Lecture_4

Lecture_4 - INTERMEDIATE MACRO THEORY FACTS OF GROWTH Fall...

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INTERMEDIATE MACRO THEORY, FACTS OF GROWTH Fall, 2011, UC Davis Giovanni Peri, Professor of Economics, [email protected]
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2 Introduction In this lecture, we learn: some facts related to economic growth that later chapters will seek to explain. how economic growth has dramatically improved welfare around the world. that this growth is actually a relatively recent phenomenon. some tools used to study economic growth, including how to calculate growth rates and what is the “ratio scale” used to makes plots of per capita GDP easier to understand.
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3 The United States of a century ago had average life expectancy, literacy rates, access to basic utilities (electricity, telephone) similar Kenya or Bangladesh today. Life expectancy: 50 years Secondary education: 10% Infant mortality: 10% Some countries have seen rapid economic growth and improvements to health quality, but many others have not. Growth of income per capita over the last 2 centuries, or lack of it is the reason for the vast differences in standard of living across countries.
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4 Growth over the Very Long Run Sustained increases in standards of living are a recent phenomenon. Last 300 years over the history of human kind (modern Humans: 130,000 BC) Modern economic growth only emerged in the most recent two or three centuries. Sustained economic growth emerges in different countries at different times. First Europe, US, then Latin America, Then Asia, still to come in most of Africa. Per capita GDP – living standards – today differ remarkably around the world.
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5 Big bang or Industrial revolution: the time at which income per person in the leader economies of the world began to grow at sustained level The Great Divergence is the era of increased difference in standards of living across countries. Before 1700, nations differed only by a factor of two or three, while today it is over a factor of 50 for several countries.
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6 Big Bang Great Divergence Some remarkable civilizations but the average farmer had living standards at the subsistence level , 500$ in 1990 prices.
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7 Modern Economic Growth From 1870 to 2000, United States per capita GDP rose by nearly 15-fold. Doubling every 35 years, on average. A typical college student today will earn a lifetime income about twice his or her parents. Different countries began their process of sustained growth (industrial revolution) at different times.
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8 About 35 years
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9 The Definition of Economic Growth Growth of per capita GDP is the rate of change of per capita GDP. Precisely, a growth rate is the percentage change in a variable. A percentage change is the change between two periods divided by the value of the variable in the initial period.
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10 Dynamic Variables In macroeconomics we deal all the time with variables that change over time. They are called “dynamic variables”. GDP is one. GDP per capita is another. Population is a third one. The way we indicate that these variables change over time is by adding a “time”
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This note was uploaded on 10/17/2011 for the course ECN 101 taught by Professor Frenkel during the Fall '10 term at UC Davis.

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Lecture_4 - INTERMEDIATE MACRO THEORY FACTS OF GROWTH Fall...

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