Chapter 4 Flashcards
Endogenous growth theory, the role of investment, social infrastructure, growth rate, Neoclassical growth model
What does Endogenous growth theory explain?
explains how society’s choices lead to technological progress and growth
What is growth rate o
growth rate of capital proportional to in endogenous growth model?
the savings rate
How does the market naturally remove the tendency towards monopolization?
When a firm has technological growth it also increases other firms productivity
What is Neoclassical convergence?
Absolute convergence for economies with equal rates of savings, population growth and access to the same technology
What is conditional convergence?
Economies with different rates of saving and/or population growth -> steady state level of income will differ, but their growth rates will eventually converge
What did Robert Barro discover about higher investment?
Higher investment ends in a steady state with higher per capita income but not with a higher growth rate
What does the neoclassical growth model predict about high population growth?
that high population growth means lower steady state income as each worker will have less capital to work with
Who are the Asian Tigers?
Hong Kong, Singapore, South Korea, Taiwan
What the Asian Tigers do to become a model of effective development (2 things)
- Concentrated on education to raise human capital
- Had stable governments and outward looking economic policies
What was China’s average per capita income growth rate over the past three decades?
8.4%
Who has the largest economy in the world?
China
What are three things holding poor countries back from developing?
- Poor countries have difficulty investing in human capital
- The political climate may use policies to discourage foreign competition/imports
- Uncertain legal environment stops the private sector businesses to help make sustainable economic development a reality
What is social infrastructure?
All the things that go into making individuals and businesses productive
