曼昆第10版课件mankiw10e-lecture-slides-ch09

EconomicGrowthII:Technology,Empirics,andPolicyMacroeconomicsN.GregoryMankiw©2019WorthPublishers,allrightsreservedINTHISCHAPTER,YOUWILLLEARN:HowtoincorporatetechnologicalprogressintheSolowmodelAboutpoliciestopromotegrowthAboutgrowthempirics:confrontingthetheorywithfactsTwosimplemodelsinwhichtherateoftechnologicalprogressisendogenousIntroductionIntheSolowmodelofChapter8,theproductiontechnologyisheldconstant.incomepercapitaisconstantinthesteadystate.Neitherpointistrueintherealworld:1900–2016:U.S.realGDPperpersongrewbyafactorof8.58,or1.9%peryear.examplesoftechnologicalprogressabound

(seethenextslide).ExamplesoftechnologicalprogressU.S.farmsectorproductivitynearlytripledfrom1950to2012.Therealpriceofcomputerpowerhasfallenanaverageof30%peryearoverthepastthreedecades.2000:361millionInternetusers,740millioncellphoneusers

2016:3.4billionInternetusers,5.0billioncellphoneusers2001:iPodcapacity=5GB,1,000songs.NotcapableofplayingepisodesofGameofThrones.2018:iPodtouchcapacity=64GB,30,000songs.CanplayepisodesofGameofThrones.TechnologicalprogressintheSolowmodel,part1Anewvariable:E=laborefficiencyAssume:

Technologicalprogressislabor-augmenting:

itincreaseslaborefficiencyattheexogenousrateg:TechnologicalprogressintheSolowmodel,part2Wenowwritetheproductionfunctionas:whereL

×E

=numberofeffectiveworkersIncreasesinlaborefficiencyhavethesameeffectonoutputasincreasesinthelaborforce.TechnologicalprogressintheSolowmodel,part3Notation:y

=Y/LE=outputpereffectiveworkerk

=K/LE=capitalpereffectiveworkerProductionfunctionpereffectiveworker:y=f(k)Savingandinvestmentpereffectiveworker:sy

=sf(k)TechnologicalprogressintheSolowmodel,part4(δ+n+g)k=break-eveninvestment:

theamountofinvestmentnecessarytokeepkconstant.Consistsof:δ

ktoreplacedepreciatingcapitaln

ktoprovidecapitalfornewworkersg

ktoprovidecapitalforthenew“effective”workerscreatedbytechnologicalprogressTechnologicalprogressintheSolowmodelΔk

=sf(k)

−

(δ+n+g)kSteady-stategrowthratesintheSolowmodelwithtech.progressVariableSymbolSteady-StateGrowthRateCapitalpereffectiveworkerk=K/(E×L)0Outputpereffectiveworkery=Y/(E×L)=f(k)0OutputperworkerY/L=y×EgTotaloutputY=y×(E×L)n+gTheGoldenRulewithtechnologicalprogressTofindtheGoldenRulecapitalstock,expressc*intermsofk*:Growthempirics:BalancedgrowthTheSolowmodel’ssteadystateexhibitsbalancedgrowth:manyvariablesgrowatthesamerate.TheSolowmodelpredictsthatY/LandK/Lgrowatthesamerate(g),soK/Yshouldbeconstant.Thisistrueintherealworld.TheSolowmodelpredictsthatrealwagegrowsatthesamerateasY/L,whilerealrentalpriceisconstant.Alsotrueintherealworld.Growthempirics:Convergence,part1Solowmodelpredictsthat,otherthingsequal,poorcountries(withlowerY/LandK/L)shouldgrowfasterthanrichones.Iftrue,thentheincomegapbetweenrichandpoorcountrieswouldshrinkovertime,causinglivingstandardstoconverge.Intherealworld,manypoorcountriesdoNOTgrowfasterthanrichones.DoesthismeantheSolowmodelfails?Growthempirics:Convergence,part2No,theSolowmodeldoesnotfailbecauseitpredictsthat,otherthingsequal,poorcountries(withlowerY/L

