lecture 9

# lecture 9 - Economics 100B Professor Wood Lecture 9 ASUC...

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Economics 100B Professor Wood 2/19/08 Lecture 9 ASUC Lecture Notes Online is the only authorized note-taking service at UC Berkeley. Please do not share, copy or illegally distribute these notes. Our non-profit, student-run program depends on your individual subscription for its continued existence. These notes are copyrighted by the University of California and are for your personal use only. Sharing or copying these notes is illegal and could end note taking for this course Lecture 9 Note : The graphs referred to in these notes can be found at http://emlab.berkeley.edu/users/webfac/wood/e100b _sp08/e100b.shtml . These are the lecture slides that Professor Wood uses in class. Use the slides corresponding to the appropriate lecture in order to understand better the graphical aspect of this class. The slides follow the order of both these notes and of the lecture. You should fill these graphs out, drawing in relevant lines. Announcement : Exam on Thursday. Endogenous Growth Theory, continued from last time 1. Attempts to explain the sources of productivity growth. a. Remember from the Solow growth model that the steady state is achieved when I a =I b i. In this state, the economic growth, growth in Y, would grow by the same rate as N ii. We know that the major determinant of growth not from an increase in savings, but from an increase in productivity iii. Why would productivity change?? iv. Economists have struggled with this issue 1. Are there other factors that can account for a growth in income per worker over time? v. The Endogenous growth theorem examines this 1. How can we examine steady changes of income per worker? b. Assume the aggregate production function is Y=A*K i. This implies a constant MPK. ii. Notice that labor is missing 1. Underlying assumption that the labor force is fixed (to simplify the model). Nowadays many countries have very slowly changing labor forces. iii. Unitary elasticity with respect to K. iv. What are the sources of growth? c. How can MPK be constant? i. Human Capital 1. Skills of the labor force 2. Human capital tends to increase in the same

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ASUC Lecture Notes Online Economics 100B 2/19/08 Sharing or copying these notes is illegal and could end note taking for this course 2 proportion as physical capital. 3. This is a big argument as to why governments should invest in education and training. Better education Æ Higher productivity ii. Business firms invest in R&D 1. Increases in capital and output generate increased technical knowledge, which offsets decline in MPK from having more capital. 2.
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## This note was uploaded on 05/20/2008 for the course ECON 100B taught by Professor Wood during the Spring '08 term at Berkeley.

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lecture 9 - Economics 100B Professor Wood Lecture 9 ASUC...

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