POTENTIAL PRODUCT ECONOMIC GROWTH, SUPPLY SIDE

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POTENTIAL PRODUCT ECONOMIC GROWTH, SUPPLY SIDE. Q = f ( L, K, TN) Labor - population Capital – National wealth Technological change. ECONOMIC GROWTH. Economic growth – diferences in the levels of development
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POTENTIAL PRODUCT ECONOMIC GROWTH, SUPPLY SIDEQ = f ( L, K, TN)Labor - populationCapital – NationalwealthTechnologicalchangeECONOMIC GROWTHEconomicgrowth – diferences in thelevelsofdevelopmentHistory – Malthusianviews, thegrowthofpopulation to limitsofresources - land; constantincomes in oldcivilizations; exceptionsChina (950-1250) andEurope (1500-1800)Modern economicgrowth 1800-medium term: thechanges in the K/L ratio; long run: unlimitedbytheamountoflandandnaturalresources Is economicgrowthunlimited? technologicalchange, totalfactorproductivitySimon Kuznetz, Robert Sollow, RES (1957), Edward Prescott, IER (1998)TheindicatorsofeconomicdevelopmentGDP/CAPITA (PPP, 1990)GDP/CAPITA(in US$, PPPi 1990)ECONOMIC DEVELOPMENTMETHODS FOR CALCULATING TOTAL FACTORS PRODUCTIVITYCobb-Douglas productionfunctionQ = A KaLbertlnQ = lnA + a*lnK + b*lnL + r*tQ = A KaL(1-a)constantreturns to scaledQ/dt = dA/dt + a*dK/dt +(1-a)*dL/dtrQ = rA + a*rK + (1-a) * rLrA = rQ – a*rK – (1-a) * rLPOPULATIONDEMOGRAPHIC NOTIONSR.T. Malthus: An Essey in thePrincipleofPopulation 1798Aassumptions, developmentNaturalmovements: natality, mortalityandgrowthMigrations:immigrations, emigrations, migration saldoStructures:genderand age, activeandnon-active, working, employed, selfemployedLabor supply:demographicand social movementsLabor demand:employmentfunctionrL=a + b rQ + c DUM, a – avtonomous, b – elasticity, c - assimetryPOPULATION GROWTHMalthuserror1800: 7 mil 1825: 14 mil 1850: 28 mil 1900: 112 mil 2000: 1892 mil30-20-mortalitynatality10-20001800ACTIVE POPULATION EU272009 EU27 SloveniaWorkingpopulation (mill) 214.3 1.0 (1) share 0-14 years 15.7 14.0(2) share >65 years 17.1 16.4Old age dependency100*((1)+(2))/(100-(1)-(2)) 48.7 43.7Activityrate M 59.4 61.8Activityrate F 46.1 50.5Unemploymentrate 8.8 5.6POPULATION FORECASTS EUYear 2010 2020 2030 2040 2050millions(1)< 15years 78 79 75 73 73(2) 15-64 years 334 331 321 307 294(3) > 65 years 87 103 123 140 148(4) Totalpopulation 499 513 519 520 515(2)/(4) activityrate 0.67 0.64 0.61 0.59 0.57((1)+(3))/(2) dependencerate 0.49 0.55 0.62 0.69 0.75SUPPLY AND DEMAND OF LABORSupplyof Labor: demographicmovements, age structures, migration, skills, priceelasticityofsupply: incomeeffectssubstitutioneffects, wealtheffects;Demandforlabor: employmentfunctionUnemployment: open, hidden, classical, cyclical, structuralDEMAND FOR LABORLabor market “a” “b” “c” consequencestraditonal + 0 0 no labor market, highhiddensocialism unemploymentselfmanaged 0 0.3 - growinghiddenunemploymentsocialism low open unemploymentclassical (US) - 1 0 flexiblelabor marketcapitalism open unemploymenttraditionalEuropean - 0.5 - lowhiddenunemploymentcapitalism high social protectionneo-evropean - 0.7 + growthof open unemploymentcapitalism hysteresisrZ- growthofemployment, rQ – growthof GDP, D- dummy,a-autonomousgrowth, b-elasticity, c- assymetryPRECARIAN EMPLOYMENTUnemployment %EU25 EU15 EU10 9.0 8.0 14.3 Employmenttype %part-time 17.7 19.4 8.0fordefinite time 13.7 13.6 14.3 self-employed 15.9 14.9 22.0 ∑ 47.3 47.9 44.3INFLATIONThediminishingpurchasingpowerofmoney, growthofprices;Mesurement: retailsalepricesindex, costoflivingindexTypesofinflation: crawling, slow, fast, hyperinflation;Thecostsofinflation: redistribution, expectedinflation, adaptation to inflation, indexationInflationarytax: thediminishingvalueofmoneySeignorage: revenuesdue to monopolyofprintingmoney, GERMAN HYPERINFLATIONJanuary 1922 1 1 1January 1923 16 75 189March 1923 45 132 -12May 1923 70 221 157July 1923 354 2021 386August 1923 5394 25515 1262September 227777 645946 2532October 20201256 191891890 29270AGGREGATE DEMAND AND SUPPLYSupply: = e + *(Y-Yr) = -1 + *(Y-Yr)e – expectedinflation, Yr– equilibriumproductDemand:Y=Y-1+ *(m - ) = m –1/ *(Y-Yr) = m –1/ *(Y-Y-1)m - moneyDEMAND PULL AND SUPPLY PUSHINFLATIONDEMAND PULL AND SUPPLY PUSH INFLATION D D1Demand PullSupply PushSDS1SP1P1PPYY1YY1THE EFFECTS OF THE INCREASE IN DEMAND IN DIFFERENT THEORIESDEMAND PULL INFLATION D S D S DC CC S Q QQneokeynesian classical keynesianINFLATION IN EU27, EU16 AND SLOVENIA
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