Transcript 5th Edition - California State University Channel Islands

CHAPTER
CHAPTER
11
Growth in production and income
over decades and centuries
Chapter outline and
learning objectives
Growth in production, health and leisure over
decades/centuries
The Industrial Revolution and Enlightenment
Productivity
Factors of production: physical capital;
human capital; ideas and technology; social,
legal and political institutions; natural
resources and geography
Diminishing marginal productivity
Positive externalities and public goods
International trade and finance
Population growth
1
Growth in production over decades/centuries
For many countries, the
real value of domestic
production per person or
per capita has grown over
generations.
In the US, the real value
of domestic production
per person has risen by
more than a factor of 8
since 1900.
The real value of US domestic production
per person (capita), 1900-2012
The average American produces and buys more than 8 times as
many goods and services in markets now as in 1900.
© 2015 Pearson Education, Inc.
2
Growth in production over decades/centuries
Country
Japan
Brazil
Mexico
Germany
Canada
China
United States
Argentina
United Kingdom
India
Indonesia
Pakistan
Bangladesh
Period
1890-2008
1900–2008
1900–2008
1870–2008
1870–2008
1900–2008
1870–2008
1900–2008
1870–2008
1900–2008
1900–2008
1900–2008
1900–2008
Price-adjusted value of Price-adjusted value of
marketable production
marketable production
Average
per person at beginning
per person at end of
growth rate per
of period (in US$ in 2008) period (in US$ in 2008)
year
1504
35220
2.71
779
10070
2.40
1159
14270
2.35
2184
35940
2.05
2375
36220
1.99
716
6020
1.99
4007
46970
1.80
2293
14020
1.69
4808
36130
1.47
675
2960
1.38
891
3830
1.36
737
2700
1.21
623
1440
0.78
Source: Robert J. Barro and Xaivier Sala-i-Martin and World Development Report
3
Value of domestic production
per person in 2011†
The value of
marketable domestic
production per person
varies widely across
countries.
Average growth rate of domestic
production from * to 2011
* from
Singapore
51146
7.8%
1961
US
42244
3.2%
1951
Australia
38513
3.6%
1951
Canada
36704
3.6%
1951
Germany
35361
3.5%
1951
UK
32093
2.4%
1951
Japan
31867
4.8%
1951
Korea
30051
7.0%
1951
Saudi Arabia
27942
4.4%
1971
Spain
25748
4.2%
1951
Portugal
20071
3.8%
1951
Russia
14899
0.8%
1991
Argentina
14765
3.0%
1951
Iran
14478
5.0%
1951
Chile
14280
4.2%
1951
Mexico
12575
4.5%
1951
China
10538
7.8%
1951
Brazil
9391
5.1%
1951
Indonesia
4600
5.4%
1960
Source: Penn World Table
Version 8.1,
Philippines
4516
4.4%
1951
India
3780
5.1%
1951
http://knoema.com/PWT2015/pennworld-table-8-1?action=download
Honduras
3143
3.7%
1951
Nigeria
2480
4.0%
1951
Bangladesh
1888
3.6%
1960
Kenya
1702
3.8%
1951
Mali
1101
3.7%
1960
†Value
of domestic production is
measured in US$ using prices
from 2005
Value of domestic production
per person in 2011†
Growth rates of
marketable domestic
production per person
per year also varies
widely across
countries.
