kulian kesebelas advanced macroeconomics

8/8/2019 Kulian Kesebelas Advanced Macroeconomics

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Advanced MacroeconomicsKuliah : KesebelasTopik : otal Factor Productivity, Human Capital &

TechnologyReferences : David Miles : 5

Sub ± topics :

1. The Role of Total Factor Productivity

2. Human Capital

3. Total Factor Productivity

4. The Importance of Technological Progress



1.The Role of Technological Progress

Total Factor Productivity : reflecting the influence of anyfactor that affects output other than capital accumulation & labor inputs :

= increase in the efficiency of producing output for a givenlevel of capital

= improvement in education= improvement in technology

The higher level of TFP, enables more output to beproduced.

The upward shift of production function due to higher TPF,may lead a country to a higher steady stage, eveninvestment rate remain the same.



See David Miles figure 5.1, p.87



2. Human Capital

Production function has only allowed the role of labor interms of hours worked.

There is another way that labor contribute, that is throughhuman capital.

Human capital refers to the skills & knowledge thataccumulate over time in individuals, the labor force, andsociety.

Many different skills make up human capital := learning acquired at school

= on the job training= learning by doing= shared social knowledge and convention

There are now three factors of production : physical capital,human capital & hours worked.



Capital Stock

Return oncapital

MPK for low human capitalcountry

MPK for high human capital country

Effect of education on MPK



The Importance of technological Progress

Improvement in technology acts as an increase in TFP

Because technological progress occurs continuously, thesteady stage of the economy is forever shifting.

Figure 5.11 ( see p.102) shows output growth from both TFP andcapital accumulation. An increase in TFP change in steady stage

stage capital stock an increase in output ( YB ± YA). (YB ± YC) =the direct increase in output from technical progress.

Technological progress ensures that capital accumulationcontinuous indefinitely as the steady stage continuously changes.



Capital

Output

See Miles : p. 102.

Old steady New steadystage stage

YB

YC

YB



Endogenous Growth

Solow growth model offers an exogenous growth theory , provides noexplanation for what drives technological progress.

Endogenous growth theories are of two types : (1) continued growthby avoiding a notion of steady stage, and (2) focuses on endogenousexplanation of how total factor productivity changes over time

Growth without end ( avoiding a notion of steady stage ) :

change in capital stock = investment ± depreciation

= s Y - d K

d = depreciation as a proportion of the capital stock.

A constant MPK implies that the doubling of machine doubles output, or

Y = A KA = total factor productivity.



change in capital stock =sY ± dK = s AK ± dk

% growth rate in capital stock = sY/K ±dK/K = s A ± d

so that increase in the capital stock depends positively on theinvestment rate.

If the government can change the investment rate , it leads not just to a one time increase in the levels of capital and output, butto permanent increase in the growth rate of capital & output.

depreciation

Investment ± a constant proportionof output

Output-constantmarginal product

Capital

Output



With a constant MPK there is no steady state level of thecapital stock.

A BROADER CONCEPT OF CAPITAL

Is constant MPK justifiable?

One way to generate a constant MPK is to focus on positive

interaction between physical and human capital. The more thehuman capital in a country, the higher the marginal product of physical capital.

The more the skilled the workforce, the higher the productivity of machines. The higher the level of physical capital in an economy,

the greater the marginal product of human capital.

The interaction may sustain constant MPK.



Interaction between human & physical capital.

Marginal MarginalProduct Productof Human A B C of MPK(Ho) MPK(H1) MPK (H2)

Capital Physical

Capital

Cost Cost

Increase in human capital generate more investment in physical capital & vice versa. As the productivity of human capital rises from A to B the stock of human capital increases from Ho to H1 & this rises the productivity of physicalschedule from MPK (Ho) to MPJK (H1). The resulting increase of physicalcapital from Ko to K1 further increase the productivity of human capital

(BC).

Ho H1 H2 Ko K1 K2



Interaction between physical and human capital can postpone

diminishing MPK and even lead to an endogenous growthmodel with constant MPK. Because of the estimate of their spillovers, government policy can be used to improve theeconomy.



Poverty Trap

Poverty traps : keep poor region or countries poor.

Return Marginal Product

on less than cost and no investment. MPK

Capital Capital stock declines

Cost

Marginal Product exceeds cost

& investment occurs. Capital stock increases

Capital



Why is Africa so Poor ?

Africa scores poorly on many of the determinants of steady state :a. low investmentb. low educational achievementsc. low of social infrastructured. Strong protectionist policies

W

hy low investment ?a. large cultural groups ethno-linguistic diversity(ELD)b. ELD poor government policyc. ELD civil wars damage the economy fractionalized economy.d. Geographical factors issues of climate disease the geography

can not be altered.e. The influence of colonialism



1898: Finnish Rubber Works foundedEduard Polón founds Finnish Rubber Works, which will later becomeNokia's rubber business.

