多恩布什＜宏觀經(jīng)濟學＞第八版第四章英文答案

1、CHAPTER 4GROWTH AND POLICYChapter Outline:· Endogenous growth theory· Constant and increasing returns to scale· Private and social returns to capital· Absolute convergence· Conditional convergence· The poverty trap· The golden rule capital stock· Growth in Asi

2、a· Reforms in Eastern Europe· Limits to growthChanges from the Previous Edition:Chapter 4 has only been slightly updated with no major changes in the material presented. Introduction to the Material:There is no easy explanation for the fact that different countries experience wide variatio

3、ns in their economic growth rates. Chapter 4 sets out to explain what policy options countries have to affect their growth in income per capita. Industrial countries may fare best if they devote resources to research and development that will lead to technological improvements. Developing countries,

4、 on the other hand, may achieve better results by investing in human capital and getting new technology either through direct foreign investment or by borrowing funds to pay for new physical capital. Poor countries with a high population growth may also want to consider population control policies.W

5、hile the neoclassical theory developed in Chapter 3 makes it clear that technological progress is essential for long-term growth, it does not clarify which factors affect such progress. Therefore the neoclassical growth model needs to be expanded to take endogenous (self-sustained) growth and the po

6、licy options that enhance it into consideration. The neoclassical growth model treats the growth rate as exogenous, while the endogenous growth model uses a framework that attempts to explain how government policies and economic behavior can affect technological advances. In order to do this, the mo

7、del assumes that the rate of technological progress is determined by the proportion of an economy's resources that is devoted to research and development and that the steady-state growth rate is affected by the rate at which the factors of production are accumulated. The major conclusion of endo

8、genous growth theory is that countries with different savings and investment rates should have persistent differences in their economic growth rates. Surprisingly, however, most empirical evidence appears to support the notion that differences in the savings and investment rates affect the growth ra

9、te of output per capita only for a transitional period. A higher level of investment leads to a higher level of per capita income but not a higher per capita income growth. This is referred to as conditional convergence.Neoclassical growth theory assumes a production function with a diminishing marg

10、inal product of capital. The savings function sy = sf(k) is curved, which ensures an intersection with the (n + d)k-line (the investment requirement line) at a stable steady-state equilibrium. Convergence to a steady-state solution will always take place, since the capital stock per head (k) increas

11、es (decreases) as soon as saving (sy) and hence gross investment becomes greater (smaller) than the investment requirement (n + d)k.However, if one assumes a constant marginal product of capital, then an intersection of these two lines is no longer possible. One of the major assumptions in endogenou

12、s growth models is that more saving allows more investment and, as a by-product of more capital investment, better technology. In other words, new investment does not simply produce new machines but also new ways of doing things. Since new ideas and methods are easily copied, we have to distinguish

13、between private (internal) and social (external) returns to capital-an idea first advanced by Paul Romer. Therefore, in order to explain long-term growth, it is important to understand the role of research and development and investment in human capital.But how can we explain the fact that countries

14、 like Japan, the U.S., Taiwan, South Korea, and others have experienced high growth, while Bangladesh experienced almost no growth over a long time period? The explanation combines elements of both the neoclassical and endogenous growth theory. Assume we have a production function that starts with a

15、 curved section (assuming a diminishing marginal product of capital) and ends with a straight section (assuming a constant marginal product of capital). Then we can have a steady-state equilibrium at a low-income level and a low capital-labor ratio and ongoing growth (a disequilibrium) at a high-inc

16、ome level and a high capital-labor ratio.While policies that can bring about further advances in technology may be of great importance for highly developed countries, many of the poorest countries around the globe choose to focus on policies that can influence population growth. A reduction in popul

17、ation growth may be difficult to achieve, however, since children often provide a form of "social security" for families in poor countries. If population growth can be influenced and is therefore endogenous, then the investment requirement is no longer a straight line but a curved one. Suc

18、h a situation is shown in Figure 4-3, and from this graph two implications can be drawn. A low-income, high-population-growth country can escape the so-called poverty trap either by increasing the savings rate (which will raise income above a certain level) or by shifting the investment requirement

19、down (by lowering population growth). Since very poor countries are often hard-pressed to invest in either physical or human capital, and since attracting direct foreign investment or foreign funds for investment is often difficult, controlling population growth seems to be the only feasible alterna

20、tive.To obtain funds needed for sufficient domestic investment in physical or human capital, developing countries have three options: they can solicit direct foreign investment; they can borrow on world capital markets; or they can ask for foreign aid. Operating in a stable economic and political fr

21、amework is important for such countries if they want to attract foreign funds. But the productivity of the resulting investments often varies widely across countries, since resources are not always used efficiently. Development strategies should therefore also focus on effective resource utilization