of domestic production is
measured in US$ using prices
from 2005
* from
China
10538
7.8%
1951
Singapore
51146
7.8%
1961
Korea
30051
7.0%
1951
Indonesia
4600
5.4%
1960
Brazil
9391
5.1%
1951
India
3780
5.1%
1951
Iran
14478
5.0%
1951
Japan
31867
4.8%
1951
Mexico
12575
4.5%
1951
4516
4.4%
1951
Saudi Arabia
27942
4.4%
1971
Spain
25748
4.2%
1951
Chile
14280
4.2%
1951
Nigeria
2480
4.0%
1951
Kenya
1702
3.8%
1951
20071
3.8%
1951
Mali
1101
3.7%
1960
Honduras
3143
3.7%
1951
Australia
38513
3.6%
1951
1888
3.6%
1960
Philippines
†Value
Average growth rate of domestic
production from * to 2011
Portugal
Source: Penn World Table
Version 8.1,
Bangladesh
Canada
36704
3.6%
1951
http://knoema.com/PWT2015/pennworld-table-8-1?action=download
Germany
35361
3.5%
1951
US
42244
3.2%
1951
Argentina
14765
3.0%
1951
UK
32093
2.4%
1951
Russia
14899
0.8%
1991
Growth in health over decades/centuries
With rising incomes, we
can afford more and better
health care and diets,
• and therefore expect to
live longer lives.
Life expectancy at birth by country, 1900 and 2013
© 2015 Pearson Education, Inc.
6
Growth in health over decades/centuries
Charles Kenny at the World Bank
argues that many African countries
have not seen rapid increases in
production,
• but some have still seen rapid
advances in health, education,
and civil and political liberties.
William Easterly similarly argues that
changes in health, education and
liberties can occur independently of
changes in production
• and therefore improve a nation’s
standard of living.
Nonetheless, there is usually an association between production per
person and health because health services and education are produced.
7
Growth in leisure over decades/centuries
With rising incomes, we
can also afford more and
leisure, and not have to
work as hard or as long.
As lifetimes increase due
to better health, we can
have a longer retirement.
Better technologies mean
less time and effort are
required to produce the
same amount of goods and
services.
© 2015 Pearson Education, Inc.
Lifetime hours of leisure in the US, 1880,
1995, 2040 (est.). Source: Robert Vogel
8
Growth in production over decades/centuries
Economic growth is not inevitable.
• Most of human history has seen little improvement in production:
•
For the average person, economic life in 1800 was not much different than
economic life in 800 or even 800 B.C.,
•
although kings and nobles could enjoy lavish lifestyles, especially after
1500.
• Poor countries today still live basically in the same way that they
did centuries ago.
• Many fear that the 21st century will be a period of a “new normal” in
which we have reached the limits of growth
•
and that income and economic welfare will stagnate.
9
Growth in production over decades/centuries
On the other hand, some countries have seen huge economic
improvements during the last 30-60 years:
• Singapore, Korea, Malaysia, Taiwan, Portugal, Spain, Brazil,
Mexico and even China and India.
10
Real value of domestic production per person in 2012
The real (price-adjusted) value of domestic production per person in US$, by country in 2012
© 2015 Pearson Education, Inc.
11
A typical family with all their possessions in the UK,
a rich country
Value of marketable
production per
person: $33,386
Life expectancy:
79 years
Adult literacy: 99%
12
A typical family with all their possessions in Mexico,
a middle income country
Value of marketable
production per
person: $11,630
Life expectancy:
76 years
Adult literacy: 92%
13
A typical family with all their possessions in Mali,
a poor country
Value of marketable
production per
person: $999
Life expectancy:
50 years
Adult literacy: 46%
14
Growth in production over decades/centuries
Why have some countries been able to produce more per person and
now enjoy an improving economic lifestyle, while others have not?
We start to address this question by realizing that rich countries today
were once poor:
15
The Industrial Revolution and Enlightenment
Significant growth in production per person did not really begin in the
world until the Industrial Revolution in England about 1750.
• Before this, production of most goods had relied on human or
animal power.
• Changes in science and engineering saw the creation of machines
and mechanical power.
From about 1620-1780, writers in England and other parts of Europe
advocated the Enlightenment, which emphasized
• science, objectivity and rationality (versus religious thinking).
• free thinking, free press and liberty (versus royal or religious
power).
• the rule of objective and rational laws (versus fickle and arbitrary
royal or religious power).
16
The Industrial Revolution and Enlightenment
Douglass North argues that the Glorious Revolution of 1688 removed
the absolute power of the king and allow many nobles in the
Parliament to govern the country and to run the economy.
The court system also became independent of the king after 1688.
