Lec15-_Ch10_Ch11-I_-ECON2123-LI-fa13-stu

Nearly all oecd countries start at high levels of

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Unformatted text preview: of output per person (say, at least one-third of the U.S. level in 1960), and there is clear evidence of convergence. 2. Convergence is also visible for most Asian countries: All the countries with growth rates above 4% over the period are in Asia. Starting in the 60’s a group of countries/economies sometimes called the four tigers: Singapore, Taiwan, Hong Kong, and South Korea started catching up to the high output of Japan. (Economies with high growth rates but low output per person are often called emerging economies. 3. Convergence is certainly not the rule in Africa. 16 Macroeconomics by Yao Li HINTS AT CONVERGENCE (CATCHING UP AND CUTTING-EDGE GROWTH) Countries with small capital stocks should grow rapidly. (why?) China: Prediction: China will slow as capital accumulates. Why don’t all poor countries grow rapidly? ---conditional convergence. Bombing a country can increase its growth rate?! 17 Macroeconomics by Yao Amber LI 10.4 THINKING ABOUT GROWTH: A PRIMER To think about the facts presented in the previous sections, we use the framework of analysis developed by Robert Solow, from MIT, in the late 1950s. Particularly: What determines growth? What is the role of capital accumulation? What is the role of technological progress? 18 10.4 THINKING ABOUT GROWTH: A PRIMER The Aggregate Production Function The aggregate production function is a specification of the relation between aggregate output and the inputs in production. Y F (K, N ) Y = aggregate output. K = capital—the sum of all the machines, plants, and office buildings in the economy. N = labor—the number of workers in the economy. The function F, which tells us how much output is produced for given quantities of capital and labor, is the aggregate production function. Aggregate output, Y, depends on aggregate capital stock, K, and aggregate employment, N. 19 of 26 Macroeconomics by Yao Amber LI 10.4 THINKING ABOUT GROWTH: A PRIMER The Aggregate Production Function The aggregate production function depends on the state of technology. The higher the state of technology, the higher output, F(K, N)...
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