Economic Growth. Spring 2014. Christian Groth

Afterthoughts (follow-ups on lectures). Chronological.

10/2    1. On the arithmetic growth of life expectancy, look here. Notice the slope in Fig. 1: For every ten years, female life expectancy in the record-holding country increases by two and a half year!!

2. Comment to DA, Figure 1.15, p. 18:
In Levine, R., and D. Renelt (1992), A sensitivity analysis of cross-country growth regressions, American Economic Review, vol. 82, 942-963, the authors find that among over 50 different regressors only the share of investment in GDP, other than initial per capita income, is strongly correlated with growth.

3. Comment to DA, Ch. 2, p. 28, on the importance of the nonrival character of "ideas" or "technical knowledge":
Let A denote the "level of technical knowledge" and assume the production function Y = F(K, L, A) has CRS w.r.t. K and L and positive marginal productivities w.r.t. K and L. Average labor productivity is y = Y/L= F(K/L,1, A).  We see that the non-rivalry of technical knowledge implies that labor productivity depends on the total stock of knowledge, not on this stock per worker. In contrast, labor productivity depends on capital per worker, not on the total stock of capital. This is because capital is a rival good.
     
11/2    At the end of the lecture today I introduced the concept of skill-biased technical change in the sense of Hicks. A Short Note about this is here.

21/2    A prominent example of innovations that are capital-saving in the sense of Harrod is the enormous technological improvements within computing that we have witnessed in economic history. See Nordhaus, W. D., 2007, Two centuries of productivity growth in computing, J. Econ. History, vol. 67 (1), 128-159.

4/3    1. In the lecture today, I decided to say that all of the Kremer (1993) article is cursory reading. This is because although the article makes very deep and interesting points, it is written in a not reader-friendly way. The important points that you should nevertheless pay attention to are:
    1. The empirical evidence in Figure I.
    2. The phase diagram in Figure IV (the diagram is more intuitive if you reverse the axes as I did in the lecture).
    3. The empirical evidence discussed at p. 710-711.

2. Here is a summary concerning institutions (rules of the game in society and rules about how to change rules of the game): They are of key importance for economic performance because they affect incentives, room to manoeuvre, feeling of justice, social trust, and scope for cooperation and exchange.

12/3    Haste is waste! Towards the end of yesterday's lecture I claimed that the section of the saddle path positioned between k_tilde(0) and k_tilde* satisfies all the conditions for being an equilibrium path. I claimed this a little early because I had not yet introduced the parameter condition (A1). This condition is necessary for the transversality condition of the household to be satisfied along the saddle path. And therefore the saddle path cannot be an equilibrium path unless the condition holds.
    Hence one should introduce the condition (A1) before talking about the saddle path being an equilibrium path. This notwithstanding, an additional noteworthy role of (A1) is that it can be shown to be both necessary and sufficient for the improper utility integral U_0 to be bounded along any technically feasible path.

 6/5    In Lecture Notes, Chapter 15, p. 263-264, I use a rather nonchalant notation, N_dot_t, for the conditional capital gain, that is, the increase per time unit in the market value of the monopoly firm at time t, conditional on its monopoly position remaining in place also in the next moment. I should have added, for instance, a "+" as a top index on the N_dot_t.  

13/5    In the lecture 6/5 I claimed that the Jones version of the horizontal innovations model lead to a four-dimensional dynamic system and that the transitional dynamics was therefore complicated. This referred to the original Jones (1995) article which includes specialized physical capital goods (durable goods). The version presented in Acemoglu §13.3 is somewhat simpler because it has only specialized intermediate goods (non-durable input goods).
    Among many other things, today we touched upon questions in Discussion Forum about the relationship between inequality and growth. I promissed to post some references here. At the end of this lecture note from 2010 there is a list of references. The meticulous empirical study from AER 2000 I mentioned is Forbes (2000) in the list. I also mentioned Perotti, J. Ec. Growth, 1996, no. 2. Both are available online from the library, of course.