• Courts were able to uphold contracts, allowing people to make
contractual economic transactions.
• Property (land) rights were also enforced through courts.
• Taxes had to be approved by Parliament, and could not be
arbitrarily collected by the king.
• Serfdom had ended in England and parts of Scotland, so the
agricultural economy and land ownership was largely free.
Mr. North argues that because of legal rights and a relatively free
economy; nobles, merchants and land holders were able to grow rich
through production and commerce.
17
The Industrial Revolution and Enlightenment
In contrast, France, Spain, Portugal, Germany, Poland, Russia, Italy,
Japan, China, India had kings and serfdom or class systems until 19 th
century or later.
• As a result, political and economic power were concentrated at the
top, and the ability to freely produce was restricted and/or not
protected by independent courts.
18
Productivity
In general, economies grow because workers become more
productive.
• Labor productivity is the amount of production from one worker
or one hour of work.
• Labor productivity can increase because
•
firms invest in physical capital for their workers.
•
individuals or society more broadly invests in human capital or education
and training.
•
firms or society more broadly invests in new ideas/technology.
19
Productivity
Questions:
• What makes workers productive?
• Why are some countries richer than others?
• Why do some countries grow quickly while others seem stuck in a
poverty trap?
• What policies may help raise growth rates and long-run living
standards?
Economists do not really know, but several factors can increase the
productivity of workers:
20
Productivity
a. Business investment in fixed or physical capital
b. Government investment in fixed or physical capital
c. Investment in education, training or “human capital”
d. Investment in health or “human capital”
e. Investment in and research and development of technology and
new ideas
f.
Stable and effective social, legal and political institutions
g. Natural resources, including ports, rivers and other geography,
which can affect:
h. Exchange of products or trade
i.
Exchange of productive ideas (see also e.)
21
Physical or fixed capital
Physical or fixed capital
Capital derives from the Latin word for head, as denoting the head of
cows, oxen or other livestock, which have always been important
sources of wealth beyond the basic meat that they provide.
Livestock served and serves as a basic way to produce additional
goods and services over time, including milk, hides, wool, meat and
fuel, transportation, traction for plowing fields for grain, and of course
through reproduction, additional livestock.
More broadly, capital today refers to an asset or good that can be
used to produce other goods and services, to increase productivity
and to increase production.
22
Physical or fixed capital
Physical capital refers to goods that were produced in the past or in
the present (with previous or existing technology) but are currently
used to produce other goods or services.
• In particular, equipment, physical structures and infrastructure that
are used to produce and sell.
•
Tools and other machines used to manufacture goods
•
Computer software and hardware
•
Office buildings, schools, factories and other structures
•
Physical infrastructure: roads, railroads, airports, water utilities, sanitation
utilities, electric utilities, telephones, internet connections
23
Physical or fixed capital
(Business) investment expenditure refers to investment in physical
capital by businesses or firms, a process also “fixed capital formation”
• to distinguish it from investment in inventories, which are not fixed.
Government expenditure can also invest in fixed or physical capital,
often
• roads, railroads, airports, electric utilities,….
24
Sources: World Bank, http://databank.worldbank.org/data/
Myanmar
Yemen
Namibia
Tuvalu
Afghanistan
Swaziland
Congo, Rep.
Timor-Leste
Zimbabwe
Benin
Haiti
Angola
Eritrea
Gambia
Somalia
Sudan
Togo
Cambodia
North Korea
Vanuatu
Ethiopia
Guinea
Mali
Kenya
Solomon Islands
Zambia
Mauritania
Lesotho
Mozambique
Uganda
Papua New Guinea
Rwanda
Congo, Dem. Rep.
Madagascar
Tanzania
Niger
Sierra Leone
Burkina Faso
Central African Rep.
