ECON 1202 Lecture Notes - Lecture 20: Creative Destruction, Human Capital, Production Function
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Document Summary
Original growth technologically critical: no real explanation of how technological change occurs. New growth: same framework, seek better understanding of what determines technical change, what drives it. First step: nations production capabilities are determined by labor: capital, human capital, natural resources tech development, entrepreneurial abilities land institutions. Y =f(l, n, k, h, e, technology (t), institutional framework). Production function: output = function of various factors. What do growth theories examine? looking at increases in capital and technological progress increases in capital per worker (k/l) increases labor productivity technological progress and human capital: better capital, bigger capital, all important! When talking about driving forces in labor productivity it is both capital and technology long term economic growth = innovation and technological change (this is more important) Why: not subject to law of diminishing returns, add more capital = output increases but at decreasing rate.
