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Canada (158,426)
Economics (479)
ECO101H1 (177)
Chapter 3

Chapter 3: Technological Change and Productivity

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University of Toronto St. George
Michael Hare

Technological Change and Productivity Reading 31 by William EasterlyDiscussed Solows Surprise Output growth based on savingsinvestments cannot be sustained in the longrun Technological change is the key Discussed Luddites that argue that technological improvements cost them their jobs and Easterly said that this is simple untrue because of the data of economies experiencing technical progress do not show longrun increase in an unemployment instead they show increasing income per worker Also pointed out that if most growth came from the transition in the long run there there must have been very few machines capital originally Solows theory couldnt explain income differences across countries Easterly defended Solow saying that he never planned to achieve to explain that The poor nations came to be so much poorer than the richer nations because in the earlier periods they were living on subsistence level in income per person not starving but poor meaning they had the same income level from centuries as they have today its impossible to be less since any lower than subsistence level means that they wouldnt have survived The rich today had similar income level in the early days since we do see from the data that they had substantial growth since then Hence the rich countries had grown away from the poor over the past century or two He also pointed out that some studies done for showing convergence across countries have been bias because they were based on data of the rich countries mostly since they were the only ones who can afford to keep statistical offices running to record historical data Reading 32 by Paul KrugmanHe argued that productivity is very important for growth and some people misinterpret it Only way in which sustained longterm growth in living standards can be achieved is by raising productivity From a trade point of view countries can get a better price for their exports so that they can import more without borrowing and in order to get a better price the goods exported must be produced with high productivity He proved that an open or a closed economy both need productivity as a key factor in its growth He argued that after 1970 US productivity has slowed down a bit compared to the first 70 years of the 20th century He mentioned that productivity growth has been an ignored topic in the US as a key political issue it is not a fashionable topic The 1973 oil crisis did not seem like a plausible explanation for the slowdown productivity growth since in 1980 oil prices went down to their original prices but that still didnot cause productivity to speed up It seemed like the rightwing economists led by Laffer did not achieve their goals of raising productivity by keeping government intervention out of the free market system
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