Liberia
Malawi
Burundi
Chad
South Sudan
percent
Physical or fixed capital
Percent of population with access to electricity
in selected poor countries, 2012
52
50
48
46
44
42
40
38
36
34
32
30
28
26
24
22
20
18
16
14
12
10
8
6
4
2
0
25
Human capital
Other kinds of investment expenditure and capital (formation),
sometimes subsidized by the government, include:
26
Human capital
Human capital
refers to knowledge, skills and mental abilities that workers acquire
through education, training and experience.
• This type of learning refers to acquiring existing knowledge that is
readily available.
• Because others in society may benefit when an individual
accumulates more knowledge, skills and mental abilities, human
capital creation can generate positive externalities.
•
A positive external effect on people who are not directly involved in a
transaction (in the education system).
27
Human capital
Education and training is supposed to make workers more productive.
• Many governments provide schools and subsidize education and
training programs so that people become more productive
members of society.
• Brazil has a policy which pays families if their children attend
school regularly.
• But more schools and education may not necessarily improve
productivity:
•
opportunity costs: staying in school means not working
•
corruption and ineptness of school systems
The data about education does not always offer a clear picture,
although richer countries are generally more educated:
28
Human capital
Income and education by country
140
percent in 2010 or nearest year:
may be more than 100% because of people younger and older than normal
students
45000
130
GDP per person in 2009 in US$
40000
120
110
35000
100
30000
90
80
25000
70
20000
60
50
15000
40
10000
30
20
5000
10
GDP per person (left scale)
Mali
Rwanda
Kenya
Bangladesh
Haiti
Nigeria
Philippines
India
China
Brazil
Mexico
Argentina
Chile
Portugal
Saudi Arabia
Korea
Israel
Spain
Japan
Germany
UK
Canada
US
0
Australia
0
gross secondary school enrollment rates (right scale)
Sources: Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 7.0, http://pwt.econ.upenn.edu
World Bank, http://databank.worldbank.org/data/
29
Human capital
Income growth and education by country
140
percent in 2010 or nearest year:
may be more than 100% because of people younger and older than normal
students
6%
average growth rate of real GDP per person
130
5%
120
110
4%
100
90
3%
80
70
2%
60
50
1%
40
30
0%
20
10
GDP per person (left scale)
Mali
Rwanda
Kenya
Bangladesh
Haiti
Nigeria
Philippines
India
China
Brazil
Mexico
Argentina
Chile
Portugal
Saudi Arabia
Korea
Israel
Spain
Japan
Germany
UK
Canada
US
0
Australia
-1%
gross secondary school enrollment rates (right scale)
Sources: Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 7.0, http://pwt.econ.upenn.edu
World Bank, http://databank.worldbank.org/data/
30
Human capital
Human capital can also refer to the physical health of humans instead
of only mental abilities.
• More healthy workers in particular allows an economy to produce
more goods and services.
• Physical health also has positive externalities, especially when
dealing with the absence of contagious diseases.
31
Diminishing marginal productivity
Some factors of production—especially labor services, physical
capital and human capital—have diminishing marginal
productivity.
• Each additional unit increases productivity at a lower rate than
previous units. For example,
•
the 1st tractor is very productive for farm production, but the 10th tractor
should be less productive.
•
the 1st worker is very productive for farm production but the 10th worker
should be less productive (unless specialization and cooperation occur).
•
during the 1st year of education you can learn a lot, but 10th year is less
productive (unless specialization occurs).
32
Diminishing marginal productivity
However, diminishing marginal productivity does not always occur.
• Learning, specialization, cooperation and trade can allow each
worker to be more productive when there are many workers.
• Decreasing costs from a larger scale of production (which can be
related to learning, specialization and cooperation) can allow each
worker/unit of capital to be more productive when there are many
workers/units.
And by definition, marginal productivity of a factor requires that other
factors remain the same, but other factors are often not the same.
33
Diminishing marginal productivity
When diminishing marginal productivity occurs, rich countries (with a
lot of physical and human capital) should grow more slowly than
poorer countries.
• Poor countries should grow very rapidly as additional physical and
human capital is added to the economy.
• Rich countries should not receive such a large benefit from
additional human and physical capital.
Poor countries are therefore predicted to “catch up” to rich ones if
other factors are the same.
