slides

Economic Growth

An increase in real GDP per capita, reflecting the value of goods and services produced per person.

Economic Development

A broader concept encompassing income growth, distribution, and improvements in well-being.

GDP Limitations

GDP does not capture non-market activities, local price variations in poor countries, or negative externalities.

Purchasing Power Parity (PPP)

A method that uses a common set of international prices for better comparison of GDP across countries.

CMEPSP Recommendations

Prioritize income and consumption over production, and expand income measures to include non-market activities.

Harrod-Domar Model

A model that relates capital, labor, and total economic production to understand economic growth.

Aggregate Production Function

The relationship where output is a function of capital stock and labor supply, represented as Y = F(K, L).

Savings-Investment Identity

In a closed economy, total savings must equal investment, expressed as S = I.

Solow’s Growth Model

A neoclassical model that introduces flexibility in the production function and retains constant returns to scale.

Technological Progress in Growth

The incorporation of technology into production improves productivity without increasing labor.

Five Instrumental Freedoms

Political freedoms, economic facilities, social opportunities, transparency guarantees, and protective security.

Convergence

The process by which countries with similar savings rates and population growth converge in income levels.

Backwardness advantages

Economic lag can provide opportunities to adopt advanced technologies and rapidly industrialize with government support.

Inequality in Latin America

Characterized by high inequality and low growth, creating a reinforcing trap.

Growth Diagnostic Methodology

A framework for identifying the most binding constraints on economic growth and evaluating relevant factors.

European Colonialism Impact

Institutions established through colonialism have long-term effects on current income levels and economic structures.

Capital Deepening

The process of increasing capital per worker to boost productivity.

Quality Change in GDP Measurement

Capturing changes in quality is crucial for accurately measuring real income and consumption.

Environmental Sustainability Assessment

Using indicators that track changes in key environmental stocks and clear thresholds for environmental damage.

Political Attitudes and Inequality

Perceptions of unfairness due to inequality can significantly influence political attitudes and stability.

Innovation as a Growth Factor

Tech advancements and competition can drive productivity improvements and economic growth.

Labor Supply Growth Rate

The labor supply grows at the same rate as the population, influencing economic outputs.

Cultural Influences on Development

Shared norms within societies affect economic performance, such as gender equity and trust levels.

Weak Redistribution Policies

Ineffective fiscal systems and competition policies often result in persistent inequality.

Long-Run Growth in Solow’s Model

In the long run, economic growth is driven by technological progress, not by capital accumulation alone.

Steady State in Solow’s Model

A condition where the economy's capital stock remains constant over time because investment equals depreciation.

Role of Savings in Solow’s Growth Model

Higher savings rates lead to greater capital accumulation, which can elevate the steady-state level of output.

Population Growth in Solow’s Model

Increased population growth can dilute capital per worker, affecting overall output and productivity.

Output per Worker in Solow’s Model

Output per worker is determined by the level of capital per worker and the productivity of technology.