RSM100EnviroPart3 - 1 Macroeconomic Environment RSM 100...

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Unformatted text preview: 1 Macroeconomic Environment RSM 100 Macroeconomic Environment of Commerce Part 3: Macro Issues for the Future 3.A Productivity Growth 3.B Demographics 3.C Globalization; World Economic Imbalances 3.D Global Warming and the Environment Macroeconomic Environment RSM 100 A. Productivity 1. What is it? Why does it matter? • Aggregate output created by a ‘production function’, with inputs of . Labour (L) . Capital (K) . Land, Energy, Resources (sometimes counted separately) . ‘Technological change’ Macroeconomic Environment RSM 100 A. Productivity – What is It? – cont’d • Changes in inputs (L, K, Resources/ Energy) do not account for all growth – technological change is calculated as the residual; • Productivity is a measure of how much output a country gets from its inputs • Technology or productivity growth permits us to get more outputs for the same inputs – this adds to the ‘standard of living’ Macroeconomic Environment RSM 100 A. Productivity – What is It? – cont’d • Two major measures commonly used: • ‘Labour Productivity’ – measures output per worker or per hour; . Affects ‘real’ (after-inflation) wage . can be affected by capital or other inputs, in addition to technology • ‘Total Factor Productivity’ (TFP) is growth not accounted for by other inputs 2 Macroeconomic Environment RSM 100 A. Productivity – What is It? – cont’d • TFP is the most useful measure, but it is difficult to determine • Productivity matters for profits – both nationally and in the firm . High US productivity growth in second half of 1990s one of the reasons behind stock-market boom. Macroeconomic Environment RSM 100 A. Productivity – What is It? – cont’d • Future productivity growth a key question in long-term economic outlook: • Just a few tenths of a per cent (e.g. from 1.5% per year to 1.8%, over 10 years) can add billions to GDP, government revenue for use on social programs, and corporate profits Macroeconomic Environment RSM 100 A. Productivity – cont’d 2. Where Does It Come From? • The short answer: ‘We aren’t sure!” • For Labour Productivity, (Physical) Capital stock is a key contributor, but impact can vary widely Macroeconomic Environment RSM 100 A. Productivity – Where From? - cont’d • Some possible contributors to TFP growth are known (but size of each not clear) . Research & Development (R&D) . Higher education and Lower education . ‘Infrastructure’ – roads, ports, internet . Industrial Organization; Entrepreneurship . ‘Institutions’ – laws, regulations, enforcement, property rights 3 Macroeconomic Environment RSM 100 A. Productivity – Where From? - cont’d • In future, businesses will be continually hustled by shareholders and governments to increase productivity; • may need better on-job training and upgrading (Human Resources input) • constant improvement in production, delivery techniques (Operations Management; Strategy) Macroeconomic Environment...
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This note was uploaded on 03/03/2011 for the course RSM 100 taught by Professor Oesch during the Spring '08 term at University of Toronto- Toronto.

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RSM100EnviroPart3 - 1 Macroeconomic Environment RSM 100...

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