Macroeconomics - CH24 Long-Run Economic Growth

Diminishing returns to physical capital is an “other things equal” phenomenon: additional amounts of physical capital are less productive when the amount of human capital per worker and the technology are held fixed! Diminishing returns may disappear if we increase the amount of human capital per worker, or improve the technology, or both at the same time the amount of physical capital per worker is increased.

That is, when the amount of human capital per worker and the state of technology are held fixed, each successive increase in the amount of physical capital per worker leads a smaller increase in productivity.

government policies, property rights political stability, and good governance

1. Government Subsidies to Infrastructure (roads, power lines, ports, informatin networks, clean water supplies etc.)
2. Government Subsidies to Education (government spending on education)
3. Government Subsidies to R&D (important R&D is done by goernment agencies)
4. Maintaining a Well-Functional Financial System (making high rates of private investment spending possible)

Property rights are the rights of owners of valuable items to dispose of those items as they choose. A subset, intellectual property rights, are rights of an innovator to accrue the rewards of her innovation.

The state of property rights generally, and intellectual property rights in particular, are important factors in explaining differences in growth rates across economies. That’s because no one would bother to spend the effort and resources required to innovate if someone else could appropriate the innovation and capture the rewards.

A patent is a government-created temporary monopoly given to an innovator for the use or sale of his or her innovation. It’s a temporary rather than permanent monopoly because while it’s in society’s interests to give an innovator an incentive to invent, it’s also in society’s interest to eventually encourage competition.

 the great energy transition.

i. 4,584 / 41,038 = 0.112 = 11.2%

ii. 588 / 41,038 = 0.014 = 1.4%

iii. 588 / 4,584 = 0.128 = 12.8%

Middle-income countries: 70/4.4 = 15.9 years

Low-income countries: 70/2.3 = 30.4 years

High-income countries: 41,038 x 2 = 82,076

Middle-income countries: 4,584 x 2 x 2 x 2 x 2 = 73,344

Low-income countries: 588 x 2 x 2 = 2,352

1. Highest: China, Bangladesh, South Korea, Russia, Argentia
   Lowest: Ireland, UK, Nigeria, US, Mexico
2. Highest: China, Nigeria, Bangladesh, Russia, South Korea
   Lowest: Mexico, Japan, US, Canada, UK
3. Yes. Four of the fice countries with the highest growth rate in per capita CO₂ emissions also have the highest growth rate in real GDP per capita: China, Bangladesh, Russia, and South Korea. Three of the five countries with the lowst growth rate in per capita CO₂ emmissions also have the lowest growth rate in real GDP per capita: the US, Mexico, and the UK.
4. Although growth rates in GDP per capita and CO₂ emissions per capita are linked, the experience of Nigeria and, to a lesser extent, Ireland shows that it is possible both to have a high growth rate of GDP and to reduce CO₂ emissoins. This can be done in a variety of ways, including using alternative energy sources and better designs for buildings and automobiles. Estimates suggest that large CO₂ reductions would put only a minor dent in long-run GDP per capita growth.
5. Some reasons:
   - Some countries "outsourced" (UK) heavy industry to other countries (China) some not (Japan, Korea)
   - Some Countries have high GDP per capita as a result of being commodity exporters starting from a very low level (Nigeria)