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Lecture

SW_LR_growth_Nov2012.pdf

14 Pages
121 Views

Department
Economics
Course Code
ECON 2400
Professor
Wai Ming Ho

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Description
APECON2400AFall2012WHoLectureNotesonLongtermEconomicGrowthObjectives1Learntheprimaryfactsofeconomicgrowth2Usegrowthaccountingtodetermineempiricallythefactorscontributingtothegrowthinoutput3StudytheSolowgrowthmodeltohelpunderstandthecausesandconsequencesofeconomicgrowth4StudyanendogenousgrowthmodelwithhumancapitalaccumulationReadingChapters6and7ofthe3rdCanadianeditionofWilliamsonsMacroeconomicsskiptheMalthusmodelEconomicGrowthFactsSeeChapter6inthe3rdCanadianeditionofWilliamsonsMacroeconomics1BeforetheIndustrialRevolutioninabout1800percapitaincomedieredlittleovertimeandacrosscountries2SincetheIndustrialRevolutiontherehasbeensustainedgrowthinpercapitaincomeintherichcountries3Thereisapositivecorrelationbetweentherateofinvestmentandoutputperworkeracrosscountries4Thereisanegativecorrelationbetweenthepopulationgrowthrateandoutputperworkeracrosscountries5Thedierencesinpercapitaincomesincreaseddramaticallyamongcountriesbetween1800to19506NoconditionalconvergenceamongallcountriesAmongallcountriesintheworldthereisnocorrelationbetweenthelevelofoutputperworkerin1960andtheaveragerateofgrowthinoutputperworkerfortheyears196019957ConditionalconvergenceamongtherichcountriesAmongtherichcountriesthereisanegativecorrelationbetweenthelevelofoutputperworkerin1960andtheaveragerateofgrowthinoutputperworkerfortheyears19601995NoconditionalconvergenceamongthepoorestcountriesAmongthepoorestcountriesthereisnocorrelationbetweenthelevelofoutputperworkerin1960andtheaveragerateofgrowthinoutputperworkerfortheyears19601995APECON2400AFall2012WHoLecturenotesonlongruneconomicgrowth2GrowthAccountingGrowthaccountingusestheproductionfunctionanddataonaggregateoutputcapitalinputandlaborinputtomeasurethecontributionofgrowthincapitallaborandtotalfactorproductivitytogrowthinaggregateoutputoveraparticularperiodoftimeConsidertheaggregateproductionfunctionintheCobbDouglasforma1aYzFKNzKNCobbDouglasproductionfunctionprovidesagoodttoaggregatedataInrecentCanadiandatathelaborshareinnationalincomehasbeenroughlyconstantat700307sothatwecanseta03andhaveYzKNTheSolowresidualtheaggregateoutputthatremainstobeaccountedforaftermeasuringthecontributionofcapitalandlaborinputstoproductionitprovidesameasureoftotalfactorproductivityTFPWecancalculateeithertheSolowresidualzorthegrowthrateintheSolowresidual4zUsingtheaggregatedataonYKandNandtheestimatedvalueofawecancalculatetheSolowresidualasfollowsYz0307KNIfwetakenaturallogarithmsonbothsidesoftheproductionfunctionandthendierentiatetheequationwithrespecttotwecancalculatethegrowthrateintheSolowresiduallnYlnz03lnK07lnNdYdz11dK1dN10307dtYdtzdtKdtN4Y4z034K074Ndx1where4xdenotesthepercentagechangeperunittimeinvariablexSubstidtxtutingthemeasuredgrowthratesonYKandNandtheestimatedvalueofaintothisequationwecancalculatethegrowthrateofz4z4Y034K074N
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