1 Four facts on the U.S. historical growth experience, aka the Kaldor facts
|
|
- Garey Griffin
- 5 years ago
- Views:
Transcription
1 1 Four facts on the U.S. historical growth experience, aka the Kaldor facts In 1958 Nicholas Kaldor listed 4 key facts on the long-run growth experience of the US economy in the past century, which have revealed to be still true today and true, to a large extent, in several other developed countries: 1. Thesharesofincomedevotedtocapital( ) and to labor ( ) are roughly constant at, respectively, 13 and 23 of total GDP. 2. The average growth rate per capita has been positive and relatively constant over time (approximately 18% from 1870). 3. Historically, consumption, investment, capital and output have all grown at the same (constant) rate. A consequence is that the great ratios and are constant over time, respectively to 7 and 15. In light of this property, we say that growth is balanced. 4. The real return on capital shows no upward or downward trend, it is constant around 5% The Cobb-Douglas production function is the simplest one that is consistent with fact 1, under the additional assumption of competitive input markets. Suppose Then, from firm s optimization: = (1 ) + = 1 1 = 1 = (1 ) 1 =(1 ) = 1 = µ µ ( + ) =(1 ) As one can see, both the labor share and the capital share of income are independent of time, as consistently with Kaldor fact #1. A caveat to keep in mind is that, in the last 20 years there seems to be a downward trend in the labor share. Data on sources of income (e.g., wages and salaries, dividends, interests, and profits) from the National Accounts can be used to compute and 1 = 1
2 2 Some basic notions of continuous time dynamics In growth theory, it is customary (and convenient) to study models in continuous time. What is the difference between continuous and discrete time? There are two key differences. 1. Notation: instead of we use the notation () so time becomes an argument of our aggregate variables, which are functions of time. 2. Changes of variables over time: consider the difference between and + in the discrete interval of time and take the limit as goes to zero: ( + ) () () lim = () 0 where the "dot" notation indicates the derivative with respect to time. Moreover, the growth rate of in the interval can be written as and taking the limit for 0 ( + ) () () µ ( + ) () 1 lim = 1 ( + ) () lim = 1 () 0 () 0 () () () Finally, note that time derivatives of logarithms are growth rates by simple application of the chain rule: [log ()] = 1 () = () () () 3 Growth Accounting One can use the aggregate production function, in particular the Cobb-Douglas specification, to perform a simple growth-accounting exercise, due to Solow (1957), in order to understand the sources of economic growth. Consider a slightly modified version of theaggregateproductionfunctionasabove,i.e. () = () () [ () ()] 1 2
3 where () is human capital, or quality of labor input. Let s modify slightly this equation as () = () () [ () () ()] 1 where () is the working age population and () the labor force participation rate () (). Take logs and differentiate with respect to time, using the techniques explained above: () () = () () + () () () +(1 ) +(1 ) () () +(1 ) () () () (1) Equation (1) shows that output growth is the sum of four components, from last to first: growth in the quality of labor (), growth in working-age population (), growth in the participation rate (), capital input () growth, plus the growth rate of total factor productivity () Given data on inputs and output, and the capital and income share and 1 that we can calculate from National Accounts as explained above, one can recover residually () which is, otherwise unobserved directly. 1 For this reason, () is often called the Solow residual. In per capita (or, more precisely per worker) terms, the same decomposition becomes = = + +(1 ) +(1 ) + +(1 ) +(1 ) where is income per capita and is capital per capita. In the literature, growth in capital per worker the fact that () isoftenreferredtoascapital deepening. Notethatwehaveused = = 2 = 1 Note that we need also data on (), otherwise our measure of () also includes quality of labor. Quality of labor can be measured directly through average years of education in the population, for example. 3
4 Therefore () = and similarly for We can illustrate the usefulness of the Solow growth decomposition with three examples: 1. In the US From , growth in output per hour worked has been 25%, capital per hour contributed by 08%, quality of labor input for 02% and TFP growth for 15% (from Jones, Table 2.1). The labor productivity slowdown of the 1970s-1980s is due to slow growth in TFP. 2. Countries in South-East Asia (SEA) are typical examples of growth miracles in the past 30 years (see Table 8.4 in Williamson). The growth accounting exercise, performed this time on aggregate output, shows that most of output growth is not due to TFP growth, but to factor accumulation, i.e., capital and labor. The key reason behind this phenomenon is the demographic transition, i.e. a fall in fertility rate and rise in life expectancy. This change in demographics leads to more investment in human capital (Becker s quantity-quality trade-off in children), and to more savings (capital accumulation) for life-cycle reasons. The implications arethatsucheconomicboomistemporary,itcannotlast.itwillexhaustassoon as the demographic transition is complete. 3. Countries in Sub-Saharian Africa (SSA) are typical examples of growth disasters. Growth accounting shows that this disastrous performance is due to extremely low growth. Why such low growth rates of TFP? Current research emphasizes that the key factor in impeding growth in SSA has been the combination of war, corruption and dictatorships which has led to large political and economic instability and extremely low protection of property rights. These are all factors that, in a simple growth accounting exercise, show up as different levels and growth rate of the Solow residuals. An example (in positive) is Botswana, which had growth rates of 7% since 1970 (vis-a-vis no growth for the rest of SSA). Botswana is a stable democracy which ranks in the top 50 countries in the index of economic freedom (compiled by the Heritage Foundation & the Wall Street Journal), while almost all the other countries in SSA rank in the bottom of the country distribution. 4
