...October 26 08 Fall The Determinants of Economic Growth ------------------------------------------------- Executive summary ------------------------------------------------- Introduction Barro (1991) and Fernandez, Ley, and Steel (2001) use various regression techniques to determine the key determinants of growth, and in particular, the driving forces behind cross-country variations. Neoclassical growth theory proposes that cross-country and per capita income will converge due to diminishing returns to capital and the diffusion of technology. There are samples of countries that display this ‘absolute convergence, however, such a phenomenon is not universal. These seemingly inexplicable variations in growth present an important question of what are the determinants and is there a role for stabilizing policy. Explain why the study is important. Why is economic growth so important? Coexistence of Growth miracles, Growth Disasters Barro (1991) provides that it is ultimately the relationship between the level of human capital and initial GDP that allows some poor countries to converge on rich countries. Ultimately, our conclusion parallels that of Barro’s and we find that the driving determinants of growth are Human capital, Investment and the initial GDP level. Our analysis follows the key ideas and assumptions of Barro’s model. We use both Primary and High School enrolment as a proxy for the accumulation of Human capital, however, this does pose some restrictions...
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...Chaotic Growth with the Logistic Model of P.-F. Verhulst Hugo Pastijn Department of Mathematics, Royal Military Academy B-1000 Brussels, Belgium Hugo.Pastijn@rma.ac.be Summary. Pierre-Fran¸ois Verhulst was born 200 years ago. After a short biograc phy of P.-F. Verhulst in which the link with the Royal Military Academy in Brussels is emphasized, the early history of the so-called “Logistic Model” is described. The relationship with older growth models is discussed, and the motivation of Verhulst to introduce different kinds of limited growth models is presented. The (re-)discovery of the chaotic behaviour of the discrete version of this logistic model in the late previous century is reminded. We conclude by referring to some generalizations of the logistic model, which were used to describe growth and diffusion processes in the context of technological innovation, and for which the author studied the chaotic behaviour by means of a series of computer experiments, performed in the eighties of last century by means of the then emerging “micro-computer” technology. 1 P.-F. Verhulst and the Royal Military Academy in Brussels In the year 1844, at the age of 40, when Pierre-Fran¸ois Verhulst on November c 30 presented his contribution to the “M´moires de l’Acad´mie” of the young e e Belgian nation, a paper which was published the next year in “tome XVIII” with the title: “Recherches math´matiques sur la loi d’accroissement de la e population” (mathematical investigations of the law of...
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...Notes on Mankiw, Romer, Weil Simon Gilchrist EC 502 1 Introduction: • To a first approximation, predictions of the Solow Growth Model are correct: – Savings and population growth affect GDP per capita in directions predicted by the Solow model. – 50% of variation in GDP per capita can be predicted by the Solow model. • While qualitative predictions are confirmed, quantitative effects of savings and population growth are too large to be consistent with standard Solow growth theory. 1 • An augmented version of the Solow growth model that allows for human capital accumulation can explain the data however. – Adding human capital explains why coefficients on savings and population growth are upward biased – human capital is an omitted variable which is positively correlated with savings. – When schooling is included in the regression as a measure of human capital, MRW find that ∗ Coefficient on savings and population growth are now of the correct magnitude for the augmented model. ∗ The augmented Solow model now explains 80% of the variation in cross-country living standards. 2 2 • Model: Population and technology grow at constant exogenous rates: L(t) = L(0) exp(nt) A(t) = A(0) exp(gt) Cobb-Douglas production Y (t) = K(t)α (A(t)L(t))1−α Constant savings rate: I(t) = S(t) = sY (t) Capital accumulation dk = sy(t) − (n + g + δ)k(t) dt where k(t) = K(t) A(t)L(t) Y (t) y(t) = = k(t)α A(t)L(t) • which implies that dk = s (k(t))α − (n + g + δ)k(t) dt 3 3 • ...
