Lecture 20: Productivity Growth

1
Lecture 20 Productivity Growth

• Current events
• Review
• Productivity growth in an AD-AS model
• Growth Basic facts

2
AD-AS in Open Economy
e
i i E - E
infl. Approx 0 / disregard
E
dynamics
Y C(Y-T) I(Y,i) G NX(Y,Y, E P )

P
- Y Y( E P, G, T )
P
P(t) P (t-1) (1 ?) F(1-Y(t), z)
L
3
AS (given P(t-1))
P
AD (given E)
Yn
Devaluation dynamics / Adjustment to an
Overvaluation / Costs (expectations) Figures
21-1 / 21-2 / 21-3
4
Productivity Growth
YAN Agt1
W/P
Warning different from book
A
1 ?
1 1 ?
Price setting
Wage setting
u
Unemployment
n

Moreover, Y shifts by more than u
n
n
5
AS
P
AD
Y
Y
n
6
Growth

• Facts Figure 10-1 / table 10-1 / fig 10-2
• Sources of growth (per/capita) Capital
  accumulation / Technological progress
• Y F(K,NA) h.d. 1
• y (Y/NA) F(K/NA,1) f(k)
• figure 10-5

7
Solows Growth Model
A 1, N ct y f(k) S sY I S
K(t1) (1-d) K(t) I(t) gt k(t1) - k(t) s
f(k(t)) - d k(t) Figure 11-2