Macroeconomic Summary

Solow Growth miracles: low smashing-labor ratio; high savings manoeuver; low population crop. Key concepts: 1. miserableer countries start out higher ripen potential than rich ones. This potential whitethorn or whitethorn non be realized. 2. Increasing savings (financial reform) has level effects. This may step-up income, but does non sustain evolution. 3. Only engineering information drives long-run growth. Without technological remove, growth eventually stops. technology and change magnitude returns: countries ar always chasing their steady state; add in productivity shifts the steady state to the right. technical schoolnology is corporal in production: y=A*f(k). How is tech produced? cook it from foreign; put friendshipable people together; labor/skills; fillips bill tech growth: (use logs) 3 rules: g(AB)=g(A)+g(B); g(A/B)=g(A)-g(B) and g(A^b)=bxg(A). Cobb Douglas: y=A*K^alpha. Steady state with tech: g(k)=0 and g(y)=g(A), economy growth s only due to tec h growth, but when this happens we neer reach the steady state the curve shifts up. Why? Tech doesnt have diminishing marginal returns; non-rival goods (all can use); noesis leaks. Poverty dugouts: increasing returns: the reward to doing an legal action increases as more(prenominal) of that activity is do. The trap: when miniature is done, there is superficial inducement to do more.

Frequently traps arise because activities need to be done together. Examples: capital investment (without roads, cant manufacture and ship), wellness (increasing returns, poor health impoverishes people), inc ret on education (w hen education levels are real low, it take! s lots of time and energy to teach canonic skills little human capital is acquired), investing in skills and equipment (inc ret, skills are not valued because they involve equipment that is unavailable equip is not worthy importing for lack of specialized workers). Poverty trap when you have low stock of capital there is little incentive to invest. The push theory: aid provides the critical citizenry to fly a poverty trap. Institutions...If you want to get a salutary essay, order it on our website: OrderCustomPaper.com

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