5 4 Empirics of Economic Growth Before presenting some of the most recent models in growth theory, it is useful to organize our thoughts around a set of key facts that theory should explain. Growth theory is concerned with questions such as: Whyisn tthewholeworlddeveloped?,whythereare countries that grow faster than others for long periods of time? Is there convergence over time among countries? Growth theory provides useful models to rationalize the existence of persistent income disparitiesacrosscountriesandtostudythenatureandthedeterminantsofthegrowth process. We use income per capita (or often, per worker) as a measure of development, where income is measured as Gross Domestic Product, GDP. There are other important measures of development, such as life-expectancy, infant mortality, education, or better measures of quality of life, like consumption and leisure. There are two key reasons why income per capita is preferred: 1) more consistent data (across countries and over time) are available; 2) the theories have predictions mainly in terms of. The comparison across countries is done with Purchase-Power-Parity (PPP) adjusted exchange rates, i.e. a similar bundle of goods (including non-tradeable goods) is compared in various countries. We can distinguish three main data sources for research on economic growth: 1. Historical annual data for 16 countries for the period from Maddison (1994) 2. Annual data on about 30 variables for about 167 countries over some or all the years assembled by Summers-Heston (1991). These are called Penn World Tables and are available at 3. There are many websites dedicated to economic growth. See for example the economic growth page of the World Bank, at A nice introductory reading on the empirics of economic growth is the book by Robert Barro, Determinants of Economic Growth, MIT Press. Below, we present some empirical regularities on growth obtained from the datasets mentioned above. 5
6 4.1 Facts on Cross-Country Income Disparity 1. There is a great disparity across countries in terms of income per capita. In 1985 the top 5% among world s countries was 20 times richer than the bottom 5%. (Table 1.1, Jones). GDP per capita in the US is 40 times bigger than in Ethiopia: workers in Ethiopia need to work 30 years, on average, to earn what a US worker earns in one year. 2. The world distribution of income per capita across countries is almost uniform. But the distribution of the world population by income per capita is very skewed, essentially because of the presence of two huge countries, China and India, in the bottom 10%. 3. World income disparity has not increased or decreased in the post-war period. 4. The world distribution of income per capita has shifted up: the richer got richer, but the poorer got richer too. 5. World growth has been faster in the 1950 s and 1960 s than in the pre-war period. Since the 1970 s growth has slowed down again, but it has picked up since the 1990s. 6. There is little persistence in growth rates: correlation in Figure 3 is only There are growth miracles and growth disasters: many examples of disasters are in Africa and Latin America. Argentina is the latest disaster. 8. Note that small differences in annual growth rate compound to huge differences in income per capita in the long-run. Consider two countries initially equal, but growing at 2% and 3% respectively for 82 years: (102) 82 =5and (103) 82 =11 The math shows that the second country will be twice as rich as the first one at the end of the period. 6
7 9. Growth rates are not correlated to initial levels of income per capita. In other words, there is no absolute convergence. The formal definition of absolute convergence is +1 = ( ),where 0 0 i.e. the growth rate is a decreasing function of the initial level of income. 10. Income per capita is strongly correlated with capital-output ratio (or investmentoutput ratio) (+), population growth rate (-), school enrollment rates (+), government size (-), political rights (+), financial development (+), trade openness (+), relative price of investment (-) Controlling for the characteristics above, growth rates are negatively correlated with initial levels of income per capita... there is some conditional convergence, i.e. convergence conditional on a number of observable characteristics of the countries. Why? The models we will study imply that these characteristics determine the steady-state income per capita of each country and that growth is proportional to the distance from the steady-state. The formal definition of conditional convergence is +1 = ( ),where 0 0 i.e., the growth rate is positively associated to the distance between current income and steady-state income per capita. Simple regression analyses can make this point clear. 2 Political rights is an index that takes into account democratic rights such as freedom of speech, fredom of press, etc. Financial development is measured by the ratio of liquid assets (currency held outside the banking system+interest-bearing assets held by bank and nonbank financial intermediaries) to GDP. 7
Testing the Solow Growth Theory
Testing the Solow Growth Theory Dilip Mookherjee Ec320 Lecture 4, Boston University Sept 11, 2014 DM (BU) 320 Lect 4 Sept 11, 2014 1 / 25 RECAP OF L3: SIMPLE SOLOW MODEL Solow theory: deviates from HD
More information1 The Solow Growth Model
1 The Solow Growth Model The Solow growth model is constructed around 3 building blocks: 1. The aggregate production function: = ( ()) which it is assumed to satisfy a series of technical conditions: (a)
More informationHow Rich Will China Become? A simple calculation based on South Korea and Japan s experience
ECONOMIC POLICY PAPER 15-5 MAY 2015 How Rich Will China Become? A simple calculation based on South Korea and Japan s experience EXECUTIVE SUMMARY China s impressive economic growth since the 1980s raises
More informationEconomic Growth: Malthus and Solow Copyright 2014 Pearson Education, Inc.
