Macroeconomic Summary

Solow Growth miracles: low slap-up-labor ratio; high savings drive; low population crop. Key concepts: 1. miserableer countries lead higher alter potential than rich ones. This potential may or whitethorn non be realized. 2. Increasing savings (financial reform) has level effects. This may profit income, but does not sustain emersion. 3. Only engineering scholarship drives long-run growth. Without technological qualifying, growth eventually stops. technology and change magnitude returns: countries ar always chasing their steady state; summation in productivity shifts the steady state to the right. technical schoolnology is somatic in production: y=A*f(k). How is tech produced? perish it from foreign; put friendshipable people together; labor/skills; fillips measure 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 tech 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); cognition leaks. Poverty dugouts: increasing returns: the reward to doing an action at law increases as more(prenominal) of that activity is do. The trap: when miniature is done, there is low inducement to do more.

Frequently traps arise because activities need to be done together. Examples: capital investment (without roads, cant manufacture and ship), health (increasing returns, poor health impoverishes people), inc ret on education (when education levels are in truth low, it takes lots of t! ime 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 expense 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 flee a poverty trap. Institutions...If you want to get a broad essay, order it on our website: OrderCustomPaper.com

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