Lecture #7 - Lecture #7 Economic Growth -To increase its...

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Lecture #7 Economic Growth -To increase its income per capita, a country’s GDP must grow faster than its population. -Labor productivity must increase. -Y/L = K/L * Y/K. -Y/L = T/L * Y/T, where -output is Y and the inputs are labor (L), land (T), and capital (K). Structural Transformation -The more than proportionate expansion in the manufacturing production possibilities than in agriculture is driven by: -Engel’s Law -Outmigration of labor from agriculture; the fraction of the work force and eventually the absolute number of people employed in agriculture declines as labor productivity there grows. -Greater capital investment in the manufacturing sector; much embodies technical improvements. -Technical change in agriculture that raises agricultural productivity. Agriculture Plays Five Roles During Economic Development -Agriculture supplies to the growing non-farm sector: -Food -Labor -Savings -Foreign exchange earnings -Markets for non-farm goods and services Partial vs. General Equilibrium -In
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Lecture #7 - Lecture #7 Economic Growth -To increase its...

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