Final Exam Study Review

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ECMC66 Final Exam Summary โ€“ Frazer
๎€Development definition
Income/capita, not very good measure; we discussed reasons why
Development more than income, as noted by Sen the notion of Human Freedom
Human Freedom: not only democracy, but capability to be educated, freedom in
health
๎€Sen: influential in holistic view of development and the Human Development Index
Human Development Index: measure of Income, Health and Education
Not a full measure of human welfare or different industries
Does not capture human development for developed countries
๎€When studying development, interested in separating income, education, health etc
Useful to look at 2 of these dimensions โ€“ helps explain lots of differences in
development
๎€We also took a look at economic growth, analyzing different models (just need to know
manipulations โ€“ no derivations needed)
๎€Harrod-Domar Model:
2 assumptions: constant savings rate and a capital output model
Technology can help improve long run growth rate
Increases in savings do lead to growth
Constant capital output ratio
๎€Solow Model:
Diminishing returns to capital stock
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Short-run growth depends on steady-state of a country
Long-run per capita growth of zero
๎€‚But in the real world, we see positive Long-run growth
๎€‚What are we missing?
Productivity increases over time
๎€‚Gave LR capital growth, but this is an exogenous explanation
๎€‚How about an endogenous explanation
Solow Model w/ Tech Progress
๎€‚Where does productivity come from?
๎€‚Capital externalities
๎€‚Endogenous research and development
Existence of human capital
๎€‚Returns to capital: extremely high in developing countries since itโ€™s low
๎€‚Lower human capital in developing countries vs developed
๎€Barro Model:
Examined unconditional convergence by simple Solow Model
๎€‚Done through holding no differences across countries
Conditional convergence did hold
๎€‚Did find lower income countries grew more
Increases in savings > Investment: increases in growth for developing countries
๎€Mankew-Romar-Weil:
Got sign of coefficients correct for Solow Model w/ Tech
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Document Summary

Income/capita, not very good measure; we discussed reasons why. Development more than income, as noted by sen the notion of human freedom. Human freedom: not only democracy, but capability to be educated, freedom in health. sen: influential in holistic view of development and the human development index. Human development index: measure of income, health and education. Not a full measure of human welfare or different industries. Does not capture human development for developed countries. when studying development, interested in separating income, education, health etc. Useful to look at 2 of these dimensions helps explain lots of differences in development. we also took a look at economic growth, analyzing different models (just need to know manipulations no derivations needed) 2 assumptions: constant savings rate and a capital output model. Technology can help improve long run growth rate. Short-run growth depends on steady-state of a country. but in the real world, we see positive long-run growth.

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