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Macroeconomic Analysis 2003

Macroeconomic Analysis 2003. Complementarity Between Human and Physical Capital and Economic Growth. Importance of Human Capital in Different Parts of the Economy. Capital Stock , Labour, GDP and Work Hours in UK in 2000.

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Macroeconomic Analysis 2003

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  1. Macroeconomic Analysis 2003 Complementarity Between Human and Physical Capital and Economic Growth Lecture 5

  2. Importance of Human Capital in Different Parts of the Economy Lecture 5

  3. Capital Stock , Labour, GDP and Work Hours in UK in 2000 Lecture 5

  4. Growth Experience is Outcome of Interaction between Human and Physical Capital Accumulation (www.HM-Treasury.co.uk) Lecture 5

  5. General Indicators of human capital • Education:literacy, numeracy and problem solving ability • Sound health and long life expectancy • Productive skills • Proportion of Independent Thinkers in the population • Opportunities for on the job training Lecture 5

  6. Specific Elements of Human Capital Lecture 5

  7. Investment and Productivity in UK (www.HM-Treasury.co.uk) Average annual % real changes, unless otherwise stated Lecture 5

  8. Human Capital and Types of Technical Advancement Y K L Base0 20 10 10 Lab Ag. 20 10 5 Cap Ag. 20 5 10 Neutral 20 5 5 Lecture 5

  9. Labour Augmenting Technology and Growth:A Simple Model Lecture 5

  10. How does the labour augmenting technological advancement affect the per capita capital and per capita output in the steady state? Advanced Technology Primitive Technology Lecture 5

  11. Increase in Real Wage Rate with Human Capital w2 MPKh2 w1 MPKh1 Technological advancement raises wage rate but reduces Work hours. Lecture 5

  12. Complimentarily of Human and Physical Capital and Output Lecture 5

  13. Human Capital Augmented Solow Growth Model Lecture 5

  14. Exogenous Technology in the Solow Model Lecture 5

  15. Why a Higher Saving Rate Does not Lead to a Higher Growth Rate in the Solow Model? High saving country Low saving country Because of diminishing returns to capital Lecture 5

  16. Economy grows only at the rate of technology and the Saving Rate does not affect the steady State growth rate in the Solow Model y This is due to the diminishing marginal Product of capital gy= gA time Lecture 5

  17. Human Capital, Savings and Economic Growth Lecture 5

  18. Constant Marginal Product of Capital with Human Capital r MPKh3 MPKh1 MPKh2 k1 k2 k3 Lecture 5

  19. Saving, Capital Accumulation and Output with Human Capital y k Lecture 5

  20. Complimentarily Between Physical and Human Capital Lecture 5

  21. What Can Policy Do to Improve the Human Capital and Technology? Lecture 5

  22. Lecture 5

  23. Human Capital Formation:Students and Teachers in Higher Education in the UKwww.dfes.gov.uk, www.hesa.co.uk Lecture 5

  24. Students in Higher Education in the UK by Subject Categories Lecture 5

  25. Simple version of the Lucas Model with Human Capital Lecture 5

  26. Production Function with Study Time and Capital Lecture 5

  27. Study Time and Growth of Human Capital Lecture 5

  28. Unbounded Growth Prospect with More Study and Growth of Human Capital (UK Example) Lecture 5

  29. Does an Advancement in the Technology Increase the Real Wage Rate of Every one Equally? • With mobility of labour across regions and sectors introduction of new technology should increase wages of all types of workers • But • Wage rates in the high tech and manufacturing sectors have grown at higher rate than in the service sectors • New technology replaces old technology and people with obsolete technology may become redundant and may spend a long time before finding a new job. Lecture 5

  30. Pessimistic and Optimistic View of Impact of Technology on Output and Employment Optimistic view Pessimistic view AS0 AS0 AS1 Price e0 AS1 p0 p0 p1 p1 AD1 AD0 Ad0 AD1 y1 y0 y0 y1 Reasons for Technology Adoption Reason for Trade Disputes Lecture 5

  31. Lecture 5

  32. Growth Rate of Per Capita Income and Human Development Index Among the slowest and Fastest Growers Lecture 5

  33. European Countries Have Better Human Capital to Grow Lecture 5

  34. Economically Important Innovations: Product of Genius, Active and Risk-loving People (Forbes Dec 2002) Lecture 5

  35. Human Capital in a Production Firm Decentralised System Centralised System Lecture 5

  36. Demand for Schools Depends on Population Growth Rate Lecture 5

  37. Exercises • Prove why saving rate does not affect the growth rate of output in the Solow model. • Analyse complementarity between human and physical capital with human capital augmented Solow model. • Find the steady state per capita output and capital stock with labour augmenting technological change. • A few economically important innovations • Real wage effect of the technology:two speed economy? Lecture 5

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