Economics 100B - 8 (2-8-07) - Economics 100B Professor...

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Economics 100B Professor Steven Wood 2/08/07 Lecture 8 ASUC Lecture Notes Online (formerly Black Lightning) 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 CLASS ANNOUNCEMENTS Non-farm business productivity, Q4 2006. Productivity increased 2.4% in the business sector and 3.0 in the non-farm business sector. In both sectors, these increases reflect faster growth in output than in hours worked. This means that y-dot accelerated while n-dot increased but not as much. Thus as a consequence, Y/N rose. Output grew 4.2% while hours worked increased 1.2%. It is possible for productivity to decline, this is rare but it happens, we declined a little bit in Q3 2006. Productivity is hard to measure on a short-term basis due to its volatility. If we look at the long-term level of productivity however, we note that productivity keeps increasing, thus our level of A keeps increasing consistent with our conclusion from last lecture. LECTURE Accounting for A and a-dot When we make comparisons of rich countries against each other, the differences in our levels of technology really are differences in what we think of as technology (computers, robots, etc). When we compare poorer countries to rich countries however, we have to broaden our possible reasons for difference in technology to: 1) Differences in technology 2) Differences in Economic Attributes 3) Differences in Institutions 4) Differences in Quality of the labor force. Technology Countries do not have similar ‘technology’. 1) Composition differences of the capital stock. Do we have new capital? Old capital? More computers than machines? We know different technologies can generate different dollar amounts; a trillion dollars of computers might be more productive than a trillion dollars of cotton gins. 2) Quality differences of the capital stock. The average age of a US computer is 3.5 to 4 years old. In Europe this number is closer to 7 years. This older equipment might not be as productive as the newer. A trillion dollars of old computers might not be as productive as a trillion dollars of new computers. 3) Infrastructure differences. Roads, highways, airports, etc. Imagine trying to produce goods in a factory where electricity is
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ASUC Lecture Notes Online Economics 100B 2/08/07 Sharing or copying these notes is illegal and could end note taking for this course 2 randomly shut down 4 hours a day. It can be difficult to keep a production line running. What if you need to deliver goods but yours roads only allow you to drive 15mph? You need to hire extra trucks and drivers costing more money but do not add any productive output. 4)
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This note was uploaded on 09/20/2009 for the course ECON ECON taught by Professor Shomali during the Spring '04 term at University of California, Berkeley.

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Economics 100B - 8 (2-8-07) - Economics 100B Professor...

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