Role of efficiency in economic growth

Question 1

what is the goal of this lecture

Answer 1

efficency plays a critical role in determining productivity, and economic growth
advanced technology is widespread, many countries struggle with efficency

Question 2

define productivity, technology,efficency

Answer 2

Productivity = tech* efficiency
1. Technology = knowledge about how factors of production can be combined to produce output
2.efficency=how well a country/firm effectively uses a technology/FOP

Poor countries still experience low productivity not solely via tech gaps, but due to poor use of technologies

Question 3

What are the sources of efficency

Answer 3

poor managment
unproductive activities
misallocation among firms and sectors,
idle resources
technology blocking

Question 4

how do managment practices affect firm productivity

Answer 4

Core management practices like:
1. task delegation
2.performance monitoring
3.incentive structures
4.sensible targets

Bloom et al(2011) ran an RCTT. hey randomly assigned a sample of 28 textile firms in India into two groups: a treatment group and a control group(free consulting vs none)., Introduced a modern management consulting program to textile plants, the study found substantial gains in productivity for treated plants. 17% increase in productivity

Question 5

how does misallocation effect productivty?

Answer 5

Misallocation can occur across sectors or firms where the marginal product of inputs arent equal. Resources like labor and capital are not distributed according to where they are most productive.

Nuanced definition is misallcoation exists of a social planner could implement budget natural targeted taxes or subsidies, to include reallocation of inputs across activities, in a way that would benefit welfare of agents

Question 6

misallocation among sectors?

Answer 6

Often sees labor stuck in low productivity sectors like agriculture dues to barriers to mobility like
1.geograhical isolation
2.wage policy
3.tax rate
4.market segmentation

Question 7

misallocation among firms?

Answer 7

MP of inputs aren’t equalized,which occurs when political, regulatory, or financial constraints prevent the flow of capital and labor to the most efficient firms. (draw graph)

1. Government-owned firms “over-employ”-political power
2. Monopolies “under-employ”, -monopolist profit
3. Financial frictions prevent efficient allocation of resources
   4.discrmination of talent

Question 8

what did Restuccia/Rugerson 2017 say?

Answer 8

distorations from tax codes, discretionary provsions made by government/entities, and market imperfections.

Question 9

what are the statutory provisions?

Answer 9

1. varying regulations
   2.tarrifs applied to certain goods
   3.labor/product market regulations
   4.land regulations

Regulation not always bad, just means regulations may induce misallocations

Question 10

what was the example of a size dependent regulation

Answer 10

In France, firms of 50 workers or more must
1.create work council
2.establish health and safety council
3.report detailed info
4.appoint union representative

resulting in a cost of labor rise, preventing growth

Question 11

discretionary polices?

Answer 11

subsidies, tax breaks, and low interest rates granted to specific firms
preferential market access
selective enforcement of taxes/regulations

Question 12

market imperfections

Answer 12

monopolies, poor access to capital, inability to hire management outside family
market frictions and poor rule of law

Question 13

what was the evidence provided for mangerial time

Answer 13

Akegit 2021 argued that entrepreneurs’ managerial time is fixed
Firms grow,and entrepreneurs need to delegate managerial tasks to professional managers.
In developing countries, entrepreneurs rely heavily on family members instead of outside managers, a low level of trust, and contractual imperfections

Hurts firms with growth potential, favors stagnant firms by shielding them from competition

Question 14

what are the unproductive activities

Answer 14

Illegal activities and rent seeking. Illegal activities include theft, kidnapping and smuggling
Rent seeking involves use of laws or government institutions to bring private benefits.

Economic rent: payment to a FOP above what is needed to supply that factor, quotas/limits/lobbying
Costs: bright people work in unproductive areas

Question 15

what is the effect of idle resoruces and technology blocking

Answer 15

Idle resources:
factors of production not being used, unemployment/underemployment
factors unused,less then fully capacity. Example was Air Afrique employing 500 employees versus Easy jet only employing 66 per plane.

Tech blocking
agents deliberately prevent the use of tech
vested interest prevents innovation
Historical examples include opposition to the printing press or automated learning, margarine and dairy farmers, for example.
Success of tech blocking depends on relative power innovator/opposer