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The Economics of Growth:

The Economics of Growth:. Physical capital accumulation Human capital investment Population and labor force growth Technological Advance Labor saving technology Capital saving technology Labor augmenting technology Capital augmenting technology.

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The Economics of Growth:

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  1. The Economics of Growth: • Physical capital accumulation • Human capital investment • Population and labor force growth • Technological Advance • Labor saving technology • Capital saving technology • Labor augmenting technology • Capital augmenting technology

  2. Increases in Physical and Human Resources and the Production Possibility Frontier: Growth and Development in Pictures

  3. Effect of Technological Change in the Industrial Sector on the Production Possibility Frontier

  4. Economic Growth and Development • Sustained rise in national output and ability to provide a wide range of ever-improving goods and services. • Technological advance is necessary but not sufficient. • Need social innovation to realize technology’s potential.

  5. High rates of per capita income and population growth High rates of total factor productivity increase The Historical Record: Characteristics of Modern Economic Growth

  6. * Factor Accumulation Accounts for Only a Fraction of Growth.* Productivity Increase Accounts for the Rest.

  7. High rates of per capita income and population growth High rates of total factor productivity increase High rates of economic structural transformation Physical Object Gap (machines) High rates of social, political, and ideological transformation International economic outreach Virtuous circles of growth Ingenuity Gap (ideas) Characteristics of Modern Economic Growth

  8. Physical and human resource endowments ACCUMULATE! EDUCATE! Relative levels of per capita income and GNP Expect CONVERGENCE Explaining Growth: the usual suspects

  9. Convergence among OECD Countries but Divergence in the World as a Whole

  10. Convergence among OECD Countries but Divergence in the World as a Whole cont’d

  11. Explaining Growth and (Lack of ) Development:Endowments • Climate/geography/primary goods • Bananas, tin • Diseased environment  EXTRACTIVE INSTITUTIONS Acemeglu, Johnson, Robinson

  12. Explaining Growth and (Lack of) Development: Lousy Policies • Autarchy vs. Openness • Labor mobility …immigration • Gov’t SIZE/Inflation • Price Distortions • Financial Repression vs. Financial Development • Instability • Civil war/coups/ETHNIC DIVERSITY/Inequality • Legal Origin • French collectivism vs. Anglo individualism

  13. Brain drain Capital accumulation Capital-augmenting technological progress Capital-saving technological progress Capital stock Dualism Economic growth Economic planning Equalization (economic and social) Free trade Human capital Infrastructure Concepts for Review

  14. Labor-augmenting technological progress Labor-saving technological progress Modernization ideals Neutral technological progress Production possibility curve Rationality Research and Development (R&D) Technological progress Terms of trade Total factor productivity (TFP) Concepts for Review, cont’d

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