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...context of increasing returns, create the possibility of multiple equilibria. A poor country can be caught in a low-equilibrium “poverty trap”, government intervention can potentially solve the coordination problem, and “push” the economic into the better equilibrium allowing a “take-off” into sustained growth. The Big Push idea has returned to the center of development policy in the recent past. William Easterly (2006) described 2005 as the Year of the Big Push. It has done so in particular in the context of debates over Africa: the compelling normative case to transform development possibilities of Africans, has been associated with renewed emphasis on the positive case for a Big Push. This has been linked to the case for a major expansion in aid, notably in the work of the Commission for Africa and the Millennium Development Goals; Jeffrey Sachs has been a vigorous exponent of this linkage. This case concerns the analytics of the Big Push, the evidence and its applicability to a poor African country. It bridges issues of growth (from macro) and general equilibrium (from micro). There are three parts. The first outlines the analytics: it uses the prism of the Solow growth model to look at three possible cases for multiple equilibria, and focuses on the coordination problem as one account. The second looks at approaches to evidence from cross-country patterns, and from country experiences. The third poses the question of Big Push...
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...ELECTRICITY CONSUMPTION AND ECONOMIC GROWTH IN NIGERIA: NEW INSIGHTS INTO THE CAUSALITY RELATIONSHIP AN ECONOMETRICS ASSIGNMENT SUBMITTED BY ------------------------------------------------- OLUWAFEMI JOSHUA IBRAHIM MATRIC NUMBER: 121937 LEVEL: 700 LECTURER IN-CHARGE: PROFESSOR E.O. OGUNKOLA November, 2010 1) STATEMENT OF THE PROBLEM Electricity plays a very important role in the socio-economic and technological development of every nation. It is widely accepted that there is a strong correlation between socio-economic development and the availability of electricity (Sambo, 2008). It is generally recognized that energy, including electricity, plays a significant role in economic development, not only because it enhances the productivity of capital , labour and other factors of production, but also that increased consumption, particularly commercial energy like electricity, signifies high economic status of a country(Aklas & Yilmaz, 2008). The relationship that exists between electricity consumption and economic growth has been of great interest to many researchers. The study of this relationship arises from the need to understand the complex links between these variables. Such understanding is basic to regulators and investors in deregulated electricity markets, in order to design a system that is reliable, efficient and growth-efficient. The empirical argument has been centered on whether economic growth responds to increase in electricity consumption, or whether...
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...the means of subsistence increases in an arithmetic ratio." Well, that seems plain enough, and perfectly understandable, if there is too many people and not enough food, then, certainly, there is going to be problems. Malthus developed his theory, at least to this extent: that left alone, no matter all the problems short of worldwide catastrophe, humankind will survive, as, nature has a natural way to cut population levels: "crime, disease, war, and vice," being, the necessary checks on population." This proposition, as was made by Malthus in 1798, was to cause quite a public stir, then, and yet today. The English economist Thomas Robert Malthus, b. Feb. 14, 1766, d. Dec. 29, 1834, was one of the earliest thinkers to study population growth as it relates to general human welfare. After studying philosophy, mathematics, and theology at Cambridge 1784-88, Malthus took holy orders 1790 and became 1805 professor of history and political economy at East India College near London. Surviving portraits and descriptions by contemporaries...
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...constituent elements of Gujarat’s growth story? To what extent can the successful features of Gujarat’s growth story be attributed to the political regime fashioned by Narendra Modi? Is it possible to replicate even this limited success story at the national level – as Modi’s starry eyed upper and middle class following would like to believe? More significantly: what are the implications of Gujarat’s Development Model in terms of its sustainability and its desirability? What happens when we assess this development through a set of comprehensive measures, judge its implication for the average citizen’s material wellbeing, and see what it means for the political and economic rights of citizens? The study proceeds through a meticulous examination of existing official data sources on investment, infrastructure, agriculture, manufacturing , employment, poverty , inequality, education and health expenditures and a set of other indicators of development. These are then used to explain various developmental outcomes in the state in relation to national averages and the performance of other states which have also experienced high growth rates recently, such as Maharashtra, Haryana and Tamilnadu. Atul Sood’s cogently argued and insightful introduction brings together the different strands of the study, weaving the detailed findings into a coherent narrative. The picture that emerges interrogates both the normative implications of the ‘Gujarat development model’, and offers a powerful critique...
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...Journal of Economic Perspectives- Volume Number1- Winter1994-pages 23-44 8, Endogenous Innovation in the Theory of Growth Gene M. Grossman and Elhanan Helpman C an economic growth be sustained in the long run? If so, what deter- mines the long-run rate of growth? Which economies will grow the fastest? And what kinds of policies can governments use to accelerate advances in living standards? These questions were central for those who studied growth in the 1950s and 1960s, and remain so in the recent revival of interest in long-run economic performance. Two observations have motivated many of the recent contributors to growth theory. First, output expansion has outpaced population growth in the 200 years since the industrial revolution. Second, different countries have remained on seemingly disparate growth paths for relatively long periods of time. Related to this second observation is another: in cross-section and timeseries data, we find national and regional growth rates correlated with a variety of economic, social, and political variables, including many that are affected by government policies. These observations have led the current generation of growth theorists to formulate models in which per capita income grows indefinitely and long-run performance reflects structural and policy parameters of the local and global economy. With this apparent similarity of intentions, recent research efforts have headed in several different directions. One strand of theory...
