Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Production for use wikipedia , lookup
Uneven and combined development wikipedia , lookup
Protectionism wikipedia , lookup
Productivity improving technologies wikipedia , lookup
Productivity wikipedia , lookup
Chinese economic reform wikipedia , lookup
Ragnar Nurkse's balanced growth theory wikipedia , lookup
CHAPTER 25 Production and Growth Economics PRINCIPLES OF N. Gregory Mankiw © 2009 South-Western, a part of Cengage Learning, all rights reserved In this chapter, look for the answers to these questions: What are the facts about living standards and growth rates around the world? Why does productivity matter for living standards? What determines productivity and its growth rate? How can public policy affect growth and living standards? 1 A typical family with all their possessions in the U.K., an advanced economy GDP per capita: Life expectancy: Adult literacy: $35,580 79 years 99% A typical family with all their possessions in Mexico, a middle income country GDP per capita: Life expectancy: Adult literacy: $11,410 76 years 92% A typical family with all their possessions in Mali, a poor country GDP per capita: Life expectancy: Adult literacy: $1,130 50 years 46% Incomes and Growth Around the World China Singapore Japan Spain FACT 1: India Israel There are United States vast Canada differences Colombia in living New Zealand standards Philippines around the Argentina Saudi Arabia world. Rwanda Haiti PRODUCTION AND GROWTH GDP per Growth rate, capita, 2005 1960-2005 $6,572 29,921 30,821 26,125 3,486 25,670 41,854 32,886 7,769 22,511 4,920 14,421 14,729 1,333 1,836 5.8% 5.4% 3.8% 3.2% 2.7% 2.7% 2.2% 2.1% 1.8% 1.4% 1.4% 1.0% 0.8% 0.3% –1.2% 5 Incomes and Growth Around the World China Singapore Japan Spain FACT 2: India Israel There is United States also great Canada variation Colombia in growth New Zealand rates across Philippines countries. Argentina Saudi Arabia Rwanda Haiti PRODUCTION AND GROWTH GDP per Growth rate, capita, 2005 1960-2005 $6,572 29,921 30,821 26,125 3,486 25,670 41,854 32,886 7,769 22,511 4,920 14,421 14,729 1,333 1,836 5.8% 5.4% 3.8% 3.2% 2.7% 2.7% 2.2% 2.1% 1.8% 1.4% 1.4% 1.0% 0.8% 0.3% –1.2% 6 Incomes and Growth Around the World Since growth rates vary, the country rankings can change over time: Poor countries are not necessarily doomed to poverty forever – e.g., Singapore, incomes were low in 1960 and are quite high now. Rich countries can’t take their status for granted: They may be overtaken by poorer but faster-growing countries. PRODUCTION AND GROWTH 7 어떤 나라가 선진화된 나라인가 <단위 : 만불> 76,040 66,530 * 출처 : World bank (2007. 1) 44,970 38,410 32,020 17,690 한국의 경제성장 한국은 1962~2008 기간에 일인당 국민소득이 $87에서 $19,231로 증가 외환위기 이전 1996년에는 $12,197를 기록 1998년에는 외환위기의 영향으로 (-) 성장률과 환율급등이 발생하여 $7,355로 하락 이후 지속적으로 상승하여 2007년 $21,695 달성 2008년에는 경기침체 및 환율상승에 따라 $19,231로 하락 우리나라 1인당 국민소득의 장기추세 국민소득($) 17,531 12,197 10,000 7,355 5,000 경제개발 5개년계획 IMF 경제위기 해방 1945 67 87 1953 1962 1970 1980 1990 1996 2000 2005 잠재GDP 잠재GDP: 실질GDP의 장기·평균적인 변화를 나타내는 추세선 경제성장과 경기변동 경제성장론 (economic growth): 장기 평균적인 경제의 성과에 초점. 잠재 GDP : 노동, 자본 투입량 등 생산요소를 모두 활용했을 때 달성할 수 있는 GDP 잠재성장률(=추세선 기울기)은 어떤 힘에 의하여 결정되나? 경기변동론 (business cycles): 경제가 단기(12년)적으로 추세선에서 이탈하는 과정에 주목 즉 boom과 recession이 왜 발생하는가에 초점. Incomes and Growth Around the World Questions: Why are some countries richer than others? Why do some countries grow quickly while others seem stuck in a poverty trap? What policies may help raise growth rates and long-run living standards? PRODUCTION AND GROWTH 13 Productivity Recall one of the Ten Principles from Chap. 1: A country’s standard of living depends on its ability to produce g&s. This ability depends on productivity, the average quantity of g&s produced per unit of labor input. Y = real GDP = quantity of output produced L = quantity of labor so productivity = Y/L (output per worker) PRODUCTION AND GROWTH 14 Why Productivity Is So Important When a nation’s workers are very productive, real GDP is large and incomes are high. When productivity grows rapidly, so do living standards. What, then, determines productivity and its growth rate? PRODUCTION AND GROWTH 15 Physical Capital Per Worker Recall: The stock of equipment and structures used to produce g&s is called [physical] capital, denoted K. K/L = capital per worker. Productivity is higher when the average worker has more capital (machines, equipment, etc.). i.e., an increase in K/L causes an increase in Y/L. PRODUCTION AND GROWTH 16 Human Capital Per Worker Human capital (H): the knowledge and skills workers acquire through education, training, and experience H/L = the average worker’s human capital Productivity is higher when the average