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Module 38
Productivity
and Growth
KRUGMAN'S
MACROECONOMICS for AP*
Margaret Ray and David Anderson
What you will learn
in this Module:
• How changes in productivity are illustrated
using an aggregate production function
• How growth has varied among several
important regions of the world and why the
convergence hypothesis applies to
economically advanced countries
Accounting for Growth: The
Aggregate Production Function
• Aggregate Production
Function
• Diminishing Returns to
Physical Capital
• Growth Accounting
• Total Factor Productivity
Accounting for Growth: The
Aggregate Production Function
What About Natural Resources?
•Other things equal, more natural resources
leads to higher GDP per capita
•Other things are often NOT equal
•Malthus (predicted
Limited resources would lead to lower
Productivity – could not predict the
Improvements in technology.)
Success, Disappointment,
and Failure
• East Asia’s Miracle
• convergence hypothesis
• Latin America’s
Disappointment
• Africa’s Troubles
Table 38.1 A Hypothetical Example: How Physical Capital per Worker
Affects Productivity, Holding Human Capital and Technology Fixed
Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition
Copyright © 2011 by Worth Publishers
Unnumbered Figure 38.1 The Information Technology Paradox
Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition
Copyright © 2011 by Worth Publishers
Figure 38.3 Success and Disappointment
Ray and Anderson: Krugman’s Macroeconomics for AP, First Edition
Copyright © 2011 by Worth Publishers
Unnumbered Figure 38.2 Are Economies Converging?
Ray and Anderson: Krugman’s Macroeconomics for AP, First
Edition
Copyright © 2011 by Worth Publishers