Week 6: Growth in developed and

It is very critical to understand why some countries prosper while others backwards in poverty.

From an executive manager, they need to decide 1) whether to offshore production  2) location of supply chain  3) where to open new market

From portfolio manager, they need to decide the global diversification.

1. The long term horizon of growth

Economic growth is the expansion of potential GDP beyond its current limits.

2. Different Path, Common traits

1) The four wheels of growth:

    1.1 quality and quantity of human resource

          quality: skills, knowledge and discipline.

    1.2 the abundance of nature resources.

    1.3 The rate of capital formation (machine, factories, and so on)

    1.4 The state of Technology  ( the seamless technology innovation push out the production possibility frontier.)

Other factors: political system, degree of corruption, culture nature

This model ingored the  scarce of land and the rent of land Week 6: Growth in developed and developing worlds Week 6: Growth in developed and developing worlds Week 6: Growth in developed and developing worlds Week 6: Growth in developed and developing worlds

However, these classic models ingored the technology innovation and productivity shift.

Neoclassic Growth Model-Technology

During the absence of technology change, the capital deepening will lead to non proportional increase in output, because of the ration of capital-of-labor.

Week 6: Growth in developed and developing worlds

If the economy consists of only capital accumulation through replicating factories with existing methods of production, then, the living standard of the nation will eventually stop rising.

Malthusism Trap: high birth rate compound with stagnant income will result in the poverty situation for developing countries.

The Nature Resource Curse predicted the looting of resources based by the ruling of elites in countries of poorly developed political system.

Week 6: Growth in developed and developing worlds Week 6: Growth in developed and developing worlds Week 6: Growth in developed and developing worlds Week 6: Growth in developed and developing worlds Week 6: Growth in developed and developing worlds Week 6: Growth in developed and developing worlds Week 6: Growth in developed and developing worlds