econ 202: macroeconomics i lecture 5 - growth facts...
TRANSCRIPT
ECON 202: Macroeconomics ILecture 5 - Growth Facts & Solow Growth
John Grigsby
January 16, 2017
Grigsby Lecture 2 - Growth Facts January 16, 2017 1 / 14
The Kaldor (1961) Facts of Growth
1 Output per capita (labor productivity) has grown at a sustained rate
2 Capital per worker has grown at a sustained rate
3 The trend in capital and output are about the same, socapital/output ratio is constant
4 Wages and profits have occupied a roughly constant share of nationalincome
5 Constant profit share + constant capital share implies constant returnon capital
6 Some countries grow faster than others
Grigsby Lecture 2 - Growth Facts January 16, 2017 2 / 14
The Kaldor (1961) Facts of Growth
1 Output per capita (labor productivity) has grown at a sustained rate
2 Capital per worker has grown at a sustained rate
3 The trend in capital and output are about the same, socapital/output ratio is constant
4 Wages and profits have occupied a roughly constant share of nationalincome
5 Constant profit share + constant capital share implies constant returnon capital
6 Some countries grow faster than others
Grigsby Lecture 2 - Growth Facts January 16, 2017 2 / 14
The Kaldor (1961) Facts of Growth
1 Output per capita (labor productivity) has grown at a sustained rate
2 Capital per worker has grown at a sustained rate
3 The trend in capital and output are about the same, socapital/output ratio is constant
4 Wages and profits have occupied a roughly constant share of nationalincome
5 Constant profit share + constant capital share implies constant returnon capital
6 Some countries grow faster than others
Grigsby Lecture 2 - Growth Facts January 16, 2017 2 / 14
The Kaldor (1961) Facts of Growth
1 Output per capita (labor productivity) has grown at a sustained rate
2 Capital per worker has grown at a sustained rate
3 The trend in capital and output are about the same, socapital/output ratio is constant
4 Wages and profits have occupied a roughly constant share of nationalincome
5 Constant profit share + constant capital share implies constant returnon capital
6 Some countries grow faster than others
Grigsby Lecture 2 - Growth Facts January 16, 2017 2 / 14
The Kaldor (1961) Facts of Growth
1 Output per capita (labor productivity) has grown at a sustained rate
2 Capital per worker has grown at a sustained rate
3 The trend in capital and output are about the same, socapital/output ratio is constant
4 Wages and profits have occupied a roughly constant share of nationalincome
5 Constant profit share + constant capital share implies constant returnon capital
6 Some countries grow faster than others
Grigsby Lecture 2 - Growth Facts January 16, 2017 2 / 14
The Kaldor (1961) Facts of Growth
1 Output per capita (labor productivity) has grown at a sustained rate
2 Capital per worker has grown at a sustained rate
3 The trend in capital and output are about the same, socapital/output ratio is constant
4 Wages and profits have occupied a roughly constant share of nationalincome
5 Constant profit share + constant capital share implies constant returnon capital
6 Some countries grow faster than others
Grigsby Lecture 2 - Growth Facts January 16, 2017 2 / 14
Output per Capita Grown at Constant Rate (≈ 2% in US)
8.5
9
9.5
10
10.5
11
11.5Lo
g G
DP
per
Cap
ita
(Ch
ain
ed 2
00
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Grigsby Lecture 2 - Growth Facts January 16, 2017 3 / 14
Capital per Worker Grows at Constant Rate
Source: Karthik Nagarajan
Grigsby Lecture 2 - Growth Facts January 16, 2017 4 / 14
Constant Capital/Output Ratio
Source: Karthik Nagarajan
Grigsby Lecture 2 - Growth Facts January 16, 2017 5 / 14
Share of Labor in National Income Constant ≈ 2/3
Source: Enghin Atalay: http://ssc.wisc.edu/~eatalay/econ899_15/
slides_transformation.pdf
