Topic_2_-_Economic_Growth - 1 Economic Growth macro Topic 2...

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Unformatted text preview: 1 Economic Growth macro Topic 2 Topic 2 – Economic Growth Economic Growth slide 1 Topic 2 learning objectives Topic 2 learning objectives s Learn the closed economy Solow model s See how a country’s standard of living depends on its saving and population growth rates s Learn how to use the “Golden Rule” to find the optimal savings rate and capital stock Topic 2 Topic 2 – Economic Growth Economic Growth slide 2 Topic 2 Learning objectives Topic 2 Learning objectives s Technological progress in the Solow model s Policies to promote growth Topic 2 Topic 2 – Economic Growth Economic Growth slide 3 The importance of The importance of economic growth economic growth …for poor countries Topic 2 Topic 2 – Economic Growth Economic Growth slide 4 selected poverty statistics selected poverty statistics In the poorest one-fifth of all countries: – daily caloric intake is 1/3 lower than in the richest fifth – the infant mortality rate is 200 per 1000 births, compared to 4 per 1000 births in the richest fifth. s source: The Elusive Quest for Growth , by William Easterly. (MIT Press, 2001) Topic 2 Topic 2 – Economic Growth Economic Growth slide 5 selected poverty statistics selected poverty statistics s In Pakistan, 85% of people live on less than $2/day s One-fourth of the poorest countries have had famines during the past 3 decades. (none of the richest countries had famines) s Poverty is associated with the oppression of women and minorities s source: The Elusive Quest for Growth , by William Easterly. (MIT Press, 2001) 2 Topic 2 Topic 2 – Economic Growth Economic Growth slide 6 Estimated effects of economic growth Estimated effects of economic growth s A 10% increase in income is associated with a 6% decrease in infant mortality s Income growth also reduces poverty. Example: +65%-12% 1997-99-25% +76% Growth and Poverty in Indonesia 1984-96 change in % of persons living below poverty line change in income per capita Topic 2 Topic 2 – Economic Growth Economic Growth slide 7 Income and poverty in the world Income and poverty in the world selected countries, 2000 selected countries, 2000 10 20 30 40 50 60 70 80 90 100 $0 $5,000 $10,000 $15,000 $20,000 Income per capita in dollars % of population living on $2 per day or less Madagascar India Bangladesh &epal Botswana Mexico Chile S. Korea Brazil Russian Federation Thailand Peru China Kenya Topic 2 Topic 2 – Economic Growth Economic Growth slide 8 The importance of The importance of economic growth economic growth …for poor countries …for rich countries Topic 2 Topic 2 – Economic Growth Economic Growth slide 9 Huge effects from tiny differences Huge effects from tiny differences In rich countries, if government policies or “shocks” have even a small impact on the long-run growth rate, they will have a huge impact on the standard of living in the long run… Topic 2 Topic 2 – Economic Growth Economic Growth slide 10 Huge effects from tiny differences Huge effects from tiny differences...
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Topic_2_-_Economic_Growth - 1 Economic Growth macro Topic 2...

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