22、. Much can be learned from the example of the Asian Tigers, that is, South Korea, Taiwan, Hong Kong, and Singapore.The challenges faced by the transformation of the market systems in the countries of Eastern European also provide fertile ground for the discussion of policy measures geared towards im

23、proving living standards. The decline in GDP in these countries in the early 1990s was largely due to disorganized markets that lacked properly assigned property rights or bankruptcy rules and an insufficiently developed banking system. In addition, it became necessary to replace outdated production

24、 technology on a large scale, which caused further disruption. While basic reform strategies have been developed, it will take a long time for most of these countries to catch up with the living standards of Western European countries. Suggestions for Lecturing:The material in Chapter 4 is likely to

25、 create more enthusiasm than the material in the previous chapter, since students are more interested in discussing real world problems than theoretical models. The international comparisons in economic performance, ways in which productivity growth can be increased, the lessons learned from the Asi

26、an Tigers, the challenges faced by the countries in Eastern Europe, and policies for economic development all provide good opportunities for lively classroom discussions. It may be particularly interesting to discuss not only the success of the Asian Tigers from 1966-1990, but also the origins of th

27、e Asian Crisis in 1997-98. Similarly, instructors may want to compare the continuous struggle of Russias economy with other, more successful Eastern European economies.While it is important for students to be at least somewhat familiar with the theoretical framework of the endogenous growth model, a

28、nd its major implications, most instructors will probably shy away from an in-depth discussion of the sections marked as optional. However, students should be familiar with the concepts of diminishing, constant, and increasing returns to scale and their implications for economic growth.One of the mo

29、st interesting aspects of endogenous growth theory is the differentiation between private (internal) returns to capital and social (external) returns to capital. By devoting more funds to research and development of new technology, better ways of doing things can be found, new ideas can be created a

30、nd, as a result, even more will be invested in new capital. While such a virtuous cycle can be created fairly easily by highly industrialized countries, it is a much more difficult task for the poorest countries of the world, which often barely have the means to feed enough people to bring in the ne

31、xt harvest.Poor countries find themselves in a poverty-trap, and students are often very interested in discussing both this concept and policies designed to escape the trap. Many developing countries have a high population growth and insufficient means to achieve the technological progress that coul

32、d lead to a significant increase in living standards. These countries often have difficulty finding the means to invest in either physical or human capital. Attracting direct foreign investment is only possible if the political climate is right, and borrowing foreign funds is only a good solution if

33、 the funds are invested wisely. The efficiency of resource utilization is often more important than the level of investment spending. In addition, a country that decides to concentrate on investing in physical capital while ignoring the need to invest in human capital may achieve higher growth in th

34、e short run but will ultimately lose in the long run.A more feasible alternative to increasing the standard of living in a very poor country with a high population growth is to control population growth by encouraging contraception or sterilization or through tax policies. However, such policies are

35、 not easily implemented and success is not always guaranteed. Education, that is, investment in human capital, is also a very important element. The old saying that "a nation's most precious resource is its people" still holds true. Unfortunately, while the rate of return on education

36、tends to be quite high, it is also a very slow process. Some evidence suggests that for developing countries, the education of women is of particular importance (and pays off handily), since women often have the primary responsibility for education, health, and even farming. In contrast to neoclassi

37、cal growth theory, endogenous growth theory predicts that countries with a higher savings rate will experience a higher long-term growth rate. This suggests that poor countries can significantly increase their rate of economic growth through deliberate investment strategies. However, it is impossibl

38、e to predict with certainty whether low-income countries can ever succeed in catching up with the standard of living of high-income countries. Empirical evidence suggests slow conditional convergence, that is, the positive impact of a higher level of saving and therefore investment is only transitor

39、y, leading to a higher level of income per capita but not a higher economic growth rate. Countries will converge to steady states, depending on the ratio of investment to GDP and the rate of investment in human capital. However, the process of convergence is extremely slow.The lesson learned from th

40、e experience of the Asian Tigers is that saving, hard work, and increased competition lead to strong economic performance. The countries which achieved enormous growth between 1966 and 1990 have several elements in common: increased use of inputs (both labor and capital), emphasis on education, an o

41、pen economy with strong encouragement to export, and a high level of competition. Students may be interested in discussing whether the strategies employed by these countries might also work for countries at different stages of development, including the U.S., that are faced with a decline in their p

42、roductivity growth. As mentioned earlier, however, the Asian crisis of 1997-98 serves as a good example of the fact that economic success cannot be taken for granted. Discussing not only the origins of the crisis but also what it took for these countries to recover from this crisis is a valuable und

