technological progress, unemployment and living standards in the long term Flashcards
what are we looking at?
the long run trend of technological progress, institutions, culture, occur every decade, century and millennium
what is economic growth?
growth in GDP
focuses on things that are measurable
what is economic development?
comprehensive include life expectancy, healthcare includes but is not limited by economic growth
what is labour and capital organised by?
a technological progress
e.g. new capital, entrepreneurial capital
job destruction in the labour market
vacanacies (labour demand)
in UK when are jobs lost>
1 job destroyed every 14 seconds
10% of jobs destroyed a year
no security due to fast changing environment
what matters in the long run the most?
the supply side compared to the keynesian short run cycle in which demand side is most important
why is there a relationship between capital and technological progress? why does supply matter the most?
capital accumulation leads to technological progress
technoligcal progress also leads to capital accumulation
what is production function?
relationship between quantity of output and the different quantities of an input such as cpiatla and labour
why cant capital accumulation generate sustainable growth?
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
what is MPK
marginal production of capital
the ration between Y and K
Y/K (change in workers over change in capital)
what is MPL?
marginal production of labour
change in total product divided by change in labour
what is technological progress?
same amount of capital input new tech allows production or output to be higher given labour
on average how many jobs created and destroyed a year?
20%
how is TP creative destruction?
emplyemnet rises leading to more jobs are created then destroyed by TP
what can cause a negative economic growth?
when more jobs are destroyed than created
what happened to the UK between 1980 and 1998
why is job creation pro cyclical?
positively correlated with the overall state of nation
if more jobs then there is lily to be economic growth
what is the beveridge curve?
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
why are job vacancies and unemployment negatively correlated?
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
what improves matching effeicncy?
ICT
how does TP drive long run economic growth?
though two input markets
- boosting investment in the capital market
- improving matching efficiency in the labour market
(both of which are positive contributions)
what can change in the output market due to TP?
number of firms in output alert due to entry and exit pints
why might a firm exit the market?
low markup
owner may withdraw their funds or even close if existing profits are too low compared to alternative opportunities
why might a firm enter a market?
due to high markup
what is markup ?
profit rate
what determines markup and how may firms are in the market?
- 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
why is mark up affected by tehcnoligcal progress?
it can drop as more and more firms enter market and use same technology
what is the adjustment gap?
how employment adjusts in repose to TP
what is dissuasion gap?
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
how do unions affect TP?
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
why might unions (institutions) not be effective in the trade off with wages and tech?
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