Chapter 7 Economic Growth: Malthus and Solow Copyright Chapter 7 Topics Economic growth facts Malthusian model of economic growth Solow growth model Growth accounting 1-2 U.S. Per Capita Real Income Growth
More informationIntroduction to economic growth (1)
Introduction to economic growth (1) EKN 325 Manoel Bittencourt University of Pretoria M Bittencourt (University of Pretoria) EKN 325 1 / 32 Introduction In the last century the USA has experienced a tenfold
More informationECON 450 Development Economics
ECON 450 Development Economics Classic Theories of Economic Growth and Development The Solow Growth Model University of Illinois at Urbana-Champaign Summer 2017 Introduction In this lecture we start the
More informationTesting the Solow Growth Theory
Testing the Solow Growth Theory Dilip Mookherjee Ec320 Lecture 5, Boston University Sept 16, 2014 DM (BU) 320 Lect 5 Sept 16, 2014 1 / 1 EMPIRICAL PREDICTIONS OF SOLOW MODEL WITH TECHNICAL PROGRESS 1.
More information202: Dynamic Macroeconomics
202: Dynamic Macroeconomics Solow Model Mausumi Das Delhi School of Economics January 14-15, 2015 Das (Delhi School of Economics) Dynamic Macro January 14-15, 2015 1 / 28 Economic Growth In this course
More information1 Chapter 1: Economic growth
1 Chapter 1: Economic growth Reference: Barro and Sala-i-Martin: Economic Growth, Cambridge, Mass. : MIT Press, 1999. 1.1 Empirical evidence Some stylized facts Nicholas Kaldor at a 1958 conference provides
More informationWhy thinking about economic growth? Kaldor facts old and new Basic tools and concepts
Prof. Dr. Thomas Steger Economic Growth Lecture WS 13/14 1. Motivation and Basic Concepts Why thinking about economic growth? Kaldor facts old and new Basic tools and concepts Why thinking about economic
More informationLong-term economic growth Growth and factors of production
Understanding the World Economy Master in Economics and Business Long-term economic growth Growth and factors of production Lecture 2 Nicolas Coeurdacier nicolas.coeurdacier@sciencespo.fr Output per capita
More informationGrowth Accounting: A European Comparison
Cyprus Economic Policy Review, Vol. 6, No. 2, p.p. 67-79 (212) 145-4561 67 Growth Accounting: A European Comparison Theofanis Mamuneas and Elena Ketteni Department of Economics and Economic Research Centre
More information3. Which of the following assertions CLEARLY DOES NOT correspond to what you learned in this course?
ECO2143 Macroeconomic Theory II First mid-term examination: February 4th, 2008 University of Ottawa Professor: Louis Hotte Time allowed: 1h 20min Attention: Not all questionnaires are the same. This is
More information5.1 Introduction. The Solow Growth Model. Additions / differences with the model: Chapter 5. In this chapter, we learn:
Chapter 5 The Solow Growth Model By Charles I. Jones Additions / differences with the model: Capital stock is no longer exogenous. Capital stock is now endogenized. The accumulation of capital is a possible
More informationMacroeconomic Models of Economic Growth
Macroeconomic Models of Economic Growth J.R. Walker U.W. Madison Econ448: Human Resources and Economic Growth Summary Solow Model [Pop Growth] The simplest Solow model (i.e., with exogenous population
More informationRegional convergence in Spain:
ECONOMIC BULLETIN 3/2017 ANALYTICAL ARTIES Regional convergence in Spain: 1980 2015 Sergio Puente 19 September 2017 This article aims to analyse the process of per capita income convergence between the
More informationE-322 Muhammad Rahman CHAPTER-6
CHAPTER-6 A. OBJECTIVE OF THIS CHAPTER In this chapter we will do the following: Look at some stylized facts about economic growth in the World. Look at two Macroeconomic models of exogenous economic growth
More informationMacroeconomics II. Growth. Recent phenomenon Great diversity of growth experiences across countries. Why do some countries grow and others not?