worker has more human capital (education, skills, etc.). i.e., an increase in H/L causes an increase in Y/L. PRODUCTION AND GROWTH 17 Natural Resources Per Worker Natural resources (N): the inputs into production that nature provides, e.g., land, mineral deposits Other things equal, more N allows a country to produce more Y. In per-worker terms, an increase in N/L causes an increase in Y/L. Some countries are rich because they have abundant natural resources (e.g., Saudi Arabia has lots of oil). But countries need not have much N to be rich (e.g., Japan imports the N it needs). PRODUCTION AND GROWTH 18 Technological Knowledge Technological knowledge: society’s understanding of the best ways to produce g&s Technological progress does not only mean a faster computer, a higher-definition TV, or a smaller cell phone. It means any advance in knowledge that boosts productivity (allows society to get more output from its resources). E.g., Henry Ford and the assembly line. PRODUCTION AND GROWTH 19 Tech. Knowledge vs. Human Capital Technological knowledge refers to society’s understanding of how to produce g&s. Human capital results from the effort people expend to acquire this knowledge. Both are important for productivity. PRODUCTION AND GROWTH 20 The Production Function The production function is a graph or equation showing the relation between output and inputs: Y = A F(L, K, H, N) F( ) – a function that shows how inputs are combined to produce output “A” – the level of technology “A” multiplies the function F( ), so improvements in technology (increases in “A”) allow more output (Y) to be produced from any given combination of inputs. PRODUCTION AND GROWTH 21 The Production Function Y = A F(L, K, H, N) The production function has the property constant returns to scale: Changing all inputs by the same percentage causes output to change by that percentage. For example, Doubling all inputs (multiplying each by 2) causes output to double: 2Y = A F(2L, 2K, 2H, 2N) Increasing all inputs 10% (multiplying each by 1.1) causes output to increase by 10%: 1.1Y = A F(1.1L, 1.1K, 1.1H, 1.1N) PRODUCTION AND GROWTH 22 The Production Function Y = A F(L, K, H, N) If we multiply each input by 1/L, then output is multiplied by 1/L: Y/L = A F(1, K/L, H/L, N/L) This equation shows that productivity (output per worker) depends on: the level of technology (A) physical capital per worker human capital per worker natural resources per worker PRODUCTION AND GROWTH 23 ACTIVE LEARNING 1 Discussion Question Which of the following policies do you think would be most effective at boosting growth and living standards in a poor country over the long run? a. Offer tax incentives for investment by local firms b. ” ” ” ” ” by foreign firms c. Give cash payments for good school attendance d. Crack down on govt corruption e. Restrict imports to protect domestic industries f. Allow free trade g. Give away condoms 24 ECONOMIC GROWTH AND PUBLIC POLICY Next, we look at the ways public policy can affect long-run growth in productivity and living standards. PRODUCTION AND GROWTH 25 Saving and Investment We can boost productivity by increasing K, which requires investment. Since resources scarce, producing more capital requires producing fewer consumption goods. Reducing consumption = increasing saving. This extra saving funds the production of investment goods. (More details in the next chapter.) Hence, a tradeoff between current and future consumption. PRODUCTION AND GROWTH 26 여러 나라 투자율과 경제성장률 (b) Investment 1960–1991 (a) Growth Rate 1960–1991 South Korea Singapore Japan Israel Canada Brazil West Germany Mexico United Kingdom Nigeria United States India Bangladesh Chile Rwanda 0 South Korea Singapore Japan Israel Canada Brazil West Germany Mexico United Kingdom Nigeria United States India Bangladesh Chile Rwanda 1 2 3 4 5 6 7 Growth Rate (percent) 0 10 20 30 40 Investment (percent of GDP) Copyright©2003 Southwestern/Thomson Learning Diminishing Returns and the Catch-Up Effect The govt can implement policies that raise saving and investment. (Details in next chapter.) Then K will rise, causing productivity and living standards to rise. But this faster growth is temporary, due to diminishing returns to capital: As K rises, the extra output from an additional unit of K falls…. PRODUCTION AND GROWTH 28 The Production Function & Diminishing Returns If workers Output per have little K, worker giving them more (productivity) increases their productivity a lot. If workers already have a lot of K, giving them more increases productivity fairly little. PRODUCTION AND GROWTH Y/L K/L Capital per worker 29 The catch-up effect: the property whereby poor countries tend to grow