econ ch 11

significant economic growth did not occur until the

industrial revolution ; application of mechanical power to the production of goods = long- run economic growth

small differences in economic growth/ growth rates

result in dramatic differences in living stanards

newly industrializing countries

countries in progress of becoming developed

economic growth model

explains growth rates in real gdp per capita over the long run

labor productivity

the quanitity of goods and services that can be produced by one worker or one hour of work t

two factors that affect labor productivity

quantity of capital per hour worked; level of technology

3 main sourcces of tech. change

1. better machinery

2. increase in human capital

3. better organization

knowledge capital

increases in this result from research and development; key determinant of economic growthp

physical capital

rival and excludable- private good- results inn diminshing returns

knowledge capital is what

nonrival and nonexcludable; a public good; results in increasing returns

free-riding

benefitting from goods and services, you do not pay for

government policy in knowledge capital

1. patent and copyrights

2. subsidizing research and development

   1. subdizing education

the purchasing power of the U.s dollar has gone down because

of inflation and money supply

new technology was an important driver

of improvements in labor productivity

poor countries will grow faster than rich countries because

1. effect of additional capital is grater

2. there are greater advances in technology immediately available to poorer countries

catch up model

US labor markets

1. relatively flexible

2. hiring and firing workers unrestriced by gov. regulation

   1. us financial system is relatively efficient

lack of growth in low-income countries

1. failure to enforce the rule of law

2. war and revolutions

3. poor publica education and health

4. low rates of saving and investment

gov. policies that foster econ growth

1. enhancing property righrs and rule of law

2. improving health and education

3. promote tech. change

4. promote savings and investment