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...The Source of Economic Growth - * An economy’s output of goods and services depends on the quantities of available inputs such as capital and labour and on the productivity of those inputs * Y = AF(K, N) * Either the quantity of input must grow or productivity must improve (or both) in order to have growth * Pg 182 – equation 6.2 * Growth accounting equation is the production function written in growth rate form Growth Accounting * Output growth can be divided into three parts: the resulting from productivity growth, increased capital inputs or increased labor inputs * Growth accounting measures empirically the relative importance of these three sources of output growth Growth Accounting and the Productivity Slowdown * One explanation for productivity slowdown is that there has not been a slowdown at all but rather is the result of a measurement error * Another explanation is that there was a slowdown due to the large increase in oil prices that occurred in 1970’s as a result of the actions of the OPEC oil cartel * Another explanation is that the productivity slowdown may have resulted from the onset of the revolution in information technology - Growth Dynamics: The Neoclassical Growth Model - * Growth accounting does not explain why capital and labor grow at the rates they do * The growth of capital stock is the result of the myriad saving and investment decisions of households and firms * This model is useful for examining...
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...Non-linear Effects of Fiscal Deficits on Growth in Developing Countries Christopher S. Adam and David L. Bevan(*) Department of Economics, University of Oxford August 2001 Revised December 2001 Abstract This paper examines the relation between fiscal deficits and growth for a panel of 45 developing countries. It finds evidence of a threshold effect at a level of the deficit around 1.5% of GDP. While there appears to be a growth payoff to reducing deficits to this level, this effect disappears or reverses itself for further fiscal contraction. There is also evidence of interaction effects between deficits and debt stocks, with high debt stocks exacerbating the adverse consequences of high deficits. Keywords: Fiscal deficits, growth, threshold effects, developing countries. JEL Codes: H3 , H6 , O4 The original version of this paper was prepared for the Cornell/ISPE Conference Public Finance and Development held at Cornell University, September 7-9, 2001. We thank our discussant, Mick Keen, conference participants, and also Jon Temple for helpful comments on the paper. Corresponding author: David Bevan (david.bevan@economics.ox.ac.uk) Department of Economics, Manor Road, Oxford OX1 3UL Tel: +44 (0) 1865 271075 Non-linear Effects of Fiscal Deficits on Growth in Developing Countries 1. Introduction A great deal of attention has been devoted in both theoretical and empirical literatures to the possible impact of various fiscal magnitudes on growth. In general, the theoretical literature...
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...Endogenous growth theory addressed limitation associated with the neo classical growth model. To what extent is this assertion valid? Introduction Neo classical growth model is an approach in economics focusing on the determination of price, output and income distributions in markets through supply and demand. These is done through a hypothesized maximization of income- constrained utility by individuals and of cost constrained profits of firms employing available information and factors of production. This economic model was developed from the classical school of economics, which was dominant in the eighteenth and nineteenth centuries. It can be traced to the marginal revolution of the 1860’s, which came up with the concept of utility as a key factor in deterging value in contrast to the classical views that the costs involved in production were value’s determinant. The Neo classical approach became increasing mathematical, focusing on the perfect competition and equilibrium. Neo classical growth model considered two factors production function with capital and labour as determinants of output. Besides, it added exogenously determined factor, technology, to the production function. Neo classical growth model uses this production function: Y=AF (K, L)……….(1) Y= Gross Domestic Production (GDP) K= Stock of Capital L= Amount of unskilled labour A= Exogenously determined level of technology. *Note a change in this exogenously variable and technology...
