Module 3 Flashcards
The only variables that determines the level and growth of output
Labor and Capital
Man made goods which are used in further production of wealth.
Capital
Very large in industrial countries, explaining as much or more than 50% of economic growth in the postwar era.
TFP- Total Factor Productivity or multifactor productivity
In TFP what is the formula in production function?
Y=f(K,L,A)
Growth Theories
Keynesian Theory Solow Model Power Balance Theory Structural Theory New Growth Theory
Give example that will include in TFP
Adaption of new technology Better educated workers Better management Better coordination within the organization More efficient production techniques
Can be measured by adjusting the factor inputs and labor and capital.
Embodied TFP
Cannot be measured. It has to go into the residual
Disembodied TFP
2 kinds of technical progress or innovation
- Embodied technical progress
2. Disembodied technical progress
Changing nature of the inputs into the production process
Embodied technical progress
Improved technology which is exploited by investing in new equipment
Embodied technical progress
Relates to the way factors are combined together in the workplace such as management or organizational innovations
Disembodied technical progress
Improved technology which allows increase in the output produced from given inputs without investing in new equipment.
Disembodied technical progress
Limited technology, static society
Traditional society
Commercial explotation of agriculture and extractive industry
Preconditions for take off
Development of a manufacturing sector
Take-off
Development wider industrial and commercial base
Drive to maturity
Exploitation of comarative advantages in international trade
High Mass Consumption
Transition triggered by external influence, interests, or markets
Traditional society
Installation of physical infrastractures and emergence of social or political elite
Preconditions for take-off
Investment in manufacturing exceeds 10% of national income: develope of modern, social, economic, and political institutions.
Take-off
Rostow’s Stages of Growth Model
Traditional society- precautions for take off- take-off-drive to maturity-high mass consumption
Growth is dependent on the rate of capital formation and the efficiency of the use of capital
The Harrod-Domar Model
Dynamic version of amsimple Keynasian Model
The Harrod-Domar Model
It introduces diminishing returns to capital and fouses on the long run
The solow model
The higher the rate of saving, the higher the steady state level of per capita income
The solow model
Emphasized explotation of poor “southern” economies by the rich industrial “northern” economies
Power Balance theory
Major sectors of the economy
Agriculture, industry, services
Stress the shift in output among the sectors of the economy and the rigidities that hinder them
Structuralist Approach
Two sectors model of growth in LFR model
A modern and a traditional
Named after three economists that developed it, is a two sector model
Lewis- Fei- Ranis model
The amount per capita capital in the current period depends upon the per capita capital and the last period, the saving rate in the previous method, and the rate of population growth.
Solow Growth Model
They stress the importance of of externalities and the possibility of increasing returns to scale rather than the decreasing returns to scale of the Solow Model.
New Growth Theories
Soth Asia includes
Afghanistan, India, Bangladesh, sri lanka, nepal, bhutan, and Madlives
Is atrade and economic policy which advocates replacing foreign imports with domestic production
Import Substitution Industrialization (ISI)
Primary factors of the asian growth miracle
Openess
Macroeconomic stability
Labor and Market Flexibility
Education Policies
Secondary factors of the asian growth miracle
Initial conditions
Sector Policies
Outward looking policies and emphasis on exports and acquisitions of foreign technology
Openess
Focused on the importance of macroeconomic policies and the role of the government
Macroeconomic Stability
Is the tendency for groups to become less like other groups over time.
Divergence
Predicts an increasingly uneven spatial distribution of economics activity due to economic phenomena
Divergence Theory
