Long Term Growth Theories

Flashcards covering concepts from lecture notes on long-term growth theories, including the Solow and Romer models, production functions, and waves of innovation.

Who are Robert Solow and Paul Romer?

Economists known for their work on long-term growth theories.

What is the focus of long-term growth theories?

Study the long-term determinants of economic growth and governmental influences.

What is the Solow model of economic growth?

Model associated with exogenous growth, developed by Robert Solow.

What is the Romer Model?

Model associated with endogenous growth, developed by Paul Romer.

What is the Production Function?

A function that specifies the relation between technology, inputs, and Real GDP: Real GDP = T (L, K).

In the production function, what does L stand for?

Labor

In the production function, what does K stand for?

Capital

In the production function, what does T stand for?

Technology coefficient

What impact does change in labor have on the production function?

Changes in labor lead to changes in Real GDP.

According to Robert Solow’s 1956 model, how can economic growth be increased when resources are fully employed?

Economic growth can only be increased through R&D and innovation that improves technology and raises productivity.

What did Paul Romer's 1986 endogenous growth model emphasize as central to long-run economic growth?

Investment in human capital, innovation, and knowledge.

What did the Solow model identify as the key determinant of long-run growth?

Technological progress or improvements in total factor productivity (TFP).

Unlike the Solow model, what does Romer's model attempt to explain?

Attempts to explain what determines technological progress.

According to Romer, what generates externalities that affect output per worker?

Research activity generates externalities that affect the level of output per worker.

What is an example of a positive externality in research activity?

Researchers don’t take into account the effect their inventions have in boosting the future productivity of other researchers.

List some examples of technologies during the first wave of innovation (1785-1845).

Water power, textiles, iron, navigation, banking

List some examples of technologies during the second wave of innovation (1845-1900).

Steam power, railways, steel, chemistry, stock markets

List some examples of technologies during the third wave of innovation (1900-1950).

Electricity, chemicals, automobiles, planes, physics, corporations

List some examples of technologies during the fourth wave of innovation (1950-1990).

Computers, software, aerospace, containerisation, telecommunications, biology and medicine, multinationals

List some examples of technologies during the fifth wave of innovation (1990-2020).

Internet and web 2, mobile and wireless tech, medical technology, genetics, venture capital

Name some inventions of the First industrial revolution?

Steam engine and cotton gin, lead to railroads and steamships.

Name some inventions of the Second Industrial Revolution.

Electric light, internal combustion engine, fresh running water to urban homes, sewers.

What invention occurred in 1995 during the Third Industrial Revolution?

The web and internet.