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ECON 3550
Alena Kimakova

CH 3GD ReadingsEconomic Growth Concepts and PatternsRapid economic growth is recent phenomena in world history500 years agooPeople lived in conditions that we now consider abject povertyEconomic growth and economic development are not synonymousoGrowth at the heart of development processThis chapter discussesoPuzzles of economic growthoDivergent levels of income across countriesoThe process by which economies grow and developoCharacteristics that distinguish rapidly growing economies from slower onesoBasic empirical data on economic growthoSome of the patterns of changing economic structure that typically accompany growthDivergent Patterns of Economic Growth Since 1960Consider Thailand and ZambiaoAnnual income of average citizenZ 1800T 960In constant 2005 PPP dollarsoSince then Ts economy rapidly grew by 43T avg income now 7800As a result Ts can now consume more and higher qualityFood housing clothing healthcare education consumer goodsTs life expectancy rose from 54 to 69 yrsTs infant mortality dropped from 103 to 12 per thousandTs literate adult population rose from 80 in 1970 to 94oZambia fell backLook at pg 56 if you want to read numbersEconomic Growth Across Countries Table on pg 57Growth exceeding 5oSingapore South Korea Botswana and ChinaoSome of the fastest growth rates ever recorded over 50year period in world historyoSouth Korea income expanded by factor of 14oBotswana average income more than 15x what is was 50 years agooChina after 1980Growth averaged 6 per yearMost remarkable transformationChinas growth one of the most important events of the last century15 of world populationSome that used to live in or near povertyoAvg incomes increased by a factor of 19 between 60 and 09Most rapid growth in East Asia and slow growth in AfricaoEast Asian exceptionsBurma Myanmar Laos PhilippinesoAfrican exceptionsBotswana Mauritius Lesotho Swaziland Understandinggrowth rates percentagesoDifference between 1 and 2 growth is hugeIts not 1 difference but 100oGrowing 1 per year meansAverage incomes increase by 65 over 50 yearsIncomes double in 70 yearsoGrowing 2Average incomes increase by 270 over 50 yearsIncomes double in 35 yearsoCalculating Future Values Growth Rates and Doubling Times pg 61 62Botswanas Remarkable Economic Development pg 59 60Factor Accumulation Productivity and Economic GrowthEconomists try to understandoDeterminants of economic growthoCharacteristics that distinguish fastgrowing from slowergrowing countriesoSince Adam Smith in 1776oSome factors important to growthAmount and type of investmentEducation and healthcare systemsNatural resources and geographical endowmentsQuality of government institutions and choice of public policyoSome of these factors are more central to the process of growth than othersTheories of economic growthoRelationship between the basic factors of production capital and labourand total economic productionCountries endowed with natural resources assetsoPetroleum deposits gold rubber land rich agricultural soil forests lakes oceansThese assets often included in broader category of Capital StockCapital and LabouroDifferent inputs of these factors will depend on product being produced oRiceL Significant labour planting and harvesting timeK no machinery just plowoGarmentL Insignificant labourK many sewing machines and decent infrastructureoSteel or chemical factoryL less labourK substantial amounts of machinery other capital reliable source of energyA countrys total output total incomeoDetermined by how much capital and labour it has availableoHow productively it uses those assetsoIncreasing amount of production economic growth depends onIncreasing amount of capital and labour available Increasing productivity of those assetsEconomic growth depends on 2 basic processeso1 Factor AccumulationIncreasing the size of capital stock or labour forceProducing more goods and services requires
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