Macroeconomics II Growth Growth Theory Facts about growth Recent phenomenon Great diversity of growth experiences across countries What drives growth? Inputs Technology Why do some countries grow and others
More informationLong-term economic growth Growth and factors of production
Understanding the World Economy Master in Economics and Business Long-term economic growth Growth and factors of production Lecture 2 Nicolas Coeurdacier nicolas.coeurdacier@sciencespo.fr Lecture 2 : Long-term
More informationMACROECONOMICS. Solow Growth Model Applications and Extensions. Zongye Huang ISEM, CUEB
MACROECONOMICS Solow Growth Model Applications and Extensions Zongye Huang ISEM, CUEB Kaldor Stylized Facts Kaldor (1957) proposed six statements about economic growth as "a stylized view of the facts".
More information5.1 Introduction. The Solow Growth Model. Additions / differences with the model: Chapter 5. In this chapter, we learn:
Chapter 5 The Solow Growth Model By Charles I. Jones Additions / differences with the model: Capital stock is no longer exogenous. Capital stock is now endogenized. The accumulation of capital is a possible
More informationTechnical change is labor-augmenting (also known as Harrod neutral). The production function exhibits constant returns to scale:
Romer01a.doc The Solow Growth Model Set-up The Production Function Assume an aggregate production function: F[ A ], (1.1) Notation: A output capital labor effectiveness of labor (productivity) Technical
More informationThe Theory of Economic Growth
The Theory of The Importance of Growth of real GDP per capita A measure of standards of living Small changes make large differences over long periods of time The causes and consequences of sustained increases
More informationThe Theory of Economic Growth
The Theory of 1 The Importance of Growth of real GDP per capita A measure of standards of living Small changes make large differences over long periods of time The causes and consequences of sustained
More informationh Edition Economic Growth in a Cross Section of Countries
In the Name God Sharif University Technology Graduate School Management Economics Economic Growth in a Cross Section Countries Barro (1991) Navid Raeesi Fall 2014 Page 1 A Cursory Look I Are there any
More informationIntroduction to economic growth (3)
Introduction to economic growth (3) EKN 325 Manoel Bittencourt University of Pretoria M Bittencourt (University of Pretoria) EKN 325 1 / 29 Introduction Neoclassical growth models are descendants of the
More informationCROATIA S EU CONVERGENCE REPORT: REACHING AND SUSTAINING HIGHER RATES OF ECONOMIC GROWTH, Document of the World Bank, June 2009, pp.
CROATIA S EU CONVERGENCE REPORT: REACHING AND SUSTAINING HIGHER RATES OF ECONOMIC GROWTH, Document of the World Bank, June 2009, pp. 208 Review * The causes behind achieving different economic growth rates
More informationEC 205 Macroeconomics I
EC 205 Macroeconomics I Macroeconomics I Chapter 8 & 9: Economic Growth Why growth matters In 2000, real GDP per capita in the United States was more than fifty times that in Ethiopia. Over the period
More informationThe Facts of Economic Growth and the Introdution to the Solow Model
The Facts of Economic Growth and the Introdution to the Solow Model Lorenza Rossi Goethe University 2011-2012 Course Outline FIRST PART - GROWTH THEORIES Exogenous Growth The Solow Model The Ramsey model
More informationConditional Convergence: Evidence from the Solow Growth Model
Conditional Convergence: Evidence from the Solow Growth Model Reginald Wilson The University of Southern Mississippi The Solow growth model indicates that more than half of the variation in gross domestic
More informationECON MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University. J.Jung Chapter 8 - Economic Growth Towson University 1 / 64
ECON 202 - MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University J.Jung Chapter 8 - Economic Growth Towson University 1 / 64 Disclaimer These lecture notes are customized for the Macroeconomics
More informationCHAPTER 11. SAVING, CAPITAL ACCUMULATION, AND OUTPUT
CHAPTER 11. SAVING, CAPITAL ACCUMULATION, AND OUTPUT I. MOTIVATING QUESTION Does the Saving Rate Affect Growth? In the long run, saving does not affect growth, but does affect the level of per capita output.
