Chapter 25: Production and Growth
(F) Day of the week: Friday Class: IS206 Created Time: April 10, 2020 2:15 PM Database: Class Notes Database Date: April 10, 2020 2:15 PM Days Till Date: Passed Last Edited Time: June 9, 2021 10:42 AM Type: Lecture
Determinants or Variables of Productivity
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Labor
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Capital/Human Resources
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Natural Resources
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Technology
Technology: society’s understanding of using the best way to produce goods and services
- Use less ≥ input to create more < output
Production Functions
Y: Calculates the productivity of the resources provided.
f( )is the function that takes in inputs combined to produce output- A is the level of technology
- Variables of f( ) need to change at the same rate to output the same change
🏁 The Catch-up Effect: growth diminishes the bigger you are Leapfrog: the small can take advantage of advancement already made by the rich
Public Policy
1. Investment and Saving
Investment: the use of money to make more money
- Interest Rate: high
- Trust in society’s Banking system
- Big and strong market of stocks and bonds
Saving: Trade off between Consumption and Saving
Investment and Savings could affect the economy’s activities or growth
2. Investment from Abroad
Foreign Direct Investment: foreigners building new company or factory in a country
Foreign Portfolio Investment: foreigner putting their money in a foreign bank, stock, and bond.
Joint Venture: local + foreign owners in a country
Problem of FDI Benefits
- Hires local labor to do make their licensed product or service
- Low skilled workers might not grow economy much
- Less educated worker
3. Education
Technology is always changing, making education always in the catch up position to learn to utilize new technologies
- Which level to be promoted? to teach new technology
Primary Education?
Secondary Education?
Tertiary Education?
Vocational Education?
- Student Encouragement: subsidy(scholarship…)
- Keep students working locally instead of abroad
4. Health and Nutrition
Good working condition > Healthy > Productivity
Body Mass Index: measurement of weight and height to determine fitness
5. Property Rights and Political Stability
To protect your intangible idea from being recreated and stolen for ~20 years
- High Property Rights Policy:
lessen the accessibility of new inventions
- Low Property Rights Policy:
less encouragement to invent new ideas or technology
8. Population Growth
- Productivity(Y/L): if L^ ⇒ Productivity(Y/L)v
- Lower quality of education
Societal Policies depend on situation (one child policy…)