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CHAPTER 3
History Growth & Contemporary development
(todaro)
The Growth Game Growth rates of national income are
followed closely by policy-makers In order to better understand
contemporary growth prospects, it is useful to examine historical growth patterns
The Economics of Growth: Capital, Labor, and Technology
Capital accumulation Population and labor force growth Technology Growth
Figure 3.1 Effect of Increases in Physical and Human Resources on the Production Possibility Frontier
Figure 3.2 Effect of Growth of Capital Stock and Land on the Production Possibility Frontier
Figure 3.3 Effect of Technological Change in the Agricultural Sector on the Production Possibility Frontier
Figure 3.4 Effect of Technological Change in the Industrial Sector on the Production Possibility Frontier
The Historical Record: Kuznet’s Six Characteristics of Modern Economic Growth
High rates of per capita income and population growth
High rates of total factor productivity increase
high rates of economic structural transformation
High rates of social, political, and ideological transformation
International economic outreach
Limited international spread of economic growth
YearPopulation in millions
GDP per personin year-2000 dollars
1000 AD 265 165
1500 AD 425 175
1800 AD 900 250
1900 AD 1625 850
1950 AD 2515 2030
1975 AD 4080 4640
2000 AD 6120 8175
Measuring the value of output historically is very tricky. There were goods that were very important at some points in time (such as covered wagons) which did not exist in earlier times and which are obsolete today.
Through 1800, average output per worker was less than $1 a day in today's terms. Nearly everyone lived in what we would call a state of poverty. The middle class is a very recent phenomenon.
Most of the growth in the average standard of living has taken place in the past 100 to 150 years.
The Limited Value of the Historical Growth Experience: Differing Initial Conditions
Physical and human resource endowments
Relative levels of per capita income and GNP
Climatic differences
Population size, distribution, and growth
The historical role of international migration
High rates of Social and Ideological transformation
Rationality Economic Planning Socail And Economic Equalization Improved institutions and Attitudes
The Limited Value of the Historical Growth Experience: Differing Initial Conditions
Physical and human resource endowments
Relative levels of per capita income and GNP
Climatic differences Population size,
distribution, and growth
The historical role of international migration
The growth stimulus of international trade
Basic R&D capabilities Stability and flexibility
of political and social institutions
Are living standards converging?
Figure 3.6 Convergence among OECD Countries but Divergence in the World as a Whole
Figure 3.6 Convergence among OECD Countries but Divergence in the World as a Whole cont’d
Concepts for Review Brain drain Capital
accumulation Capital-augmenting
technological progress
Capital-saving technological progress
Capital stock Dualism
Economic growth Economic planning Equalization
(economic and social)
Free trade Human capital Infrastructure
Concepts for Review, cont’d Labor-augmenting
technological progress
Labor-saving technological progress
Modernization ideals
Neutral technological progress
Production possibility curve
Rationality Research and
Development (R&D) Technological
progress Terms of trade Total factor
productivity (TFP)