Lecture2 - U.S Growth Growth Accounting Application U.S...

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U.S. Growth Growth Accounting Application: U.S. American Century The Rise (and Decline?) of the U.S. Century American Economic History University of California, Berkeley Department of Economics August 31, 2010 Econ 113 (UC Berkeley) Lecture 2 8/31/2010 0 / 33
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U.S. Growth Growth Accounting Application: U.S. American Century Today’s Agenda: Growth of Modern U.S. Economy The U.S. overtook the U.K. as the world economic leader circa 1900 Which factor was most important for U.S. growth? Was it that Americans worked harder (e.g., more labor)? Or, did Americans work smarter (e.g., division of labor)? Growth Accounting: decomposes growth into its various inputs Econ 113 (UC Berkeley) Lecture 2 8/31/2010 1 / 33
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U.S. Growth Growth Accounting Application: U.S. American Century Contiguous U.S: Acquired between 1776 and mid-1800s Econ 113 (UC Berkeley) Lecture 2 8/31/2010 2 / 33
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U.S. Growth Growth Accounting Application: U.S. American Century U.S. becomes world economic leader in 20th century Econ 113 (UC Berkeley) Lecture 2 8/31/2010 3 / 33
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U.S. Growth Growth Accounting Application: U.S. American Century Output per Hour Worked in the U.S: steady Source: Gordon (2000). Econ 113 (UC Berkeley) Lecture 2 8/31/2010 4 / 33
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U.S. Growth Growth Accounting Application: U.S. American Century Growth in per capita output: u-shaped Growth: GNP per capita GNP P 1800-1855 0.93 1855-1890 1.55 1890-1927 2.00 1929-1966 1.86 1966-1989 1.67 Per capita output is slowing down in 20 th century Growth follows upside-down U Surpassed UK (and all others) c. 1900, but losing ground since c. 1960 Econ 113 (UC Berkeley) Lecture 2 8/31/2010 5 / 33
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U.S. Growth Growth Accounting Application: U.S. American Century Production Function: Output is function of inputs Y = F ( K , L , T ) Y : aggregate output F : function that maps inputs to outputs K : capital L : labor T : land Factors of production: the inputs, K , L , and T Can add other factors of production if relevant (e.g., education levels) F refers generally to the production process. It can include technology, institutions, markets, and so forth. Econ 113 (UC Berkeley) Lecture 2 8/31/2010 6 / 33
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U.S. Growth Growth Accounting Application: U.S. American Century Cobb-Douglas Function: functional form for this course Cobb-Douglas function: F will be Cobb-Douglas so Y = AK α L β We use Cobb-Douglas because it has some nice intuitive features For now, suppose that land does not affect on output Constant returns to scale: causes exponents to sum to 1 For example, doubling capital and labor causes output to double Y = AK α L 1 α α , elasticity, is the importance of capital in production We will assume constant returns (but in reality, they need not equal 1) Econ 113 (UC Berkeley) Lecture 2 8/31/2010 7 / 33
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U.S. Growth Growth Accounting Application: U.S. American Century Total Factor Productivity: Measures Ef±ciency A is Total Factor Productivity (TFP) in Y = AK α L β An economy with a greater A can produce more output per labor TFP increases with more ef±cient means of production e.g., transition from hand production to the assembly line What is A mathematically?
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This note was uploaded on 02/06/2012 for the course ECON 100A taught by Professor Woroch during the Fall '08 term at Berkeley.

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Lecture2 - U.S Growth Growth Accounting Application U.S...

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