Grigsby Lecture 2 - Growth Facts January 16, 2017 6 / 14
Share of Labor in National Income Constant ≈ 2/3
Source: Enghin Atalay: http://ssc.wisc.edu/~eatalay/econ899_15/
slides_transformation.pdf
Grigsby Lecture 2 - Growth Facts January 16, 2017 6 / 14
Share of Labor in National Income Constant ≈ 2/3
Source: Enghin Atalay: http://ssc.wisc.edu/~eatalay/econ899_15/
slides_transformation.pdf
Grigsby Lecture 2 - Growth Facts January 16, 2017 6 / 14
Return on Capital Roughly Constant
Source: Karthik Nagarajan
Grigsby Lecture 2 - Growth Facts January 16, 2017 7 / 14
Different Countries Grow at Different Rates
Source: Karthik NagarajanGrigsby Lecture 2 - Growth Facts January 16, 2017 8 / 14
One more: Convergence Among Rich Countries
Grigsby Lecture 2 - Growth Facts January 16, 2017 9 / 14
Convergence Systematic
Countries U.S. States
Source: Barro
Grigsby Lecture 2 - Growth Facts January 16, 2017 10 / 14
But Convergence is Not A Law
Grigsby Lecture 2 - Growth Facts January 16, 2017 11 / 14
Major questions of growth
1 Why do some countries grow so much faster than others?
2 Why has growth been such a constant? What set it off? Will itcontinue forever?
3 Will poor countries converge to rich ones? Why?
4 What “causes” growth?
Only recently getting study:
1 Is growth inclusive?
2 What is the role of institutions/government?
3 Does growth “diffuse” across space?
Grigsby Lecture 2 - Growth Facts January 16, 2017 12 / 14
Major questions of growth
1 Why do some countries grow so much faster than others?
2 Why has growth been such a constant? What set it off? Will itcontinue forever?
3 Will poor countries converge to rich ones? Why?
4 What “causes” growth?
Only recently getting study:
1 Is growth inclusive?
2 What is the role of institutions/government?
3 Does growth “diffuse” across space?
Grigsby Lecture 2 - Growth Facts January 16, 2017 12 / 14
Major questions of growth
1 Why do some countries grow so much faster than others?
2 Why has growth been such a constant? What set it off? Will itcontinue forever?
3 Will poor countries converge to rich ones? Why?
4 What “causes” growth?
Only recently getting study:
1 Is growth inclusive?
2 What is the role of institutions/government?
3 Does growth “diffuse” across space?
Grigsby Lecture 2 - Growth Facts January 16, 2017 12 / 14
Major questions of growth
1 Why do some countries grow so much faster than others?
2 Why has growth been such a constant? What set it off? Will itcontinue forever?
3 Will poor countries converge to rich ones? Why?
4 What “causes” growth?
Only recently getting study:
1 Is growth inclusive?
2 What is the role of institutions/government?
3 Does growth “diffuse” across space?
Grigsby Lecture 2 - Growth Facts January 16, 2017 12 / 14
Major questions of growth
1 Why do some countries grow so much faster than others?
2 Why has growth been such a constant? What set it off? Will itcontinue forever?
3 Will poor countries converge to rich ones? Why?
4 What “causes” growth?
Only recently getting study:
1 Is growth inclusive?
2 What is the role of institutions/government?
3 Does growth “diffuse” across space?
Grigsby Lecture 2 - Growth Facts January 16, 2017 12 / 14
Major questions of growth
1 Why do some countries grow so much faster than others?
2 Why has growth been such a constant? What set it off? Will itcontinue forever?
3 Will poor countries converge to rich ones? Why?
4 What “causes” growth?
Only recently getting study:
1 Is growth inclusive?
2 What is the role of institutions/government?
3 Does growth “diffuse” across space?
Grigsby Lecture 2 - Growth Facts January 16, 2017 12 / 14
Major questions of growth
1 Why do some countries grow so much faster than others?
2 Why has growth been such a constant? What set it off? Will itcontinue forever?
3 Will poor countries converge to rich ones? Why?
4 What “causes” growth?
Only recently getting study:
1 Is growth inclusive?
2 What is the role of institutions/government?
3 Does growth “diffuse” across space?
Grigsby Lecture 2 - Growth Facts January 16, 2017 12 / 14
Tools at our disposal
1 Solow growth model (today)
2 Neoclassical growth model (Thursday + Next Week)
3 Modern Growth Theory (next Thursday)
Grigsby Lecture 2 - Growth Facts January 16, 2017 13 / 14
Key Input to Solow Growth: Savings rate
Grigsby Lecture 2 - Growth Facts January 16, 2017 14 / 14
Jones and Romer (2010) - New Kaldor Facts
1 Increases in the extent of the market from increased flow ofgoods/ideas/finance/people
2 Accelerating growth (over the very long run) from virtually zeroseveral hundred years ago
3 The variation in modern growth rate increases in the distance fromthe technology frontier
4 Large income and Total Factor Productivity (TFP) differences:Differences in measured inputs explain less than half of cross-countrydifferences in GDP
5 Human capital per worker dramatically rising throughout the world
6 Long-run stability of skill premium
Grigsby Lecture 2 - Growth Facts January 16, 2017 14 / 14
Jones and Romer (2010) - New Kaldor Facts
1 Increases in the extent of the market from increased flow ofgoods/ideas/finance/people
2 Accelerating growth (over the very long run) from virtually zeroseveral hundred years ago
3 The variation in modern growth rate increases in the distance fromthe technology frontier
4 Large income and Total Factor Productivity (TFP) differences:Differences in measured inputs explain less than half of cross-countrydifferences in GDP
5 Human capital per worker dramatically rising throughout the world
6 Long-run stability of skill premium
Grigsby Lecture 2 - Growth Facts January 16, 2017 14 / 14
Jones and Romer (2010) - New Kaldor Facts
1 Increases in the extent of the market from increased flow ofgoods/ideas/finance/people
2 Accelerating growth (over the very long run) from virtually zeroseveral hundred years ago
3 The variation in modern growth rate increases in the distance fromthe technology frontier
4 Large income and Total Factor Productivity (TFP) differences:Differences in measured inputs explain less than half of cross-countrydifferences in GDP
5 Human capital per worker dramatically rising throughout the world
6 Long-run stability of skill premium
Grigsby Lecture 2 - Growth Facts January 16, 2017 14 / 14
Jones and Romer (2010) - New Kaldor Facts
1 Increases in the extent of the market from increased flow ofgoods/ideas/finance/people
2 Accelerating growth (over the very long run) from virtually zeroseveral hundred years ago
3 The variation in modern growth rate increases in the distance fromthe technology frontier
4 Large income and Total Factor Productivity (TFP) differences:Differences in measured inputs explain less than half of cross-countrydifferences in GDP
5 Human capital per worker dramatically rising throughout the world
6 Long-run stability of skill premium
Grigsby Lecture 2 - Growth Facts January 16, 2017 14 / 14
Jones and Romer (2010) - New Kaldor Facts
1 Increases in the extent of the market from increased flow ofgoods/ideas/finance/people
2 Accelerating growth (over the very long run) from virtually zeroseveral hundred years ago
3 The variation in modern growth rate increases in the distance fromthe technology frontier
4 Large income and Total Factor Productivity (TFP) differences:Differences in measured inputs explain less than half of cross-countrydifferences in GDP
5 Human capital per worker dramatically rising throughout the world
6 Long-run stability of skill premium
Grigsby Lecture 2 - Growth Facts January 16, 2017 14 / 14
Jones and Romer (2010) - New Kaldor Facts
1 Increases in the extent of the market from increased flow ofgoods/ideas/finance/people
2 Accelerating growth (over the very long run) from virtually zeroseveral hundred years ago
3 The variation in modern growth rate increases in the distance fromthe technology frontier
4 Large income and Total Factor Productivity (TFP) differences:Differences in measured inputs explain less than half of cross-countrydifferences in GDP
5 Human capital per worker dramatically rising throughout the world
6 Long-run stability of skill premium
Grigsby Lecture 2 - Growth Facts January 16, 2017 14 / 14