More informationEconomic growth: Interesting Facts and Examples. 2Topic
Economic growth: Interesting Facts and Examples 2Topic The Basics of Economic Growth U.S. real GDP per person and the standard of living tripled between 1960 and 2010. We see even more dramatic change
More informationQUESTIONNAIRE A I. MULTIPLE CHOICE QUESTIONS (2 points each)
ECO2143 Macroeconomic Theory II First mid-term examination: July 3rd 2014 University of Ottawa Professor: Louis Hotte Time allotted: 1h 30min Attention: Not all questionnaires are the same. This is questionnaire
More informationECON 450 Development Economics
ECON 450 Development Economics Classic Theories of Economic Growth and Development The Empirics of the Solow Growth Model University of Illinois at Urbana-Champaign Summer 2017 Introduction This lecture
More informationBeyond the Basic Solow Growth Model, Part 1 Agenda. The Basic Solow Growth Model. The Basic Solow Growth Model. The Basic Solow Growth Model
Beyond the Basic Solow Growth Model, Part genda The. Shortcomings The Growth ccounting Formula. The The : depends on v, n-dot, δ, and. Changes in v, δ, and lead to changes in the level of but they affect
More informationGrowth and Ideas. Martin Ellison, Hilary Term 2017
Growth and Ideas Martin Ellison, Hilary Term 2017 Recap of the Solow model 2 Production function is Cobb-Douglas with constant returns to scale in capital and labour - exponent of 1/3 on K Goods invested
More informationDeep Determinants. Sherif Khalifa. Sherif Khalifa () Deep Determinants 1 / 65
Deep Determinants Sherif Khalifa Sherif Khalifa () Deep Determinants 1 / 65 Sherif Khalifa () Deep Determinants 2 / 65 There are large differences in income per capita across countries. The differences
More informationIntroduction to economic growth (2)
Introduction to economic growth (2) EKN 325 Manoel Bittencourt University of Pretoria M Bittencourt (University of Pretoria) EKN 325 1 / 49 Introduction Solow (1956), "A Contribution to the Theory of Economic
More informationECON 256: Poverty, Growth & Inequality. Jack Rossbach
ECON 256: Poverty, Growth & Inequality Jack Rossbach Plan for Semester: Two parts (split around spring break) Part I: Measurement and background Links between Poverty, Growth & Inequality Measurement:
More informationMacroeconomic Models of Economic Growth
Macroeconomic Models of Economic Growth J.R. Walker U.W. Madison Econ448: Human Resources and Economic Growth Course Roadmap: Seemingly Random Topics First midterm a week from today. What have we covered
More informationNotes on classical growth theory (optional read)
Simon Fraser University Econ 855 Prof. Karaivanov Notes on classical growth theory (optional read) These notes provide a rough overview of "classical" growth theory. Historically, due mostly to data availability
More informationAdvanced Macroeconomics 9. The Solow Model
Advanced Macroeconomics 9. The Solow Model Karl Whelan School of Economics, UCD Spring 2015 Karl Whelan (UCD) The Solow Model Spring 2015 1 / 29 The Solow Model Recall that economic growth can come from
More informationEconomic Growth. (c) Copyright 1999 by Douglas H. Joines 1. Module Objectives
Economic Growth Module Objectives now what determines the growth rates of aggregate and per capita GDP Distinguish factors that affect the economy s growth rate from those that merely shift the level of
More informationLEC 2: Exogenous (Neoclassical) growth model
LEC 2: Exogenous (Neoclassical) growth model Development of the model The Neo-classical model was an extension to the Harrod-Domar model that included a new term productivity growth The most important
More informationSolow Growth Accounting
Econ 307 Lecture 3 Solow Growth Accounting Let the production function be of general form: Y = BK α L (1 α ) We call B `multi-factor productivity It measures the productivity of the composite of labour
More informationREGIONAL ECONOMIC GROWTH AND CONVERGENCE, :
REGIONAL ECONOMIC GROWTH AND CONVERGENCE, 950-007: Some Empirical Evidence Georgios Karras* University of Illinois at Chicago March 00 Abstract This paper investigates and compares the experience of several
More informationSIS 628 Jan. 16, 2019 INCOME
SIS 628 Jan. 16, 2019 INCOME 1 What is macro about? Macroeconomics is the study of income. Why do incomes vary over time? Why do they differ across countries? Why do they differ among people? If we try
More informationThe Role of Physical Capital
San Francisco State University ECO 560 The Role of Physical Capital Michael Bar As we mentioned in the introduction, the most important macroeconomic observation in the world is the huge di erences in
More informationQUESTIONNAIRE A I. MULTIPLE CHOICE QUESTIONS (3 points each)
ECO2143 Macroeconomic Theory II First mid-term examination: January 26 2018 University of Ottawa Professor: Louis Hotte Time allotted: 1h 20min Attention: Not all questionnaires are the same. This is questionnaire
More informationImagine that countries A and B each have ten people (or ten equally large groups of people) with incomes distributed as follows:
Practice Problems EC 102.03 Questions 1. Suppose you are comparing income per capita in the United States and Ghana. You first convert the values into U.S. dollars using the current exchange rate between
