ECON 2020 Lecture 8: Lecture 8

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8 Feb 2017

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Chapter 12- Production and Growth
Investment in human capital
Gap between wages of educated and uneducated workers
Opportunity cost: wages forgone
Conveys positive externalities
Public education
Large subsidies to human capital investment
Problem for poor countries: Brain Drain
People come here to learn and end up staying here, leaving their home
country without that college educated worker
Health and Nutrition
Human Capital
Expenditures that lead to a healthier population
Healthier workers are more productive
Wages reflect a worker’s productivity
Right investments in the health of the population
Increase productivity
Raise living standards
Historical Trends
Improves health, better nutrition
Taller workers, higher wages, better productivity
Vicious Cycle in poor countries
Unhealthy populations cannot work, therefore cannot afford to get healthy
Virtuous Cycle
Allowing a population to be healthy sustains economic growth
Property Rights
To foster economic growth
Protect property rights
Ability of people to exercise authority over the recourse they own
Promote political stability
Prerequisite of price system to work
Countries without property rights (major problem)
Contracts hard to enforce
Fraud goes unpunished
Impedes coordinating power of markets
Discourages domestic saving
Discourages investment from abroad
Political Stability
Threat to property rights
Revolution and coups
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