Data show that some poorer countries, like China, have grown
quickly, while others, like Mali, have not:
34
Catching up to rich countries?
Some (previously)
poor countries have
grown more quickly
than the US and
other rich countries
since 1960,
• but many have not.
© 2015 Pearson Education, Inc.
35
Ideas and technologies
Many ideas and knowledge are useful to produce new goods and
services or existing goods and services more efficiently.
• Ways to better arrange workers and capital in production
processes to make them more efficient, or to create new and
improved capital or consumer goods, or to improve the health and
efficiency of workers.
• This type of learning refers to inventing, discovering or finding new
knowledge that is not readily available.
• They are created by research and development.
• Because others in society may benefit when new knowledge is
created, technological knowledge and ideas can also generate
positive externalities.
36
Ideas and technologies
Property rights give people a legal right over property, not only land
and other physical assets but also intangible assets like ideas that
come from research and development.
• If ownership of land and real estate is legally protected in courts,
we will likely invest more in them to earn a return.
• If ownership of wages from work is legally protected in courts, we
likely work more to earn revenue.
• If ownership of ideas is legally protected in courts, we will likely
invest more in them to earn revenue.
Enforcement of property rights is necessary for a market economy
based on private property to work well.
37
Ideas and technologies
To protect intellectual property rights, rich countries typically enforce
• patents, which offered to inventors of new products and
technologies to reward them for their research and development.
• copyrights, which are exclusive rights to the products created
through original thinking: writing, audio, visual and other artistic or
non-artistic work.
• trademarks, which are exclusive rights to use a mark, logo, brand,
name or other information that is associated with a product.
38
Ideas and technologies
Due to a patent system which grants property rights to the benefits of
research and development, most technological knowledge comes
from private research by firms and individual inventors.
But because benefits of research and development are not fully
captured by the private sector, governments often subsidize research
and development through research grants, government institutions
and the tax system.
39
Positive externalities and public goods
Governments need to protect intellectual property rights,
• when ideas and technologies are public goods: freely available to
the public so that producers can not earn revenue from them.
• The public or society can widely benefit from ideas (without paying),
•
which is good for society but bad for those who must work in research and
development.
And because ideas and technologies can be used widely by the
public or society,
• they might not experience diminishing marginal productivity, at
least for a long while.
But because ideas and technologies have positive externalities for
society, individuals and private firms have little incentive to generate
the socially optimal amount.
40
Positive externalities and public goods
Because ideas, technologies and human capital have positive
externalities and/or are public goods, governments should
• protect intellectual property with patents and copyrights
• subsidize research and development
• subsidize education
•
Educated individuals benefit others in society.
• subsidize health care
•
Healthy individuals benefit others in society.
41
Ideas and technologies
Traditional economic growth theory from 1956, developed by Robert
Solow, focused on business investment in physical capital.
• During the 1940s-1960s modern economies focused on
manufacturing and construction.
42
Ideas and technologies
Paul Romer developed the endogenous growth
theory in 1986 to explain investment in new
technologies through research and development.
• Instead of investment in physical capital in
traditional industries like manufacturing and
construction,
•
Mr. Romer argued that rising living standards come
from investment in research and development of
new technologies—new machines, new medicines,
new fuels, new forms of transportation,…
• His theory was called an “endogenous” theory
because it tries to explain how new
technologies are created:
•
through investment in research and development by
firms and governments.
43
Ideas and technologies
Another (old) theory about economic growth
comes from Joseph Schumpeter in 1942, called
creative destruction.
• He argued that new technologies are created
from new ideas, which modernizes the
economy, and at the same time “destroys” old
and outdated parts of the economy.
•
Example: The automobile replaced the horse-drawn
carriage.
 The creation of the automobile destroyed the horse
carriage industry, for a more efficient and productive
economy.
•
E-mail and personal computers replaced (destroyed)
the fax industry and typewriter industry.
44
Social, legal and political institutions
Institutions (formal or informal rules, principles and ways of thinking)
influence our behavior and might also be important in explaining
economic growth.
