slides3-handout

slides3-handout - Econ407 J. Tessada Spring 2009 Intro...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Econ407 J. Tessada Spring 2009 Intro Growth Accounting Technology Differences Taking Stock Econ407 Advanced Macroeconomics Lecture 3: Growth Accounting Jos´e Tessada University of Maryland - College Park February 17, 2009 Econ407 J. Tessada Spring 2009 Intro Motivation Growth Accounting Technology Differences Taking Stock Motivation Growth facts Dispersion of income levels (and unconditional divergence?) Dispersion of growth rates Models so far show different effects of factor accumulation and technological progress Level effects versus growth rate effects in the long-run If we see a fast growing country, is it transition or permanently high rates? Go back and compare countries This time we (a) look at the data using the models as a guide (e.g., transition vs. long run) (b) look for evidence to guide further work
Background image of page 1

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

View Full DocumentRight Arrow Icon
Econ407 J. Tessada Spring 2009 Intro Motivation Growth Accounting Technology Differences Taking Stock Motivation What do we look for? What explains the differences in the growth rates? Is it because of different rates of factor accumulation or because of technological progress? What explains the differences in the income levels? How much of the variation in income levels can be explained only by looking at differences in factor accumulation? Notice the potential implications of the answers to both questions If factor accumulation is main difference = need to look at determinants of factor accumulation If technology = what determines technological progress? = what determines technology levels across countries? (e.g., technology flows) Econ407 J. Tessada Spring 2009 Intro Motivation Growth Accounting Technology Differences Taking Stock Motivation A Simple Framework A country produces output (income) using factors Total output depends on amount of factors and how they are used: technology or productivity or efficiency This can be expressed as Output = F ( Factors, Technology ) (1) How do we quantify the relative contributions of factors and technology? We can look at the evolution of countries across time Alternatively, Quantify differences in factors and output Recover implicit differences in technology Assumptions will be made How to measure factors Functional form for equation ( 1 )
Background image of page 2
Econ407 J. Tessada Spring 2009 Intro Growth Accounting Growth Accounting Applications Technology Differences Taking Stock Growth Accounting I Aggregate production function Y ( t ) = F [ K ( t ) , L ( t ) , A ( t )] (2) We maintain our assumption of continuous time, if we take logs of equation ( 2 ) and differentiate with respect to t ˙ Y Y = F A A Y ˙ A A + F L L Y ˙ L L + F K K Y ˙ K K Denote the growth rates as ˆ Y = ˙ Y / Y , ˆ K = ˙ K / K , ˆ L = ˙ L / L We can write now ˆ Y = F A A Y ˆ A + F L L Y ˆ L + F K K Y ˆ K Under the assumption of competitive factor markets we have that F L = w and F K = r , where w is the wage and r is the return on capital Econ407 J. Tessada Spring 2009 Intro Growth Accounting Growth Accounting Applications
Background image of page 3

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

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/08/2009 for the course ECON 407 taught by Professor Josétessada during the Spring '09 term at Maryland.

Page1 / 11

slides3-handout - Econ407 J. Tessada Spring 2009 Intro...

This preview shows document pages 1 - 4. Sign up to view the full document.

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