Long-Run+Growth - Long-Run Growth Incomes and Growth Around...

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Long-Run Growth
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2 GDP per capita, 2005 Growth rate, 1960-2005 China $6,572 5.8% Singapore 29,921 5.4% Japan 30,821 3.8% Spain 26,125 3.2% India 3,486 2.7% Israel 25,670 2.7% United States 41,854 2.2% Canada 32,886 2.1% Colombia 7,769 1.8% New Zealand 22,511 1.4% Philippines 4,920 1.4% Argentina 14,421 1.0% Saudi Arabia 14,729 0.8% Rwanda 1,333 0.3% Haiti 1,836 –1.2% Incomes  and Growth  Around the  World FACT 1: There are vast differences in living standards around the world.
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3 GDP per capita, 2005 Growth rate, 1960-2005 China $6,572 5.8% Singapore 29,921 5.4% Japan 30,821 3.8% Spain 26,125 3.2% India 3,486 2.7% Israel 25,670 2.7% United States 41,854 2.2% Canada 32,886 2.1% Colombia 7,769 1.8% New Zealand 22,511 1.4% Philippines 4,920 1.4% Argentina 14,421 1.0% Saudi Arabia 14,729 0.8% Rwanda 1,333 0.3% Haiti 1,836 –1.2% Incomes  and Growth  Around the  World FACT 2: There is also great variation in growth rates across countries.
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4 Incomes and Growth Around the World Since growth rates vary, the country rankings can change over time: Poor countries are not necessarily doomed to poverty forever – e.g. , Singapore, incomes were low in 1960 and are quite high now. Rich countries can’t take their status for granted: They may be overtaken by poorer but faster-growing countries.
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5 Incomes and Growth Around the World Questions: Why are some countries richer than others? Why do some countries grow quickly while others seem stuck in a poverty trap? What policies may help raise growth rates and long-run living standards?
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6 Productivity Recall one of the Ten Principles: A country’s standard of living depends on its This ability depends on productivity , the average quantity of g&s produced per unit of labor input. Y = real GDP = quantity of output produced L = quantity of labor so productivity = Y / L (output per worker)
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7 Why Productivity Is So Important When a nation’s workers are very productive, real GDP is large and incomes are high. When productivity grows rapidly, so do living standards. What, then, determines productivity and its growth rate?
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8 The Production Function The production function: output (Y) is dependent on (function of) technological Knowledge (A), Labor (L), Capital (K), Human Capital (H) and Natural Resources (N) Input Processing Output Y = A F ( L , K , H , N )
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Physical Capital Per Worker Recall: The stock of equipment and structures used to produce g&s is called [ physical ] capital , denoted K . K / L = capital per worker. Productivity is higher when the average worker has more capital (machines, equipment, etc.). i.e.
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This note was uploaded on 11/23/2010 for the course ECONOMICS Econ 13 taught by Professor Georgesarraf during the Winter '10 term at UC Irvine.

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Long-Run+Growth - Long-Run Growth Incomes and Growth Around...

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