More informationINTRODUCTION TO ECONOMIC GROWTH. Dongpeng Liu Department of Economics Nanjing University
INTRODUCTION TO ECONOMIC GROWTH Dongpeng Liu Department of Economics Nanjing University ROADMAP INCOME EXPENDITURE LIQUIDITY PREFERENCE IS CURVE LM CURVE SHORT-RUN IS-LM MODEL AGGREGATE DEMAND AGGREGATE
More informationThe Euro Area s Long-Term Growth Prospects: With and Without Structural Reforms
The Euro Area s Long-Term Growth Prospects: With and Without Structural Reforms Karl Whelan University College Dublin Kieran McQuinn Economic and Social Research Institute, Dublin Presentation at University
More informationGrowth and the World Economy
Convergence Growth and the World Economy A. This hypothesis indicates that gaps in output per capita, Y/N, among countries narrows over time. B. Convergence in the Solow growth model. 1. Suppose all countries
More informationConditional convergence: how long is the long-run? Paul Ormerod. Volterra Consulting. April Abstract
Conditional convergence: how long is the long-run? Paul Ormerod Volterra Consulting April 2003 pormerod@volterra.co.uk Abstract Mainstream theories of economic growth predict that countries across the
More informationCheck your understanding: Solow model 1
Check your understanding: Solow model 1 Bill Gibson March 26, 2017 1 Thanks to Farzad Ashouri Solow model The characteristics of the Solow model are 2 Solow has two kinds of variables, state variables
More informationShall we play a game? Solow growth model Steady state Break-even investment Rule of 70 Depreciation Dilution
National Income & Business Cycles Why growth matters? Learn the closed economy Solow model See how a country s standard of living depends on its saving and population growth rates Importance of productivity
More informationChapter 4. Economic Growth
Chapter 4 Economic Growth When you have completed your study of this chapter, you will be able to 1. Understand what are the determinants of economic growth. 2. Understand the Neoclassical Solow growth
More informationChapter 1. Introduction: The Facts of Economic Growth. Instructor: Dmytro Hryshko
Chapter 1. Introduction: The of Economic Growth Instructor: Dmytro Hryshko New Directions in Economic Growth Why are some countries rich and other poor? Modern treatment starts with Solow (1956, 1957)
More informationSGPE Summer School: Macroeconomics Lecture 5
SGPE Summer School: Macroeconomics Lecture 5 Recap: The natural levels of production and interest rate Y n = C( Y,Y e,r, A) + I ( r,y e, K) where Y n = F(K, E(1- u n )L) Capital stock was taken as exogenous
More information3.1 Introduction. 3.2 Growth over the Very Long Run. 3.1 Introduction. Part 2: The Long Run. An Overview of Long-Run Economic Growth
Part 2: The Long Run Media Slides Created By Dave Brown Penn State University 3.1 Introduction In this chapter, we learn: Some tools used to study economic growth, including how to calculate growth rates.
More informationINTERMEDIATE MACROECONOMICS
INTERMEDIATE MACROECONOMICS LECTURE 5 Douglas Hanley, University of Pittsburgh ENDOGENOUS GROWTH IN THIS LECTURE How does the Solow model perform across countries? Does it match the data we see historically?
More informationRoad Map to this Lecture
Economic Growth 1 Road Map to this Lecture 1. Steady State dynamics: 1. Output per capita 2. Capital accumulation 3. Depreciation 4. Steady State 2. The Golden Rule: maximizing welfare 3. Total Factor
More informationInvestment in Physical Capital, Investment in Health and Economic Growth in China
Investment in Physical Capital, Investment in Health and Economic Growth in China AUTHORS ARTICLE INFO JOURNAL FOUNDER Xie Xiaoqing Xie Xiaoqing (2005). Investment in Physical Capital, Investment in Health
More informationMacroeconomics Lecture 2: The Solow Growth Model with Technical Progress
Macroeconomics Lecture 2: The Solow Growth Model with Technical Progress Richard G. Pierse 1 Introduction In last week s lecture we considered the basic Solow-Swan growth model (Solow (1956), Swan (1956)).
More informationWhy are some countries richer than others? Part 1
Understanding the World Economy Why are some countries richer than others? Part 1 Lecture 1 Nicolas Coeurdacier nicolas.coeurdacier@sciencespo.fr Practical matters Course website http://econ.sciences-po.fr/staff/nicolas-coeurdacier
More informationGrowth. Prof. Eric Sims. Fall University of Notre Dame. Sims (ND) Growth Fall / 39
Growth Prof. Eric Sims University of Notre Dame Fall 2012 Sims (ND) Growth Fall 2012 1 / 39 Economic Growth When economists say growth, typically mean average rate of growth in real GDP per capita over
More informationChapter 16. Price Levels and the Exchange Rate in the Long Run
Chapter 16 Price Levels and the Exchange Rate in the Long Run Preview Law of one price Purchasing power parity Long-run model of exchange rates: monetary approach (based on absolute version of PPP) Relationship
More informationDemographics, Structural Reform and the Growth Outlook for Europe
Demographics, Structural Reform and the Growth Outlook for Europe Karl Whelan University College Dublin Kieran McQuinn ESRI Presentation at UCD October 30, 2014 Debt Crisis or Growth Crisis? Highly indebted
More informationClass Notes. Intermediate Macroeconomics. Li Gan. Lecture 7: Economic Growth. It is amazing how much we have achieved.