more rapidly than rich ones Y/L Rich country’s growth Poor country’s growth K/L Poor country starts here PRODUCTION AND GROWTH Rich country starts here 30 Example of the Catch-Up Effect Over 1960-1990, the U.S. and S. Korea devoted a similar share of GDP to investment, so you might expect they would have similar growth performance. But growth was >6% in Korea and only 2% in the U.S. Explanation: the catch-up effect. In 1960, K/L was far smaller in Korea than in the U.S., hence Korea grew faster. PRODUCTION AND GROWTH 31 Investment from Abroad To raise K/L and hence productivity, wages, and living standards, the govt can also encourage foreign direct investment: a capital investment (e.g., factory) that is owned & operated by a foreign entity foreign portfolio investment: a capital investment financed with foreign money but operated by domestic residents Some of the returns from these investments flow back to the foreign countries that supplied the funds. PRODUCTION AND GROWTH 32 Investment from Abroad Especially beneficial in poor countries that cannot generate enough saving to fund investment projects themselves. Also helps poor countries learn state-of-the-art technologies developed in other countries. PRODUCTION AND GROWTH 33 Education Govt can increase productivity by promoting education–investment in human capital (H). Public schools, subsidized loans for college Education has significant effects: In the U.S., each year of schooling raises a worker’s wage by 10%. But investing in H also involves a tradeoff between the present & future: Spending a year in school requires sacrificing a year’s wages now to have higher wages later. PRODUCTION AND GROWTH 34 Health and Nutrition Health care expenditure is a type of investment in human capital – healthier workers are more productive. In countries with significant malnourishment, raising workers’ caloric intake raises productivity: Over 1962-95, caloric consumption rose 44% in S. Korea, and economic growth was spectacular. Nobel winner Robert Fogel: 30% of Great Britain’s growth from 1790-1980 was due to improved nutrition. PRODUCTION AND GROWTH 35 Property Rights and Political Stability Recall: Markets are usually a good way to organize economic activity. The price system allocates resources to their most efficient uses. This requires respect for property rights, the ability of people to exercise authority over the resources they own. PRODUCTION AND GROWTH 36 Property Rights and Political Stability In many poor countries, the justice system doesn’t work very well: Contracts aren’t always enforced Fraud, corruption often go unpunished In some, firms must bribe govt officials for permits Political instability (e.g., frequent coups) creates uncertainty over whether property rights will be protected in the future. PRODUCTION AND GROWTH 37 Property Rights and Political Stability When people fear their capital may be stolen by criminals or confiscated by a corrupt govt, there is less investment, including from abroad, and the economy functions less efficiently. Result: lower living standards. Economic stability, efficiency, and healthy growth require law enforcement, effective courts, a stable constitution, and honest govt officials. PRODUCTION AND GROWTH 38 Free Trade Inward-oriented policies (e.g., tariffs, limits on investment from abroad) aim to raise living standards by avoiding interaction with other countries. Outward-oriented policies (e.g., the elimination of restrictions on trade or foreign investment) promote integration with the world economy. PRODUCTION AND GROWTH 39 Free Trade Recall: Trade can make everyone better off. Trade has similar effects as discovering new technologies – it improves productivity and living standards. Countries with inward-oriented policies have generally failed to create growth. E.g., Argentina during the 20th century. Countries with outward-oriented policies have often succeeded. E.g., South Korea, Singapore, Taiwan after 1960. PRODUCTION AND GROWTH 40 Research and Development Technological progress is the main reason why living standards rise over the long run. One reason is that knowledge is a public good: Ideas can be shared freely, increasing the productivity of many. Policies to promote tech. progress: Patent laws Tax incentives or direct support for private sector R&D Grants for basic research at universities PRODUCTION AND GROWTH 41 Population Growth …may affect living standards in 3 different ways: 1. Stretching natural resources 200 years ago, Malthus argued that pop. growth would strain society’s ability to provide for itself. Since then, the world population has increased sixfold. If Malthus was right, living standards would