06_EconomicGrowth

06_EconomicGrowth - Economic Growth Content 1. Historical...

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ECONOMIC GROWTH Intro to Macro (ECON 0110) Torsten Jochem Economic Growth b Content b 1. Historical Perspective b 2. Economic Growth = Development? . Determinants of Economic Growth b 3. Determinants of Economic Growth b 4. Are Developing Countries catching up? Economic Growth b 1. Historical Perspective b In the last chapter on GDP, we discussed s 1. GDP measures the output of an economy and, simul- taneously, the income of all people in the economy. s 2. GDP/capita (i.e., income per person in one year) is frequently applied as a proxy for the general living standards of individuals in the economy. Economic Growth b 1. Historic Perspective b For most of human history, live was “poor, nasty, brutish, and short” (Thomas Hobbes, Leviathan ). 1 A.D.: Roman Empire Italy: 809 Rest of Europe ~576 North America: 400 1000 A.D. Otto III, “Holy Roman Empire” Avg. of Europe: 427 Byzantine Empire: “Golden Age of Islamic World” Turkey/Iran/Iraq: 600-650 North America: 400
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b 1. Historic Perspective b A different view: Economic Growth Brad DeLong (Economist, UBerkley) 1. There was no improvement of living standards before 1300. 2. 1300-1800: 0.2%, i.e. doubling of standards of living every 50 years(!) 350 years(!) 3. 1800-1900: 1.3%, i.e. doubling of living standards every 54 years. 4. 1900-2000: 2.3%, i.e. doubling of living standards every 30 years. b 1. Historic Perspective b Small differences in economic growth rates matter tremendously over the long run due to compounding : s Argentina Economic Growth s 1950 real GDP/capita: $7,736 s 1950-2007: avg. growth rate: 1.2 % p.a. s 2000 real GDP/capita: $15,274 s France s 1950: Real GDP/capita: $6,456 s 1950-2007: avg. growth rate: 2.7% p.a. s 2000 real GDP/capita: $29,633 “Rule of 70”: Numbers of years to double = 70/growth rate b 2. Economic Growth = Development? b Rapid industrialization can cause a lot of pain: s 1. Change in life style s from village life with traditions and stable relationship to urban Economic Growth slums with stress, noise, crime, isolation, homelessness. s 2. Change in work style s from farm work to factory work s 3. Change in family structures s from extended families to nuclear families s 4. Pollution s b 2. Economic Growth = Development? b But also: Economic Growth
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Economic Growth b 2. Economic Growth = Development? Higher incomes lead to more health & education. b 2. Economic Growth = Development? Economic Growth The Human Development Index is a composite statistic including health (life expectancy), education (literacy, school enrolment rates) and income (GDP/cap). Source: IADB, Beyond Facts: Understanding Quality of Life , 2008 Economic Growth b 2. Economic Growth = Development? b 2. Economic Growth = Development? b
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This note was uploaded on 03/26/2012 for the course ECON 0100 taught by Professor Kenkel during the Spring '08 term at Pittsburgh.

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06_EconomicGrowth - Economic Growth Content 1. Historical...

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