Class Notes Intermediate Macroeconomics Li Gan Lecture 7: Economic Growth It is amazing how much we have achieved. It is also to know how much difference across countries. Nigeria is only 1/43 of the US.
More informationSeparate file have practice problems for the Cobb-Douglas production function and convergence.
Modules 3 and 4: Solow growth model practice problems Practice problems for the final exam (The attached PDF file has better formatting.) This posting gives sample final exam problems for the Solow growth
More information2014/2015, week 4 Cross-Country Income Differences. Romer, Chapter 1.6, 1.7, 4.2, 4.5, 4.6
2014/2015, week 4 Cross-Country Income Differences Romer, Chapter 1.6, 1.7, 4.2, 4.5, 4.6 Growth Accounting How can we test for the determinants of growth and, thereby, of income differences across countries?
More informationSolow instead assumed a standard neo-classical production function with diminishing marginal product for both labor and capital.
Module 5 Lecture 34 Topics 5.2 Growth Theory II 5.2.1 Solow Model 5.2 Growth Theory II 5.2.1 Solow Model Robert Solow was quick to recognize that the instability inherent in the Harrod- Domar model is
More informationSustained Growth of Middle-Income Countries
Sustained Growth of Middle-Income Countries Thammasat University Bangkok, Thailand 18 January 2018 Jong-Wha Lee Korea University Background Many middle-income economies have shown diverse growth performance
More informationThe Solow Model. Econ 4960: Economic Growth
The Solow Model All theory depends on assumptions which are not quite true That is what makes it theory The art of successful theorizing is to make the inevitable simplifying assumptions in such a way
More informationApplied Economics. Growth and Convergence 1. Economics Department Universidad Carlos III de Madrid
Applied Economics Growth and Convergence 1 Economics Department Universidad Carlos III de Madrid 1 Based on Acemoglu (2008) and Barro y Sala-i-Martin (2004) Outline 1 Stylized Facts Cross-Country Dierences
More informationECON 256: Poverty, Growth & Inequality. Jack Rossbach
ECON 256: Poverty, Growth & Inequality Jack Rossbach What Makes Countries Grow? Common Answers Technological progress Capital accumulation Question: Should countries converge over time? Models of Economic
More informationECN101: Intermediate Macroeconomic Theory TA Section
ECN101: Intermediate Macroeconomic Theory TA Section (jwjung@ucdavis.edu) Department of Economics, UC Davis November 4, 2014 Slides revised: November 4, 2014 Outline 1 2 Fall 2012 Winter 2012 Midterm:
More informationChapter 2 Savings, Investment and Economic Growth
George Alogoskoufis, Dynamic Macroeconomic Theory Chapter 2 Savings, Investment and Economic Growth The analysis of why some countries have achieved a high and rising standard of living, while others have
More informationDepartment of Economics Queen s University. ECON835: Development Economics Instructor: Huw Lloyd-Ellis
Department of Economics Queen s University ECON835: Development Economics Instructor: Huw Lloyd-Ellis ssignment # nswer Key Due Date: Friday, November 30, 001 Section (40 percent): Discuss the validity
More informationEconomic Growth and Convergence across the OIC Countries 1
Economic Growth and Convergence across the OIC Countries 1 Abstract: The main purpose of this study 2 is to analyze whether the Organization of Islamic Cooperation (OIC) countries show a regional economic
More informationClass 3. Explaining Economic Growth. The Solow-Swan Model
MACROECONOMICS I Class 3. Explaining Economic Growth. The Solow-Swan Model March 7 th, 2014 Announcement Homewor assignment #1 is now posted on the web Deadline: March 21 st, before the class (12:00) Submission:
More informationThe New Growth Theories - Week 6
The New Growth Theories - Week 6 ECON1910 - Poverty and distribution in developing countries Readings: Ray chapter 4 8. February 2011 (Readings: Ray chapter 4) The New Growth Theories - Week 6 8. February
More informationTopic 3: Endogenous Technology & Cross-Country Evidence
EC4010 Notes, 2005 (Karl Whelan) 1 Topic 3: Endogenous Technology & Cross-Country Evidence In this handout, we examine an alternative model of endogenous growth, due to Paul Romer ( Endogenous Technological
More informationLecture notes 2: Physical Capital, Development and Growth
Lecture notes 2: Physical Capital, Development and Growth These notes are based on a draft manuscript Economic Growth by David N. Weil. All rights reserved. Lecture notes 2: Physical Capital, Development
More informationTheory of the rate of return
Macroeconomics 2 Short Note 2 06.10.2011. Christian Groth Theory of the rate of return Thisshortnotegivesasummaryofdifferent circumstances that give rise to differences intherateofreturnondifferent assets.
