ECON 1BB3 Lecture Notes - Michael Kremer, Forego, Thomas Robert Malthus
6 Apr 2014
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ECON 1BB3 Full Course Notes
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Summary of lecture notes from chapter 7 and practice questions. Key points: economic prosperity, as measured by gdp per person, varies substantially around the world. The average income in the world"s richest countries is more than ten times that in the world"s poorest countries. Because growth rates of real gdp also vary substantially, the relative positions of countries can change dramatically over time: the standard of living in an economy depends on the economy"s ability to produce goods and services. Because of diminishing returns, higher saving leads to higher growth for a period of time, but growth eventually slows down as the economy approaches a higher level of capital, productivity, and income. Also because of diminishing returns, the return to capital is especially high in poor countries. Other things equal, these countries can grow faster because of the catch-up effect. Table 1 shows data on real gdp per person for 13 countries during different periods of time.