have fallen. Instead, they’ve risen. Malthus failed to account for technological progress and productivity growth. PRODUCTION AND GROWTH 42 Population Growth 2. Diluting the capital stock Bigger population = higher L = lower K/L = lower productivity & living standards. This applies to H as well as K: fast pop. growth = more children = greater strain on educational system. Countries with fast pop. growth tend to have lower educational attainment. PRODUCTION AND GROWTH 43 Population Growth 2. Diluting the capital stock To combat this, many developing countries use policy to control population growth. China’s one child per family laws Contraception education & availability Promote female literacy to raise opportunity cost of having babies PRODUCTION AND GROWTH 44 Population Growth 3. Promoting tech. progress More people = more scientists, inventors, engineers = more frequent discoveries = faster tech. progress & economic growth Evidence from Michael Kremer: Over the course of human history, growth rates increased as the world’s population increased more populated regions grew faster than less populated ones PRODUCTION AND GROWTH 45 우리나라 인구구조 변화 (1960년 vs 2050년) (1960년) 남 (2050년) 여 (1960년) 여 남 (2050년) 인구구조 변화 (2000년 vs 2015년) 80세 80세 70세 70세 60세 60세 50세 50세 40세 40세 30세 30세 20세 20세 10세 10세 (만명) 00세 - 10 20 30 40 50 (2000년) 60 70 80 90 00세 100 (만명) - 10 20 30 40 50 60 (2015년) 70 80 90 100 ACTIVE LEARNING 2 Review productivity concepts List the determinants of productivity. List three policies that attempt to raise living standards by increasing one of the determinants of productivity. 48 ACTIVE LEARNING 2 Answers Determinants of productivity: K/L, physical capital per worker H/L, human capital per worker N/L, natural resources per worker A, technological knowledge Policies to boost productivity: Encourage saving and investment, to raise K/L Encourage investment from abroad, to raise K/L Provide public education, to raise H/L 49 ACTIVE LEARNING 2 Answers Determinants of productivity: K/L, physical capital per worker H/L, human capital per worker N/L, natural resources per worker A, technological knowledge Policies to boost productivity: Patent laws or grants, to increase A Control population growth, to increase K/L 50 한국 경제·사회 주요지표: 과거와 현재 지표 단위 과거 억 달러 20 (1960) 9,287 (2008) 1인당 GDP 달러 79 (1960) 19,231 (2008) 인구 백만 25.0 (1960) 48.6 (2008) % 57.0 (1960) 61.5 (2008) 시간 53.4 (1965) 47.7 (2002) % 10.0 (1960) 31.2 (2008) 년수 5.0 (1966) 10.6 (2000) 초등학교 졸업생의 대학 진학률 % 26.9 (1970) 79.7 (2003) GDP대비 연구개발비 비율 % 0.4 (1970) 2.91 (2002) 년수 51.1 (1960) 76.1 (2007) 53.7 (1960) 82.7 (2007) 명목GDP 경제활동 참가율 주당 근로시간 GDP 대비 투자율 평균 교육년수 현재 평균수명 남성 여성 14세 남학생 평균신장 cm 149.9 (1965) 167.2 (2000) 1000명당 자동차대수 대수 0.6 (1966) 189 (2001) 1000명당 전화대수 대수 9 (1966) 493 (2001) 우리나라 경제성장의 요인 분석 10% 8% 기술진보 물적자본 인적자본 취업자수 6% 4% 2% 0% 1980-1985 1985-1990 1990-1995 1995-2000 2000-2003 성장률 6.7%에 대한 요인별 기여도: 취업자수 증가 21%, 인적자본 증가 13%, 물적자본 증가 42%, 기술진보 25% 한국의 장기 추세선 GDP증가율(3년 이동평균)과 장기추세 Are Natural Resources a Limit to Growth? Some argue that population growth is depleting the Earth’s non-renewable resources, and thus will limit growth in living standards. But technological progress often yields ways to avoid these limits: Hybrid cars use less gas. Better insulation in homes reduces the energy required to heat or cool them. As a resource becomes scarcer, its market price rises, which increases the incentive to conserve it and develop alternatives. PRODUCTION AND GROWTH 55 CONCLUSION In the long run, living standards are determined by productivity. Policies that affect the determinants of productivity will therefore affect the next generation’s living standards. One of these determinants is saving and investment. In the next chapter, we will learn how saving and investment are determined, and how policies can affect them. PRODUCTION AND GROWTH 56 CHAPTER SUMMARY There are great differences across countries in living standards and growth rates. Productivity (output per unit of labor) is the main determinant of living standards in the long run. Productivity depends on physical and human capital per worker, natural resources per worker, and technological knowledge. Growth in these factors – especially technological progress – causes growth in living standards over the long run. 57 CHAPTER SUMMARY Policies can affect the following, each of which has important effects on growth: Saving and investment International trade Education, health & nutrition Property rights and political stability Research and development Population growth Because of diminishing returns to capital, growth from investment eventually slows down, and poor countries may “catch up” to rich ones. 58