More informationGROWTH DETERMINANTS IN LOW-INCOME AND EMERGING ASIA: A COMPARATIVE ANALYSIS
GROWTH DETERMINANTS IN LOW-INCOME AND EMERGING ASIA: A COMPARATIVE ANALYSIS Ari Aisen* This paper investigates the determinants of economic growth in low-income countries in Asia. Estimates from standard
More informationCommentary: The Search for Growth
Commentary: The Search for Growth N. Gregory Mankiw For evaluating economic well-being, the single most important statistic about an economy is its income per capita. Income per capita measures how much
More informationVERIFYING OF BETA CONVERGENCE FOR SOUTH EAST COUNTRIES OF ASIA
Journal of Indonesian Applied Economics, Vol.7 No.1, 2017: 59-70 VERIFYING OF BETA CONVERGENCE FOR SOUTH EAST COUNTRIES OF ASIA Michaela Blasko* Department of Operation Research and Econometrics University
More informationTesting the predictions of the Solow model: What do the data say?
Testing the predictions of the Solow model: What do the data say? Prediction n 1 : Conditional convergence: Countries at an early phase of capital accumulation tend to grow faster than countries at a later
More informationThe End of State Income Convergence
Chapter 2 The End of State Income Convergence The convergence thesis offers a broad and plausible explanation for the widely different rates of state economic development that chapter 1 describes. The
More informationQUESTIONNAIRE A I. MULTIPLE CHOICE QUESTIONS (4 points each)
ECO2143 Macroeconomic Theory II 2nd mid-term examination: March 4 2013 University of Ottawa Professor: Louis Hotte Time allotted: 1h 20min Attention: Not all questionnaires are the same. This is questionnaire
More informationECON 206 Macroeconomic Analysis
ECON 206 Macroeconomic Analysis Prof. Francesc Ortega s Class Guest Lecture by Prof. Ryan Edwards October 5, 2011 1 Our objectives today Growth: Cover the key facts about economic growth that we wish to
More informationChapter 6: Long-Run Economic Growth
Chapter 6: Long-Run Economic Growth Cheng Chen FBE of HKU October 12, 2017 Chen, C. (FBE of HKU) ECON2102/2220: Intermediate Macroeconomics October 12, 2017 1 / 59 Chapter Outline Discuss the sources of
More informationQUESTIONNAIRE A I. MULTIPLE CHOICE QUESTIONS (4 points each)
ECO2143 Macroeconomic Theory II First mid-term examination: January 28 2013 University of Ottawa Professor: Louis Hotte Time allotted: 1h 20min Attention: Not all questionnaires are the same. This is questionnaire
More informationEcon 102: Lecture Notes #7. Human Capital. John Knowles University of Pennsylvania. October 6th, 2004
Econ 102: Lecture Notes #7 Human Capital John Knowles University of Pennsylvania October 6th, 2004 1 Why Doesn t Capital Flow from Rich Countries to Poor? Title from an article by Nobel-prize winner Robert
More informationDepartment of Economics Shanghai University of Finance and Economics Intermediate Macroeconomics
Department of Economics Shanghai University of Finance and Economics Intermediate Macroeconomics Instructor: Min Zhang Answer 2. List the stylized facts about economic growth. What is relevant for the
More informationMEMO TO: Case study teams FROM: Steve O Connell DATE: December 3, 2002 SUBJECT: Differences between half-decadal dyn and gyso
MEMO TO: Case study teams FROM: Steve O Connell DATE: December 3, 2002 SUBJECT: Differences between half-decadal dyn and gyso. Introduction In the O Connell/Ndulu (999) paper we used two different series
More informationForeign Direct Investment and Economic Growth in Some MENA Countries: Theory and Evidence
Loyola University Chicago Loyola ecommons Topics in Middle Eastern and orth African Economies Quinlan School of Business 1999 Foreign Direct Investment and Economic Growth in Some MEA Countries: Theory
More informationInterest groups and investment: A further test of the Olson hypothesis
Public Choice 117: 333 340, 2003. 2003 Kluwer Academic Publishers. Printed in the Netherlands. 333 Interest groups and investment: A further test of the Olson hypothesis DENNIS COATES 1 & JAC C. HECKELMAN
More information