1937: Verner Weckman, industry heavyweightFormer Olympic wrestler Verner Weckman becomes President of FinnishCable Works.

1912: Finnish Cable Works foundedArvid Wickström starts Finnish Cable Works, the foundation of Nokia'scable and electronics businesses

1960: First electronics departmentCable Works establishes its first electronics department, selling andoperating computers.

1962: First in-house electrical deviceThe Cable Works electronics department produces its first in-houseelectrical device - a pulse analyzer for nuclear power plants.1967: The mergerNokia Ab, Finnish Rubber Works and Finnish Cable works formallymerge to create Nokia Corporation

TECHNOLOGICAL CHANGE :



1981: The mobile era beginsNordic Mobile Telephone (NMT), the first international mobile phonenetwork, is built.

1979: Mobira Oy, early phone makerRadio telephone company Mobira Oy begins life as a joint venturebetween Nokia and leading Finnish television maker Salora.

1982: Nokia makes its first digital telephone switchThe Nokia DX200, the company¶s first digital telephone switch, goesinto operation.

1984: Mobira Talkman launchedNokia launches the Mobira Talkman portable phone.

1987: Mobira Cityman ± birth of a classicNokia launches the Mobira Cityman, the first handheld NMT phone.1991: GSM ± a new mobile standard opens upNokia equipment is used to make the world¶s first GSM call.

1992: Jorma Ollila becomes President and CEOJorma Ollila becomes President and CEO of Nokia, focusing thecompany on telecommunications

1992: Nokia¶s first GSM handsetNokia launches its first GSM handset, the Nokia 1011.



1994: Nokia Tune is launched

Nokia launches the 2100, the first phone to feature the Nokia Tune.1994: World¶s first satellite callThe world¶s first satellite call is made, using a Nokia GSM handset.

1997: Snake ± a classic mobile gameThe Nokia 6110 is the first phone to feature Nokia¶s Snake game.

1998: Nokia leads the worldNokia becomes the world leader in mobile phones. 1

1999: The Internet goes mobile

Nokia launches the world's first WAP handset, the Nokia 7110.

2002: First 3G phone

Nokia launches its first 3G phone, the Nokia 6650.2003: Nokia launches the N-Gage

Mobile gaming goes multiplayer with the N-Gage

2005: The Nokia Nseries is born

Nokia introduces the next generation of multimedia devices, the NokiaNseries.

2005: The billionth Nokia phone is sold

Nokia sells its billionth phone ± a Nokia 1100 ± in Nigeria. Global mobile phone

subscriptions pass 2 billion



THE FOUR S TAGE S OF DEVELOPM ENT Porter mengemukakan 4 tahapan pembangunan:

1. Factor driven stage :* Keunggulan bersaing diperoleh dari basic factors of production:

memanfaatkan ketersediaan SDA dan upah buruh yang murah.* Banyak negara tetap berada pada stage ini, dan sangat rawan

thd naik turun perekonomian dunia ( business cycles).* Banyak negara tetap miskin dengan konsep ini, ttp negara-2

Arab/Teluk makmur dng sumberdaya minyak.

2. Investment driven :* Kesiapan berinvestasi dalam peralatan modern dan efisien

dengan memanfaatkan teknologi terbaik yang tersedia di pasarinternasional.

* Upgrading faktor-2 produksi dari basic menjadi modern,pembangunan infrastruktur modern.* Pada stage ini, kesempatan kerja di sektor industri meningkat.* Korea Selatan : competitiveness in large scale industries;* Taiwan : competitiveness in small scale industries



3. Innovation driven :* perusahaan2 secara aktif menciptakan teknologi baru, produk

baru, dan pasar baru.* keunggulan bersaing tdk lagi ditentukan oleh factor cost, tetapi

dari produktivitas yang tinggi yang bersumber dari high skill levels dan advanced technology.

* Perusahaan berkembang menjadi multinationals, bersaingsecara global dengan strategi yang handal, dengan organisasi

pemasaran internasional, service network, dan brand reputation.

4. Wealth- driven stage :

* Negara telah mencapai tingkat kemakmuran tinggi yang

membawa dampak berkurangnya gairah untuk sukses.* P rioritas : pemanfaatan kekayaan yang telah terkumpul;* Prilaku bisnis bergeser dari risk taking leadership ke risk ±

reducing stewardship.

kulian kesebelas advanced macroeconomics

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