43、ertaking. A final topic that will probably be of great interest to students is the transition of the nations of Eastern Europe to a free market system. The challenges involved in such vast economic reform were overwhelming and it will take many years for these countries to achieve standards of livin

44、g comparable to those of Western industrial countries. It should be noted that improved economic performance in these countries brings both benefits and perils, including increased crime, social unrest, and growing inequities between the nouveau-rich and the less fortunate (particularly the elderly)

45、. Students are generally eager to offer solutions for the problems of these countries and lively discussions of the advantages and disadvantages of capitalism and the optimal degree of government involvement in economic activities often result.Additional Readings:Barro, Robert, “Economic Growth in a

46、 Cross Section of Countries,” Quarterly Journal of Economics, May, 1991.The Economist, “Russian Economy: Surplus to Requirements,” July 8, 2000.The Economist, “Growth is Good,” May 27, 2000.The Economist, “South-East Asia: The Tigers Changed Their Stripes,” February 12, 2000.The Economist, “Why Did

47、Asia Crash?” January 10, 1998.Fisher, Stanley, Reforming World Finance: Lesson from a Crisis,” The Economist, October 3, 1998.Fisher, S., Sahay, R. and Vegh, C., “Stabilization and Growth in Transition Economics,” Journal of Economic Perspectives, Spring, 1996.Galor, O. and Weil, D., “From Malthusia

48、n Stagnation to Modern Growth,” American Economic Review, May, 1999.Grossman, G. and Helpman, E., “Endogenous Innovation in the Theory of Growth,” Journal of Economic Perspectives, Winter, 1994.Hoenig, Thomas, “The Asian Financial Crisis,” Economic Review, FRB of Kansas City, Second Quarter, 1998.Ki

49、ngston-Mann, Esther, “How Do We Understand Russias Crisis?” Challenge, January/February, 1999.Lucas, Robert E., “On the Mechanics of Economic Development,” Journal of Monetary Economics, July, 1988.Mancur, Olson, “Big Bills on the Sidewalk: Why Are Some Nations Rich and Others Poor?” Journal of Econ

50、omic Perspectives, Spring, 1996.Mankiw, Gregory, “The Growth of Nations,” Brookings Papers on Economic Activity, 1995.McCallum, Bennett, “Neoclassical versus Endogenous Growth: An Overview,” Economic Quarterly, FRB of Atlanta, Fall 1996. Reed, John, “Explaining the Gap,” The Wall Street Journal, Sep

51、tember 27, 1999.Romer, Paul, “The Origins of Endogenous Growth,” Journal of Economic Perspectives, Winter, 1994.Romer, Paul, “Increasing Returns and Long-Run Growth,” Journal of Political Economy, October, 1986.Romer, Paul, “Endogenous Technological Change,” Journal of Political Economy, vol. 98, 19

52、90.Solow, Robert, M. "Growth Theory and After," American Economic Review, June, 1988.Temple, Jonathan, “The New Growth Evidence,” Journal of Economic Literature, March, 1999. Whitt, Joseph, “The Role of External Shocks in the Asian Financial Crisis,“ Economic Review, FRB of Atlanta, Second

53、 Quarter, 1999.Young, Alwyn, “The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience,” Quarterly Journal of Economics, August, 1995.Learning Objectives:· Students should be able to explain the difference between exogenous and endogenous growth.· S

54、tudents should know that endogenous growth theory can imply either that technological progress is endogenous or that there are constant returns to scale.· Students should be familiar with the concept of an aggregate production function that displays constant, increasing, or decreasing returns t

55、o scale.· Students should be aware that technological progress is an important factor in achieving growth in output per capita and that the major components leading to technological progress are advances in knowledge and efficiency that come from increased research, education, and training.

56、83; Students should be familiar with the distinction between private and social returns to capital. · Students should be aware that, contrary to the prediction of the endogenous growth model, the notion of conditional convergence seems to hold, that is, countries with higher savings rates will

57、not achieve higher long-term growth rates.· Students should be able to evaluate the options available to developing nations for increasing their economic growth rate. This includes the lessons learned from the Asian Tigers as well as strategies to help poor countries escape the poverty trap.

58、83; Students should be aware that economic growth cannot be taken for granted and should be familiar with some of the reasons for the Asian financial crisis.· Students should be aware of possible reform strategies that countries in Eastern European can employ to move their economies towards fre

59、e market economies.Solutions to the Problems in the TextbookConceptual Problems:1.Endogenous or self-sustained growth supposedly can be achieved by policies that affect a nation's savings rate and therefore the proportion of GDP that goes towards investment. The neoclassical growth model of Chapter 3 predicted that long-term growth can only be achieved through technological progress and that changes in the savings rate have only transitory effects. The endogenous growth model, however, predicts that countr