chapter 9 Flashcards
real GDP per capita
real GDP divided by the population of a country to see how much it has grown
gini coefficient
an increase in the real GDP per cpaita should result in better living conditions for everyone but it is not true: GDP is not fairly distributed
gini index shows inequalities in wealth distribution:
- 1 is maximal inequality
- 0 is equality (there is no difference)
the more the curve is near to the straight slope, the fairer wealth is distributed
rule of the 70
if the growth rate is 1% per year, it will take 70 years to double the wealth
sources of growth?
the key factor is productivity: how many people are working, for how long, how much
- physical capital
- human capital (education improves productivity)
- technology
growth accounting
contributions of each major factor in the aggregate production function to economic growth and rising productivity is essential
GDP per worker
tech level x physical capital per worker x human capital per worker
diminishing returns
the more physical capital you give to a worker, the less returns you will get per new unit, unless you don’t use technology
way to add physical capital
high saving rates will have more investment capital available
way to add human capital
eduaction, more skilled workers, more productivity
way to add tech
R&D research and development, applying education and investment
government role in producivity
subsidies by the gov to education, R&D, infrastructure and a well functioning financial system is essential
convergence hypothesis
real GDPs will converge along with timesthanks to free market and common institutes and policies
Robert Gordon’s thesis
there can only be one big growth in history, ours is the age of mass communication
