09+Drivers+of+Growth--Technology,+Policy,+and+Institutions,+Part+1

09+Drivers+of+Growth--Technology,+Policy,+and+Institutions,+Part+1

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1 9-1 Drivers of Growth: Technology, Policy, and Institutions 9-2 Agenda 1. Technology as a Production Input 2. Policies to Promote Productivity 3. Institutions and Property Rights 4. Endogenous Growth Theory 9-3 Technology as a Production Input Total factor productivity, A, is the most important source of growth in both: The growth accounting formula, and The Solow growth model. But total factor productivity, A, has been treated as an exogenous variable . 9-4 Technology as a Production Input In modern, high-income economies total factor productivity is largely analogous with technology. Technology increases the efficiency with which labor and capital are used together. In this sense technology can be treated as a factor input into the production process.
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2 9-5 Technology as a Production Input Technology is characteristically different from capital and labor. Capital and labor are physical objects and have the properties of rivalry and excludability . 1. Rivalry means that only one person can use the factor at any given time. 2. Excludability means that the owner of the factor can prevent other from using the factor. 9-6 Technology as a Production Input Technology is characteristically different from capital and labor. Technology is a set of ideas and usually has the properties of non-rivalry and non-excludability. 1. Non-rivalry means that more than one person can use the technology at the same time. 2. Non-excludability means the one person cannot prevent another person from using the technology. 9-7 Technology as a Production Input Because technology is largely non-excludable, the private sector is likely to spend too little, rather than too much, on developing new technologies. 9-8 Policies to Promote Productivity Several government policies that have been adopted to promote productivity, including: 1. Building infrastructure. 2. Increasing human capital. 3. Encouraging research and development.
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3 9-9 Policies to Promote Productivity 1. Building infrastructure : Infrastructure is the highways, bridges, utilities, dams, airports, etc. that support the transportation and distribution of goods and services. Research suggests a correlation between the amount and quality of infrastructure and productivity growth. 9-10 Policies to Promote Productivity 1. Building infrastructure : Government can promote improved infrastructure: a. By direct government expenditures such as building roads, bridges, ports, tunnels, etc., b. By providing tax incentives for private infrastructure spending, or c. By streamlining or removing barriers for private sector investment in infrastructure. 9-11 Policies to Promote Productivity 2. Increasing human capital : Human capital is the knowledge and skills that workers acquire through education and training.
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This note was uploaded on 07/21/2011 for the course ECON 100B taught by Professor Wood during the Spring '08 term at University of California, Berkeley.

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09+Drivers+of+Growth--Technology,+Policy,+and+Institutions,+Part+1

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