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...Havard model HRM is generally considered to be either Hard or Soft where hard HRM is quantitative, calculative and treats people as a factor of production (an object). Soft HRM on the other hand draws from the Human Resource school of thought which treats people as strategic resources who can provide an organisation with strategic flexibility through being committed, innovative and working in a team so as to achieve a competitive advantage. The Harvard Model is considered to be more soft in nature because it views individuals as potential assets or human assets rather than variable costs. [pic] The Harvard map of HRM A large part of this section in Human Resource Management, 4th edition is devoted to the Harvard 'map' of HRM. This is probably the most seminal model of HRM and has had a major influence on academic debate on the subject. 'We noted that the Harvard Business School generated one of the most influential models of HRM. The Harvard interpretation sees employees as resources. However, they are viewed as being fundamentally different from other resources - they cannot be managed in the same way. The stress is on people as human resources. The Harvard approach recognizes an element of mutuality in all businesses, a concept with parallels in Japanese people management, as we observed earlier. Employees are significant stakeholders in an organization. They have their own needs and concerns along with other groups such as shareholders and customers.' The Harvard...
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...ECO 302 WK 4 ASSIGNMENT 1 THE SOLOW GROWTH MODEL To purchase this visit here: Contact us at: http://www.activitymode.com/product/eco-302-wk-4-assignment-1-the-solow-growth-model/ SUPPORT@ACTIVITYMODE.COM ECO 302 WK 4 ASSIGNMENT 1 THE SOLOW GROWTH MODEL ECO 302 WK 4 Assignment 1 - The Solow Growth Model Write a four to six (4-6) page paper that answers the following: 1. Discuss the three (3) basic assumptions of the Solow Growth Model and analyze their compatibility with real-world economic conditions. 2. Analyze the effects of an increase in population growth on the growth rate of capital per worker. More Details of the Question are hidden... Activity mode aims to provide quality study notes and tutorials to the students of ECO 302 WK 4 Assignment 1 The Solow Growth Model in order to ace their studies. ECO 302 WK 4 ASSIGNMENT 1 THE SOLOW GROWTH MODEL To purchase this visit here: Contact us at: http://www.activitymode.com/product/eco-302-wk-4-assignment-1-the-solow-growth-model/ SUPPORT@ACTIVITYMODE.COM ECO 302 WK 4 ASSIGNMENT 1 THE SOLOW GROWTH MODEL ECO 302 WK 4 Assignment 1 - The Solow Growth Model Write a four to six (4-6) page paper that answers the following: 1. Discuss the three (3) basic assumptions of the Solow Growth Model and analyze their compatibility with real-world economic conditions. 2. Analyze the effects of an increase in population growth on the growth rate of capital per worker. More Details of the Question are hidden...
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...1 Population Growth William DiCarlo SCI/230 November 12, 2012 Casey Bulaclac 2 Population growth has increased rapidly due to the vast advancements in food production, medical technology, and sanitation infrastructure. Human births have drastically outpaced human deaths to a level which is unprecedented in human history(Petryni, 2012). It has become very important for individuals to understand this phenomenon of human growth by understanding the two main growth curves that are practiced by scientists. The first human growth is the exponential growth curve. With this curve, scientists believe that the population growth will remain fairly constant and the population will increase by double in a short period of time(Petryni, 2012). The reasoning behind this curve is that it plots an output of an exponential equation, hence the name exponential growth(Petryni, 2012). The second human growth curve is the logistic growth curve. Scientists that study this curve predict that the population will eventually level off as the growth rate approaches zero(Petryni, 2012). Scientists call this human growth curve the S- curve because of its strong resemblance to a large capital S when plotted correctly. The population growth rate does have a significant effect on our population. The more people brought into this world creates a strong demand for other resources. The demand for food, water, and shelter...
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...3. What is carrying capacity? Carrying capacity is the maximum, equilibrium number of organisms of a particular species that can be supported indefinitely in a given environment. 4. What types of organisms are more likely to follow an exponential growth curve (refer to week 5 textbook readings and lecture notes)? 5. What types of organisms are more likely to follow a logistic growth curve (refer to week 4 textbook readings and lecture notes)? Start EcoBeaker Virtual Labs and load the “Isle Royale” lab. Just like with the Keystone Predator lab it is recommended you print out and fill in your answers on the work book, then just type the requested answers onto this assignment. Exercise I Make sure you follow directions carefully. Insert your workbook answers below. 5.1. What is the approximate size of the stable moose population? 720 5.2. What was the maximum size the moose population attained? 970 5. The moose population grew fastest when it was a. Smallest b. medium-sized c. largest 6. Based on your graph, what is the carrying capacity of moose on the island? 720 5. I am not requiring you to dissect the logistic growth equation. If you feel...
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