Documente Academic
Documente Profesional
Documente Cultură
Macroeconomi
csN. Gregory Mankiw
CHAPTER
12
Production
and Growth
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Principles of
In this chapter,
look for the answers to these questions
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Incomes
and Growth
Around the
World
FACT 1:
There are
vast
differences
in living
standards
around the
world.
GDP per
capita, 2012
China
Singapore
India
Japan
Spain
Israel
Colombia
United States
Canada
Philippines
Rwanda
New Zealand
Argentina
Saudi Arabia
Chad
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$9,233
$61,803
$3,876
$35,178
$32,682
$31,869
$10,583
$49,965
$42,533
$4,410
$1,354
$32,219
$17,917
$31,729
$1,493
Growth rate,
19702012
7.5%
4.7%
3.3%
2.1%
1.9%
2.1%
2.0%
1.8%
1.7%
1.4%
1.4%
1.4%
1.4%
1.2%
0.6%
Incomes
and Growth
Around the
World
FACT 2:
There is
also great
variation
in growth
rates across
countries.
GDP per
capita, 2012
China
Singapore
India
Japan
Spain
Israel
Colombia
United States
Canada
Philippines
Rwanda
New Zealand
Argentina
Saudi Arabia
Chad
2015 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
$9,233
$61,803
$3,876
$35,178
$32,682
$31,869
$10,583
$49,965
$42,533
$4,410
$1,354
$32,219
$17,917
$31,729
$1,493
Growth rate,
19702012
7.5%
4.7%
3.3%
2.1%
1.9%
2.1%
2.0%
1.8%
1.7%
1.4%
1.4%
1.4%
1.4%
1.2%
0.6%
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Productivity
Recall one of the Ten Principles from Chap. 1:
A countrys standard of living depends
on its ability to produce g&s.
This ability depends on productivity,
the average quantity of g&s produced
per unit of labor input.
Y = real GDP = quantity of output produced
L = quantity of labor
so productivity = Y/L (output per worker)
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10
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12
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14
Technological Knowledge
Technological knowledge: societys
understanding of the best ways to produce g&s
Technological progress does not only mean
a faster computer, a higher-definition TV,
or a smaller cell phone.
It means any advance in knowledge that boosts
productivity (allows society to get more output
from its resources).
e.g., Henry Ford and the assembly line.
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18
19
1
Discussion question
ACTIVE LEARNING
by foreign firms
20
ECONOMIC GROWTH
AND PUBLIC POLICY
Next,
Next, we
we look
look at
at the
the ways
ways
public
public policy
policy can
can affect
affect
long-run
long-run growth
growth in
in productivity
productivity
and
and living
living standards.
standards.
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Y/L
If workers already
have a lot of K,
giving them more
increases
productivity
fairly little.
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K/L
Capital per worker
24
Rich countrys
growth
Poor countrys
growth
Poor country
starts here
K/L
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28
Education
Govt can increase productivity by promoting
educationinvestment in human capital (H).
Public schools, subsidized loans for college
Education has significant effects: In the U.S.,
each year of schooling raises a workers wage
by 10%.
But investing in H also involves a tradeoff
between the present & future:
Spending a year in school requires sacrificing
a years wages now to have higher wages later.
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33
Free Trade
Inward-oriented policies
(e.g., tariffs, limits on investment from abroad)
aim to raise living standards by avoiding
interaction with other countries.
Outward-oriented policies
(e.g., the elimination of restrictions on trade or
foreign investment)
promote integration with the world economy.
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Free Trade
Recall: Trade can make everyone better off.
Trade has similar effects as discovering new
technologiesit improves productivity and living
standards.
Countries with inward-oriented policies have
generally failed to create growth.
e.g., Argentina during the 20th century.
Countries with outward-oriented policies have
often succeeded.
e.g., South Korea, Singapore, Taiwan after 1960.
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36
Population Growth
may affect living standards in 3 different ways:
1. Stretching natural resources
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Population Growth
2. Diluting the capital stock
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Population Growth
2. Diluting the capital stock
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Population Growth
3. Promoting tech. progress
More people
= more scientists, inventors, engineers
= more frequent discoveries
= faster tech. progress & economic growth
Evidence from Michael Kremer:
Over the course of human history,
growth rates increased as the worlds
population increased
more populated regions grew faster than
less populated ones
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2
Review productivity concepts
ACTIVE LEARNING
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41
ACTIVE LEARNING
Answers
Determinants of productivity:
K/L, physical capital per worker
H/L, human capital per worker
N/L, natural resources per worker
A, technological knowledge
Policies to boost productivity:
Encourage saving and investment, to raise K/L
Encourage investment from abroad, to raise K/L
Provide public education, to raise H/L
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42
ACTIVE LEARNING
Answers
Determinants of productivity:
K/L, physical capital per worker
H/L, human capital per worker
N/L, natural resources per worker
A, technological knowledge
Policies to boost productivity:
Patent laws or grants, to increase A
Control population growth, to increase K/L
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CONCLUSION
In the long run, living standards are determined by
productivity.
Policies that affect the determinants of productivity
will therefore affect the next generations living
standards.
One of these determinants is saving and
investment.
In the next chapter, we will learn how saving and
investment are determined, and how policies can
affect them.
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Summary
There are great differences across countries in
living standards and growth rates.
46
Summary
Policies can affect the following, each of which
has important effects on growth:
Saving and investment
International trade
Education, health & nutrition
Property rights and political stability
Research and development
Population growth
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