TAILIEUCHUNG - Lecture Economics: Chapter 26 - Dean Karlan, Jonathan Morduch

Chapter 26 - Economic growth. In this chapter you will learn: How to calculate growth rate of real GDP per capita? What the relationship between productivity and growth is? What the factors that determine productivity are? Why there are differences between a country’s level of income and its rate of growth?. | Chapter 26 Economic Growth © 2014 by McGraw-Hill Education 1 What will you learn in this chapter? • How to calculate growth rate of real GDP per capita. • What the relationship between productivity and growth is. • What the factors that determine productivity are. • Why there are differences between a country’s level of income and its rate of growth. • How to assess evidence for and against convergence theory. • How good governance and economic openness can promote growth. © 2014 by McGraw-Hill Education 2 Economic growth through the ages Rapid economic growth is a modern phenomenon. During the 1800s, economic activity increased substantially. • During the 1900s, GDP grew faster than population, raising the standard of living for many. History of world economic growth: GDP per capita, 1000 BC to 2000 AD • Millions of people/ constant . dollars In the last 50 years, global GDP per capita quadrupled. 9,000 8,000 7,000 6,000 5,000 4,000 Little to no GDP growth. 3,000 World GDP Population Industrial Revolution 2,000 1,000 0 -1000 1 1000 1500 © 2014 by McGraw-Hill Education 1800 Year 1900 1950 1975 2000 3 1 Economic growth through the ages • From the previous chapter, we learned that combining real GDP with population data yields real GDP per capita. – Real GDP per capita describes the change in purchasing power for each person over time. • Given the growth rate in nominal GDP, real GDP per capita growth rate is calculated as: real GDP per capita growth rate = nominal GDP growth rate – inflation rate – population growth rate © 2014 by McGraw-Hill Education 4 Active Learning: Growth in Real GDP per capita Use the equation for calculating real GDP per capita growth to fill in the missing values. Country Nominal GDP Growth (%) Inflation (%) Population Growth (%) Panama 4 Guatemala 9 4 Italy Real GDP per capita Growth (%) 3 .4 © 2014 by McGraw-Hill Education 5 Compounding and the rule of 70 • Economic .

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