Economics 2152A/B Lecture Notes - Human Capital, Human Development Index

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Government policies to raise long run living standards: Although theories predict that saving increases in response to the expected real return (s = f(r)) most studies find this response to be small. An alternative to this is a more direct way in which government saves more. (s = sprt. + sgov: policies to raise the rate of productivity growth ( a/a) Unlike the classical economic growth model which assumes a/a as exogenous, the new growth models consider endogenous productivity growth model . Endogenous growth theory explains productivity growth within the model. Productivity growth can be explained due to the following: Building human capital (knowledge, skills, training, etc. ) R&d: highly skilled labour force, has led to improved living standards. By private firms as a source of productivity growth. Industrial policy - is a growth strategy in which governments can employ taxes, subsidies, regulations and other incentives to influence industrialization (applies mainly to developing nations)

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