2018SpringUN3213Lecture15BarriersToRiches.pdf

2018SpringUN3213Lecture15BarriersToRiches.pdf -...

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Intermediate Macroeconomics Economics UN3213 Professor: Jón Steinsson Lecture 15 1
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Announcements Mid-semester student feedback survey Thursday: Midterm exam in class Midterm Location: This room Please bring you Columbia ID to the midterm 2
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Announcements Romer model: Won’t cover in lecture Please read in textbook (except not section 6.9) Have posted slides on Courseworks Not covered on Midterm: “Extra slides” on exchange efficiency (end of lecture 6) History of thought slides (end of lecture 9) High wages and cheap coal section of lecture 12 3
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Announcements Readings for Today: Jones and Olken (2005) Introduction Readings for Tuesday after spring break: Jones, ch. 2 Nordhaus (1998) 4
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Is Knowledge Accumulation Key to Growth? What is special about knowledge? (Capital accumulation is not key to growth.) Objects are rivalrous One person’s use of an object reduces ability of other people to use that same object. Ideas are non-rivalrous Me using calculus to solve a problem does not affect anyone else ability to do the same. 5
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Ideas and the Production Function 𝑌𝑌 𝑡𝑡 = 𝐴𝐴 𝑡𝑡 𝐾𝐾 𝑡𝑡 1 / 3 𝐿𝐿 𝑡𝑡 2 / 3 Replication argument: Production function constant returns to objects (capital and labor) Ideas are different because they are non-rival Don’t need more ideas to build more factories Two factories can both use same ideas 6
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Ideas and the Production Function 7 Production is thus increasing returns to objects and ideas This turns out to be key to sustained growth Ideas source of increasing returns This can “cancel out” diminishing returns to capital Yield sustained growth Romer model formalizes this (see extra slides)
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