technological progress, unemployment and living standards in the long term

Question 1

what are we looking at?

Answer 1

the long run trend of technological progress, institutions, culture, occur every decade, century and millennium

Question 2

what is economic growth?

Answer 2

growth in GDP

focuses on things that are measurable

Question 3

what is economic development?

Answer 3

comprehensive include life expectancy, healthcare includes but is not limited by economic growth

Question 4

what is labour and capital organised by?

Answer 4

a technological progress
e.g. new capital, entrepreneurial capital
job destruction in the labour market
vacanacies (labour demand)

Question 5

in UK when are jobs lost>

Answer 5

1 job destroyed every 14 seconds

10% of jobs destroyed a year

no security due to fast changing environment

Question 6

what matters in the long run the most?

Answer 6

the supply side compared to the keynesian short run cycle in which demand side is most important

Question 7

why is there a relationship between capital and technological progress? why does supply matter the most?

Answer 7

capital accumulation leads to technological progress

technoligcal progress also leads to capital accumulation

Question 8

what is production function?

Answer 8

relationship between quantity of output and the different quantities of an input such as cpiatla and labour

Question 9

why cant capital accumulation generate sustainable growth?

Answer 9

due to marginal production of capital (diminishing) technoligcal progress is needed to shift the production function up, leading to a higher working capital intensity and output per worker

with the same amount of capital goods technology allow production to be higher given labour

capital accumulation can give you short-term growth

Question 10

what is MPK

Answer 10

marginal production of capital
the ration between Y and K

Y/K (change in workers over change in capital)

Question 11

what is MPL?

Answer 11

marginal production of labour

change in total product divided by change in labour

Question 12

what is technological progress?

Answer 12

same amount of capital input new tech allows production or output to be higher given labour

Question 13

on average how many jobs created and destroyed a year?

Answer 13

20%

Question 14

how is TP creative destruction?

Answer 14

emplyemnet rises leading to more jobs are created then destroyed by TP

Question 15

what can cause a negative economic growth?

Answer 15

when more jobs are destroyed than created

what happened to the UK between 1980 and 1998

Question 16

why is job creation pro cyclical?

Answer 16

positively correlated with the overall state of nation

if more jobs then there is lily to be economic growth

Question 17

what is the beveridge curve?

Answer 17

relationship between job vacancy rates (jobs looking for workers) and level of unemployment (workers looking for jobs) expressed asa fraction of the labour force

beveridge noticed that when unemployment was high, vanacany rate was low and when unemployment low vancany was high

negatively correlated

Question 18

why are job vacancies and unemployment negatively correlated?

Answer 18

search matching model

• skills mismatch: unemployed workers may not have the skills required for the vacant jobs
• space mismatch: jobseekers and vacancies located in different parts of the country
• info mismatch: may not know about each other, no correct references

Question 19

what improves matching effeicncy?

Answer 19

ICT

Question 20

how does TP drive long run economic growth?

Answer 20

though two input markets

• boosting investment in the capital market
• improving matching efficiency in the labour market
  (both of which are positive contributions)

Question 21

what can change in the output market due to TP?

Answer 21

number of firms in output alert due to entry and exit pints

Question 22

why might a firm exit the market?

Answer 22

low markup

owner may withdraw their funds or even close if existing profits are too low compared to alternative opportunities

Question 23

why might a firm enter a market?

Answer 23

due to high markup

Question 24

what is markup ?

Answer 24

profit rate

Question 25

what determines markup and how may firms are in the market?

Answer 25

• profit maximising line describe the firms optimisation decision on markup given the number of firms
• more firm sin the market = less markup
• lots of markup = invest and employ

Question 26

why is mark up affected by tehcnoligcal progress?

Answer 26

it can drop as more and more firms enter market and use same technology

Question 27

what is the adjustment gap?

Answer 27

how employment adjusts in repose to TP

Question 28

what is dissuasion gap?

Answer 28

created by the fact that it takes years for new tech to be widely adapted causes differences between the productivity of labour market in most adanavced firms to those that lack the tech

Question 29

how do unions affect TP?

Answer 29

unions now help to close the pay gaps, by rallying for equality in pay, the low production firms that are still in the market due to low wages have to then take on the new technology otherwise they will have to exit the market

Question 30

why might unions (institutions) not be effective in the trade off with wages and tech?

Answer 30

they may be non inclusive, only include certain workers

for example UK non inclusive unions, so they were all wanting different things, Margerat Thatcher then reduced the power of unions

Norway has inclusive unions so low unemployment