review - MIDTERM REVIEW Why some countries develop why some...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
MIDTERM REVIEW Why some countries develop why some don’t? – (the map in the review) Where can we get difference in countries? - Factors of production THEORY : 1) Malthusian Model (Graphical ) - Figure 4.3 - Incomes fall with population increasing - More people on land, less productive - Relationship between growth rate and pop is increasing - If people become richer, have more kids - Figure 4.4 - Increases in tech. don’t translate for income increase - Increase in tech in long term, positive population growth rate (rate of pop pushes up to new level, end up at original capital level) - no tech increase will generate economic development - Small increase in tech, pop growth rates increase - Increase in income does increase pop growth rate 2) Solow Model - Labour share may be low in some countries - Rich countries have high industrial shares - Labour shares can be high due to oil (an ex) - Production function … Y = AK a L (1-a) - Look at it algebraically or graphical (Figure 3.4) - Diminishing product of labour and capital gives concave output curve - Constant savings means investment = savings. - Amount of capital that depreciates by pop growth is linear function of capital - If countries at steady state, they have a steady state income/capital - If below steady state, means they are poor - Conditional convergence: based on fact that savings rate, depreciation and pop growth rate and none of these assumptions are likely to hold. (fact Canada is growing
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

review - MIDTERM REVIEW Why some countries develop why some...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online