133.5 9986 9470 1999 1.9 19.03 131.5 9605 9067 1998 1.8 18.67 129.6 9242 8704 1997 1.7 18.35 126.7 8917 8329 1996 0.60....
View Full Document

Page1 / 27

LongRunGrowth - 1 Long-Run Economic Growth Growth Facts...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online