andK/L)shouldgrowfasterthanrichones.Insamplesofcountrieswithsimilarsavingsandpopulationgrowthrates,incomegapsshrinkabout2%peryear.Inlargersamples,aftercontrollingfordifferencesinsaving,populationgrowth,andhumancapital,incomesconvergebyabout2%peryear.Growthempirics:Convergence,part3WhattheSolowmodelreallypredictsisconditionalconvergence:countriesconvergetotheirownsteadystates,whicharedeterminedbysaving,populationgrowth,andeducation.Thispredictioncomestrueintherealworld.Growthempirics:Factoraccumulationvs.productionefficiency,part1Differencesinincomepercapitaamongcountriescanbeduetodifferencesin:capital—physicalorhuman—perworkertheefficiencyofproduction(theheightoftheproductionfunction)Studies:Bothfactorsareimportant.Thetwofactorsarecorrelated:countrieswithhigherphysicalorhumancapitalperworkeralsotendtohavehigherproductionefficiency.Growthempirics:Factoraccumulationvs.productionefficiency,part2Possibleexplanationsforthecorrelationbetweencapitalperworkerandproductionefficiency:Productionefficiencyencouragescapitalaccumulation.Capitalaccumulationhasexternalitiesthatraiseefficiency.Athird,unknownvariablecauses

capitalaccumulationandefficiencytobehigherinsomecountriesthanothers.PolicyissuesArewesavingenough?Toomuch?Whatpoliciesmightchangethesavingrate?Howshouldweallocateourinvestmentbetweenprivatelyownedphysicalcapital,publicinfrastructure,andhumancapital?Howdoacountry’sinstitutionsaffectproductionefficiencyandcapitalaccumulation?Whatpoliciesmightencouragefastertechnologicalprogress?Policyissues:Evaluatingtherateofsaving,part1UsetheGoldenRuletodeterminewhethertheU.S.savingrateandcapitalstockaretoohigh,toolow,oraboutright.If(MPK

−

δ)>(n

+

g),theU.S.economyisbelowtheGoldenRulesteadystateandshouldincreases.If(MPK

−

δ)<(n

+

g),theU.S.economyisabovetheGoldenRulesteadystateandshouldreduces.Policyissues:Evaluatingtherateofsaving,part2Toestimate(MPK

−

δ),usethreefactsabouttheU.S.economy:k

=2.5y

Thecapitalstockisabout2.5timesoneyear’sGDP.δk

=0.1y

About10%ofGDPisusedtoreplacedepreciatingcapital.MPK

×

k

=0.3y

Capitalincomeisabout30%ofGDP.Policyissues:Evaluatingtherateofsaving,part3k

=2.5yδk

=0.1yMPK

×

k

=0.3yTodetermineδ,divide

2

by1:Policyissues:Evaluatingtherateofsaving,part4k

=2.5yδk

=0.1yMPK

×

k

=0.3yTodetermineMPK,divide3by1:Hence,

MPK

−

δ=0.12

−0.04=0.08Policyissues:Evaluatingtherateofsaving,part5Fromthelastslide:MPK

−

δ=0.08U.S.realGDPgrowsanaverageof3%peryear,

son

+

g=0.03Thus,MPK

−

δ=0.08>0.03=n

+

gConclusion:TheU.S.isbelowtheGoldenRulesteadystate:

IncreasingtheU.S.savingratewouldincreaseconsumptionpercapitainthelongrun.Policyissues:HowtoincreasethesavingrateReducethegovernmentbudgetdeficit(orincreasethebudgetsurplus).Increaseincentivesforprivatesaving:Reducecapitalgainstax,corporateincometax,andestatetax,astheydiscouragesaving.Replacefederalincometaxwithaconsumptiontax.ExpandtaxincentivesforIRAs(individualretirementaccounts)andotherretirementsavingsaccounts.Policyissues:Allocatingtheeconomy’sinvestment,part1IntheSolowmodel,there’sonetypeofcapital.Intherealworld,therearemanytypes,whichwecandivideintothreecategories:privatecapitalstockpublicinfrastructurehumancapital:

theknowledgeandskillsthatworkersacquirethrougheducationHowshouldweallocateinvestmentamongthesetypes?Policyissues:Allocatingtheeconomy’sinvestment,part2Twoviewpoints:Equalizetaxtreatmentofalltypesofcapitalinallindustriesandletthemarketallocateinvestmenttothetypewiththehighestmarginalproduct.Industrialpolicy:

Governmentshouldactivelyencourageinvestmentincapitalofcertaintypesorincertainindustriesbecauseitmayhavepositiveexternalitiesthatprivateinvestorsdon’tconsider.PossibleproblemswithindustrialpolicyThegovernmentmaynothavetheabilityto“pickwinners”(chooseindustrieswiththehighestreturntocapitalorbiggestexternalities).Politics(e.g.,campaigncontributions)ratherthaneconomicsmayinfluencewhichindustriesgetpreferentialtreatment.Policyissues:EstablishingtherightinstitutionsCreatingtherightinstitutionsisimportantforensuringthatresourcesareallocatedtotheirbestuse.Examples:Legalinstitutions,toprotectpropertyrights.Capitalmarkets,tohelpfinancialcapitalflowtothebestinvestmentprojects.Acorruption-freegovernment,topromotecompetition,enforcecontracts,etc.Establishingtherightinstitutions:NorthversusSouthKoreaAfterWW2,Koreasplitinto:NorthKoreawithinstitutionsbasedonauthoritariancommunismSouthKoreawithWestern-styledemocraticcapitalismToday,GDPpercapitaisover10timeshigherinS.KoreathaninN.Korea.Policyissues:EncouragingtechnologicalprogressPatentlaws:

encourageinnovationbygrantingtemporarymonopoliestoinventorsofnewproductsTaxincentivesforR&DGrantstofundbasicresearchatuniversitiesIndustrialpolicy:

encouragesspecificindustriesthatarekeyforrapidtechnologicalprogress(subjecttotheprecedingconcerns).CASESTUDY:Isfreetradegoodforeconomicgrowth?Part1SinceAdamSmith,economistshavearguedthatfreetradecanincreaseproductionefficiencyandlivingstandards.ResearchbySachs&Warner:Averageannualgrowthrates,1970–89OpenClosedDevelopednations2.3%0.7%Developingnations4.5%0.7%CASESTUDY:Isfreetradegoodforeconomicgrowth?Part2Todeterminecausation,FrankelandRomerexploitgeographicdifferencesamongcountries:Somenationstradelessbecausetheyarefartherfromothernationsorlandlocked.Suchgeographicdifferencesarecorrelatedwithtradebutnotwithotherdeterminantsofincome.Hence,theycanbeusedtoisolatetheimpactoftradeonincome.Findings:increasingtrade/GDPby2%causesGDPpercapitatorise1%,otherthingsequal.EndogenousgrowththeorySolowmodel:Sustainedgrowthinlivingstandardsisduetotechnologicalprogress.Therateoftechnologicalprogressisexogenous.Endogenousgrowththeory:Inthissetofmodels,thegrowthrateofproductivityandlivingstandardsisendogenous.Thebasicmodel,part1Productionfunction:Y=A

K

whereAistheamountofoutputforeachunitofcapital(Aisexogenousandconstant)KeydifferencebetweenthismodelandSolow:MPKisconstanthere,diminishesinSolowInvestment:sYDepreciation:δKEquationofmotionfortotalcapital:ΔK

=sY−δKThebasicmodel,part2ΔK

=sY−δKDividethroughbyK

anduseY

=A

Ktoget:Ifs

A>δ,thenincomewillgrowforever,andinvestmentisthe“engineofgrowth.”Here,thepermanentgrowthratedependsons.InSolowmodel,itdoesnot.Doescapitalhavediminishingreturnsornot?Itdependsonthedefinitionofcapital.Ifcapitalisnarrowlydefined(onlyplantandequipment),thenyes.Advocatesofendogenousgrowththeory

arguethatknowledgeisatypeofcapital.Ifso,thenconstantreturnstocapitalismoreplausible,andthismodelmaybeagooddescriptionofeconomicgrowth.Atwo-sectormodel,part1Twosectors:manufacturingfirmsproducegoods.researchuniversitiesproduceknowledgethatincreaseslaborefficiencyinmanufacturing.u=fractionoflaborinresearch(uisexogenous)Manufacturingproductionfunction:Y

=F[K,(1−u)EL]Researchproductionfunction:ΔE=g(u)ECapitalaccumulation:ΔK=sY

−δKAtwo-sectormodel,part2Inthesteadystate,manufacturingoutputperworkerandthestandardoflivinggrowatrate

ΔE/E=g(u).Keyvariables:s:affectsthelevelofincomebutnotitsgrowthrate(sameasintheSolowmodel)u:

affectslevelandgrowthrateofincomeDISCUSSIONQUESTION

ThemeritsofraisinguQuestion:Inwhatwayswouldraisingu(thatis,devotingmorelabortoresearch)benefittheeconomy?Whatarethecostsofraisingu?FactsaboutR&DMuchresearchisdonebyfirmsseekingprofits.Firmsprofitfromresearch:Patentscreateastreamofmonopolyprofits.Thereisextraprofitinbeingfirstonthemarketwithanewproduct.Innovationproducesexternalitiesthatreducethe

costofsubsequentinnovation.Muchofthenewendogenousgrowththeoryattemptstoincorporatethesefactsintomodelstobetterunderstandtechnologicalprogress.IstheprivatesectordoingenoughR&D?Theexistenceofpositiveexternalitiesinthecreationofknowledgesuggeststhattheprivatesectorisnotdoing