lecture1_overheads_F09 - the general idea holds with almost...

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Lecture 1 September 3, 2009
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Lecture #1 Extensive vs. Intensive Growth Income = GNP = Output = P*Q Population Growth Per Capita Income = Total Income/Population Where does America fit into the current level of World Economic Development?
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David’s conjectural estimate model V = r[S a P a + (1 - S a ) P n ] where V = Output per capita r = fraction of population in the labor force S a = fraction of the labor force in agriculture P a = Output per worker in agriculture P n = Output per worker in non-agriculture David assumed that the ratio of Output per worker in agriculture and in non-agriculture before 1840 was the same as it was in 1840: Z = P n /P a
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Land/Labor Ratios and Labor Productivity In an AGRARIAN ECONOMY, most people are engaged in agriculture. The production function for agriculture looks like this: Output = F(Land, Labor) = F(T,L) for simplicity, say, Q = α TL Output per worker is simply Q/L In this very simple example, as the amount of land, T, rises, holding the amount of labor fixed, the average productivity of labor rises: Q/L = α T
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This is a very simple “production function” but
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Unformatted text preview: the general idea holds with almost all production functions. As the amount of land per farmer goes up, the amount of output per farmer also increases. At the same time, it is also true that as land per farmer increases, output per acre of land decreases. Productivity is a slippery notion. It is always measured relative to something. In an AGRARIAN ECONOMY, output is, in part a function of the amount of land available. In earely 19 th century America, the bulk of economic growth was probably caused by increasing productivity in agriculture. This is a bit surprising, since there were no substantial changes in the technology of agricultural production until the very end of the period (we will talk about farm mechanization later in the semester). So one of the first places that we need to look for increasing productivity in the US economy is in the relationship between land and labor after the revolution. We will start with land, then move on to labor....
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lecture1_overheads_F09 - the general idea holds with almost...

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