A CAUTIONARY FINAL NOTE

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A CAUTIONARY FINAL NOTE This chapter has described the problems and prospects of poor countries struggling to be rich and free-s-to provide the dry houses, education. electric lights, fast horses, automobiles, and long vacations of the excerpt that opened this.chapter. What are the prospects of attaining these goals?We close with a hopeful note and sober warning from Sachs and Warner The […]

From Marx to Market

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From Marx to Market Beginning in 1989, the countries of Eastern Europe and the former Soviet Union rejected the communist experiment and .introduced market economies. A cruel joke heard in Eastern Europe is “Question: What is communism? Answer: The longest road from capitalism to capitalism. Having decided to take the road back to a market economy, a command economy has an’ arduous […]

Balance Sheet.

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Balance Sheet. Is there a final balance sheet on the experience with Soviet central planning? The Soviet model demonstrated that a command economy can work-it is capable of mobilizing capital and labor and producing both guns and butter. But the Soviet economy, with borders closed to trade, technologies, and people, became increasingly obsolete over time. Innovation withered because of poor incentives. In competition […]

A brave new world for productivity?

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A brave new world for productivity? Economists have been waiting for an upturn in productivity growth. hoping that the revolution in information technology would spur rapid growth throughout the economy. Indeed; innovations in information technology (computer hardware. software. and communications) have produced astonishing improvements in every comer of the economy. The prices of computers have fallen more than a thousand- fold in […]

Explaining the Slowdown

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Explaining the Slowdown Studies of productivity point to a number of unfavorable factors converging on the American economy at about the same time, including the following: • Beginning in the 970 s, environmental regulations required that firms spend substantial sums 011 plant and operations reduce pollution and Over the long run, real wages’tend to move with trends in labor productivity. After the […]

THE PRODUCTIVITY SLOWDOWN

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THE PRODUCTIVITY SLOWDOWN Given the importance of productivity to living standards, economists viewed with alarm the decline in U.S. productivity growth. This break in the trend •. which is called the productivity slowdown, can be seen in Figure 27-8. This graph shows the growth in labor productivity in the private business economy. (Growth in multi factor productivity-has peen somewhat lower hut shows […]

Detailed Studies

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Detailed Studies More thorough studies refine the simple calculation but show quite similar conclusions. Table 27-3 on page 584 presents the results of studies by the Department of Labor for. the 1948- 1997 period. Doling this time, output (measured as gross output of the private business sector) grew at an average rate of 3.5 percent per year, while input growth (of capital, […]

Numerical Example

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Numerical Example To determine the contributions or labor, capital, and other factors ill Plimsoll growth. we substitute Representative numbers for the period 1900-1 ) into equation the growth of  Since  worker hours have grown and has growl per year. 1.8 = Y4 (1.2) + T.e. = 0.3 + 1.5 Thus of the 1.8 percent-per-year increase in output per worker, […]

The Growth-Accounting Approach

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The Growth-Accounting Approach Growth accounting usually begins with the ago aggregate production function we .met earlier in this chapter. Q = AF( K. L. R) ..Often resources are omit· ted because land is constant. Using elementary calculus and some simplifying assumptions, we can express the growth of output in terms of the growth of the inputs plus the contribution of technological change. […]

The Sources of Economic Growth

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The Sources of Economic Growth We have seen that advanced market economies grow through increases in labor and capital and by technological change as well. But what are the relative contribution’s of labor, capital, and technology? To ,answer this question, we turn to an analysis of the quantitative aspects of growth and of the useful approach known as growth accounting. This […]