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Chapter 3 Slide 1Copyright © 2003 Pearson Education, Inc.
Chapter 3 Slide 2Copyright © 2003 Pearson Education, Inc.
Historic Growth and Contemporary Development: Lessons and Controversies
Chapter 3
Chapter 3 Slide 3Copyright © 2003 Pearson Education, Inc.
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
Chapter 3 Slide 4Copyright © 2003 Pearson Education, Inc.
The Economics of Growth: Capital, Labor, and Technology Capital accumulation Population and labor force growth
Chapter 3 Slide 5Copyright © 2003 Pearson Education, Inc.
Figure 3.1 Effect of Increases in Physical and Human Resources on the Production Possibility Frontier
Chapter 3 Slide 6Copyright © 2003 Pearson Education, Inc.
Figure 3.2 Effect of Growth of Capital Stock and Land on the Production Possibility Frontier
Chapter 3 Slide 7Copyright © 2003 Pearson Education, Inc.
The Economics of Growth: Capital, Labor, and Technology Capital accumulation Population and labor force growth Technological progress
Chapter 3 Slide 8Copyright © 2003 Pearson Education, Inc.
Figure 3.3 Effect of Technological Change in the Agricultural Sector on the Production Possibility Frontier
Chapter 3 Slide 9Copyright © 2003 Pearson Education, Inc.
Figure 3.4 Effect of Technological Change in the Industrial Sector on the Production Possibility Frontier
Chapter 3 Slide 10Copyright © 2003 Pearson Education, Inc.
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
Chapter 3 Slide 11Copyright © 2003 Pearson Education, Inc.
Figure 3.5 Factor Accumulation Accounts for Only a Fraction of Growth
Chapter 3 Slide 12Copyright © 2003 Pearson Education, Inc.
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
Chapter 3 Slide 13Copyright © 2003 Pearson Education, Inc.
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
Chapter 3 Slide 14Copyright © 2003 Pearson Education, Inc.
Chapter 3 Slide 15Copyright © 2003 Pearson Education, Inc.
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?
Chapter 3 Slide 16Copyright © 2003 Pearson Education, Inc.
Figure 3.6 Convergence among OECD Countries but Divergence in the World as a Whole
Chapter 3 Slide 17Copyright © 2003 Pearson Education, Inc.
Figure 3.6 Convergence among OECD Countries but Divergence in the World as a Whole cont’d
Chapter 3 Slide 18Copyright © 2003 Pearson Education, Inc.
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
Chapter 3 Slide 19Copyright © 2003 Pearson Education, Inc.
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)