2. The key statistic used to track economic growth is
real GDP per capita.
Real GDP per capita is real GDP (GDP adjusted for
inflation) divided by the population size (to isolate
the effect of changes in the population.
Growth in real GDP per capita serves as a useful
summary measure of a country’s economic
progress over time.
3. Long-run economic growth is normally a gradual
process in which real GDP per capita grows at
most a few percent per year.
The Rule of 70 is used to measure the time it
takes a variable that grows gradually over time to
double. To find that period of time, we need to
divide 70 by that variable’s annual growth rate.
Number of years for a variable to double =
ퟕퟎ
풂풏풏풖풂풍 품풓풐풘풉 풓풂풕풆 풐풇 풕풉풆 풗풂풓풊풂풃풍풆
(Note: the Rule of 70 can be applied only to a positive growth
rate)
4. Some countries have been notably successful in
growing over time. For example: China, United
States
Other countries have had very disappointing
growth over time. For example: Argentina,
Zimbabwe
What explains these differences in growth rates?
5. Long-run growth depends almost entirely on one
ingredient: rising productivity.
Sustained growth in real GDP per capita occurs
only when the amount of output produced by the
average worker increases steadily.
The term labor productivity (or productivity) is
used to refer either to output per worker, or to
output per hour (as the number of hours worked
by an average worker differs across countries)
6. Productivity (output per worker) is found by
dividing real GDP by the number of people who are
working.
An economy could, in the short run, put a higher
percentage of its population to work in order to
experience an increase of growth in output per
capita.
7. Over the long-run, the rate of employment growth
is not very different from the rate of population
growth
In general, oveall real GDP can grow because of
population growth, but any large increase in real
GDP per capita must be the result of increase
output per worker. That is, it must be due to
higher productivity.
8. There are three main reasons why an average
worker today produces more than a worker
produced in the past:
1. The modern worker has far more physical capital
to work with.
2. The modern worker is much better educated and
so possesses much more human capital.
3. Modern firms have the advantage of an
accumulation of technical advancements reflecting
a great deal of technological progress.
9. Capital refers to manufactured goods used to
produce other goods and services.
Physical capital make workers more productive.
10. It’s not enough for a worker to have good
equipment- he needs to know what to do with it.
Human capital refers to the improvement in labor
created by the education and knowledge embodied
in the workforce.
Analyses based on growth accounting suggest that
education, and its effect on productivity, is even a
more important determinant of growth than
increases in physical capital.
11. Progress in technology is probably the most
important driver of productivity growth.
Technology is broadly defined as the technical
means for the production of goods and services.
Workers are able to produce more than workers in
the past, even with the same amount of physical
and human capita, because technology has
advanced over time.
12. Historians note that past economic growth has
been driven not only by major inventions, like
the railroad or the semi-conductor chip, but by
thousands of modest innovations, such as the
flat-bottomed paper bags or Post-it notes.
Experts attribute much of the productivity
surge that has taken place to new technology
adopted by retail companies like Wal-mart.