• enforcement of property rights: rules of ownership
• rule of law in general
• regulations that are intended to make the financial and economic
system more efficient.
•
regulations that prevent fraud
•
regulations that require publication of information to inform consumers
• political and economic institutions that promote sustainable fiscal
and monetary policies by the national government and the central
bank
45
Social, legal and political institutions
• social order, trust, reciprocity: informal principles to align individual
interests with social interests
• lack of (civil) war and violence: fighting and killing is very
unproductive, to say the least
•
the state (government) is supposed to have a monopoly on the use of
violence, but sometimes the government abuses its power.
• democratic institutions that maintain social order and reduce
political unrest??
46
Social, legal and political institutions
But in many poor countries, property rights and other laws are not
well enforced by courts and the police.
• Breach of contracts, theft, fraud and corruption are often not
punished by courts.
• Bankruptcy of firms may leave creditors no way to legally recover
their investments.
• Firms may need to bribe others to secure contracts or to acquire
permission from the government.
Uncertainty over whether property rights will be enforced and
protected can be a big impediment to investment.
In many poor countries, violent crime rates are also high relative to
rich countries:
47
Social, legal and political institutions
Intentional homicides by selected countries, 1995-2013
75
70
65
60
55
per 100,000 people
50
45
Argentina
Colombia
40
Costa Rica
Guatemala
35
Mexico
30
UK
US
25
Korea
20
15
10
5
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: World Bank, World Development Indicators, http://databank.worldbank.org/data/
48
Natural resources and geography
Natural resources and geography might also be helpful in allowing
countries to increase production and productivity.
• Natural resources are provided by nature: land, trees, water, coal,
bauxite, petroleum, iron ore, copper ore, ocean ports, rivers,….
•
Geography like ocean ports and rivers is associated with trade and the
exchange of ideas (technology).
• Geography may be very important because it allows people to
exchange products, ideas and technology.
49
Other factors
Besides the above “factors of production”, other factors can affect
production and productivity in the domestic economy:
• International trade and finance, which may be related to
geography, but is primarily influenced by government policy
• Population growth
50
International trade and finance
By liberalizing trade, governments expand markets and lower prices,
so that institutions and individuals can produce items that they are
relatively productive at, earn more, save more and consume more.
• Benefits of comparative advantage with limited resources: a
country should concentrate on relatively competitive industries
•
while relying on foreigners to produce in other industries.
• Trade also allows more competition and exposure to new ideas.
•
Monopolies flourish and ideas/products stagnate when trade is restricted.
• Unemployment is primarily influenced by monetary policy, not
trade policy.
• International finance can allow domestic companies to raise more
funds from international investors.
But evidence about trade is mixed, because other factors might be
more important in explaining (the lack of) economic growth:
51
International trade and finance
Openness to trade and the growth rate of real GDP per person,
1950*-2009
Exports + imports relative to total expenditure on domestic products (GDP) (left axis)
Growth rate of real GDP per person (right axis)
120%
6%
Brazil
Japan
US
Singapore
(1960)
India
0%
China
(1952)
0%
Spain
1%
Mexico
20%
Australia
2%
Korea
(1953)
40%
UK
3%
Canada
60%
Rwanda
(1960)
4%
Mali
(1960)
80%
Philippines
5%
percent
100%
percent
to 312%
*or other years, as indicated. Source: Source: Alan Heston, Robert Summers and Bettina Aten, http://pwt.econ.upenn.edu/php_site/
52
Population growth
Population growth can influence economic growth in the following
ways:
1. It depletes natural resources for the average worker
2. It reduces physical capital and human capital for the average
worker
3. It can improve technology and new ideas
4. It affects the ratio of young (productive) workers relative to old
(retired) people
53
Population growth
1. It depletes natural resources.
• 200 years ago, Thomas Malthus argued
that population growth would deplete finite
resources and strain economic growth.
• Since then, the world population has
increased by a factor of 7 but economies
have continued to grow.
