Structural Change/Productivity Flashcards
Define structural change.
Change in the distribution of output, income and employment in the economy over time.
What are the main causes of structural change?
- Change in C preference/production processes (solar, fuel efficiency, education).
- Endogenous - firms ability to innovate/profitability (outsourcing, new g+s, production process, new organisations - Uber).
- Exogenous - developed health care - ageing pop. (globalisation, education/skills, growth in Asia, government policies).
Outline the effects of structural change.
- Change in sectors (size); age/health care rise - newspapers fall.
- Change in jobs; office jobs rise - structural UE (holden).
- OC of production - jobs/production spread gloablly to improve productivity and cost.
- Change in demand for skills.
- Higher levels of EG - FE; however a rise in Y inequality.
What is the relationship between structural change and economic growth?
EG: rise in Y, shift in consumption pattern (rise in demand) - SC.
Can lead to expansion of some sectors (mining) at the cost of another (manufacturing).
SC: privatisation, competition, allocative efficiency and productivity - EG.
Trade Lib. M cheaper, EG + XY.
Define productivity.
Increasing output from the same level of input.
What is the distinction between labour/multifactor productivity?
LP: level of output based on hours worked - O/HW.
MFP: BETTER - covers level of inputs as well as hours worked - measure of increased productivity.
O/HW + inputs + energy + capital + misc.
What is the relationship between productivity and economic growth?
1) Potential Ouput/Capacity - production rise - more efficient - rise in AD can be sustained quicker/longer. Without capacity rise - D-pull inf.
- Rise in LF participation.
2) Wage/Y levels - productivity promotes rise in demand for employers - more competitive - more jobs - higher wages.
3) Material Living Standards - productivity increases MLS from rise in growth and income; other effectors (TOT, size of population, wage shares, UE rate, social wage).
4) Public Finances - positive impact on gov. budget balance and sovereign debt, stronger public finances - gov. has more $ to spend in economy (health care/education) - rise in future productivity growth.
5) International Competitiveness - rise in productivity leads to higher competitiveness - narrowing CAD, rise in ER and fall in foreign debt.
6) Macroeconomic Objectives -
- Sustained EG: rise in capacity - economy can grow faster for longer.
- Low UE: reducing demand deficiency and cyc. UE - though cost of struc. UE.
- Price Stability: rise in productivity/tech. efficiency - fall in AS and overall P levels - by increasing capacity - non-inflationary growth.
- Equitable Y distribution: promoting employment - rise in real wages.
Outline recent government policies that promote economic growth and productivity.
Product Market Reform - (Comp. Policy)
- open to trade/investment - trade liberilisation; keeping the market efficient and competitive.
Infrastructure Development - (Transport)
- Improved transport to increase productivity/efficiency of producers, exporters, etc.
Labour Market Reform - (Minimum Wage)
- Reinvestment of income from more individuals - driving economic growth and productivity.
Overseas Maret Reform - (FTA’s)
- open to trade/investment - trade liberilisation; keeping the market efficient and competitive.
Tax and Transfer Reform - (Welfare Payments)
- Market is more productive as the UE have a leeway to seek jobs matched to their skills; rather than snapping at the first one.
How may productivity impact the main economic objectives?
Rising productivity increases the capacity of the economy to produce goods and services at lower costs.
- lower inflation
- higher output/income
- output maximised in allocative efficiency
Outline recent indicators of structural change.
- decline in manufacturing/rise in services.
- change in employment
- change in proportion of household spending
- outsourcing
- change in energy use
