08 Long Term Economic Growth, Part 1

08 Long Term Economic Growth, Part 1 - 1 8-1 Long-Run...

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Unformatted text preview: 1 8-1 Long-Run Economic Growth, Part 1 8-2 Agenda The Sources of Economic Growth Growth Dynamics: The Solow Model 8-3 Long-Run Economic Growth Countries have grown at very different rates over long spans of time. 8-4 The Sources of Economic Growth The economys production function is: Y = AF ( K , N ) The growth accounting formula : ' Y / Y = ' A / A + a K ' K / K + a N ' N / N The a terms are the output elasticities with respect to the K and N inputs. 2 8-5 The Sources of Economic Growth According to the growth accounting formula: ' Y / Y = ' A / A + a K ' K / K + a N ' N / N A rise of 10% in A raises output by 10%. A rise of 10% in K raises output by a K times 10%. A rise of 10% in N raises output by a N times 10%. 8-6 The Sources of Economic Growth Accounting for Growth: Collect data on ' Y / Y , ' K / K , and ' N / N . Adjust for quality changes. Estimate a K and a N from historical data. 8-7 The Sources of Economic Growth Accounting for Growth: Calculate the contribution of K as a K ' K / K . Calculate the contribution of N as a N ' N / N . Calculate productivity growth as the residual: ' A / A ' Y / Y a K ' K / K a N ' N / N 8-8 Table 6.3 Sources of Economic Growth 3 8-9 The Sources of Economic Growth Accounting for Growth: Why the post-1973 productivity slowdown? Measurement inadequate accounting for quality improvements. The legal and human environment regulations for pollution control and worker safety, crime, and declines in educational quality....
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08 Long Term Economic Growth, Part 1 - 1 8-1 Long-Run...

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