• Mr. Malthus failed to account for creation
of technological knowledge and new
capital.
• Mr. Malthus’ argument might also be
applied to water and to energy,
•
but these industries also can become more
productive from new technologies.
54
Population growth
2. It reduces physical capital and human capital available for the
average worker
• A larger population less physical capital and fewer education
resources for the average person
3. It can improve technology and new ideas
• More people implies more scientists, inventors, engineers and
other researchers, and therefore more technological knowledge
and economic growth.
55
Population growth
4. It affects the ratio of young workers to retired people
•
Fewer than 2.1 children per couple on average can eventually
strain retirement resources and limit care for the elderly.
•
Korea, Japan, China, Russia, Italy, Spain and other countries
have populations with a growing amount old people and relatively
few young workers.
•
Immigration can help, but is usually be politically unpopular.
56
Population growth
Ways of controlling population growth include
• Strictly enforced laws (China)
• Education, availability and/or subsidization of contraception
(condoms, IUDs, hormones,…)
• Education and employment opportunities for girls and women to
provide alternatives to and to raise opportunity cost of having
babies.
•
In addition to affecting population, this should also increase productivity of the
labor force.
57
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
live births per woman
Population growth
Nations with the 10 highest fertility rates, 2013
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Nigeria
Gambia
Uganda
Burundi
Source: World Bank, http://databank.worldbank.org/data/
Congo, Dem. Rep.
Angola
Chad
Mali
Somalia
Niger
58
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
live births per woman
Population growth
Fertility rates of selected populous countries, 1960-2013
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Korea
Poland
Spain
Germany
Italy
Japan
United States
China
Russia
Brazil
India
Indonesia
Source: World Bank, http://databank.worldbank.org/data/
59
0.0
Source: World Bank, http://databank.worldbank.org/data/
Somalia
Angola
Uganda
Burkina Faso
Malawi
Senegal
Cote d'Ivoire
Congo, Rep.
Liberia
Mauritania
Comoros
Sudan
Eritrea
Samoa
Rwanda
Gabon
Kiribati
Tajikistan
Swaziland
Djibouti
Kyrgyz Republic
Israel
Syria
Oman
Mongolia
South Asia
Guyana
Morocco
Indonesia
Panama
Guam
South Africa
Cabo Verde
Nicaragua
Mexico
Myanmar
Grenada
Antigua and Barbuda
French Polynesia
Turkey
Ireland
St. Vincent
Malaysia
Australia
Sweden
United States
Georgia
Brazil
Belgium
Albania
Denmark
Russia
Montenegro
Cuba
Lithuania
Estonia
Thailand
Liechtenstein
Bulgaria
Moldova
Czech Republic
Austria
Italy
Hungary
Greece
Macao
Hong Kong
live births per woman
Population growth
Fertility rates of 200 nations and the world, 2013
8.0
200 nations
world
7.0
6.0
5.0
4.0
3.0
2.0
1.0
60
Summary
1. Real GDP per person varies substantially around the world and
has varied substantially through time.
•
The average income of the world’s richest countries is more than ten times
that in the world’s poorest countries.
2. The standard of living in an economy depends on the economy’s
ability to produce goods and services: its productivity.
3. Productivity depends on the amounts of physical capital, human
capital, natural resources and technological knowledge available
to workers.
4. The accumulation of capital is subject to diminishing marginal
productivity.
5. Countries with high amounts of capital are predicted to grow more
slowly than those that are building their capital stock from low
levels when other factors are constant.
61
Summary
6. Governments can encourage growth in the capital stock by
promoting domestic saving and investment and foreign
investment.
7. Governments can encourage growth in human capital by
subsidizing education and training.
8. Governments can encourage growth in technological knowledge
by subsidizing research and development and through the patent
system.
9. Governments can encourage growth in the capital stock, human
capital and technological knowledge by protecting property rights
and enforcing the rule of law.
10. Governments can encourage growth by liberalizing international
trade and finance.
62
Summary
11. Population growth affects a nation’s productivity and production
per person.
63