Structural change and productivity

Question 1

Structural Change endogenous factors

Answer 1

• Business seeking to develop comparative advantage by creating new products
• R&D
• competitive forces gradually leading to industry-wide change

Question 2

Structural Change exogenous factors

Answer 2

• Drop in birth rate 1970s and 1980s and increase in life expectancy = rising aging population
• Rapid growth in Asia = increased demand for services and commodities
• Environmental concern impact consumer demand and production processes

Question 3

Structural Change definition

Answer 3

Changes in output, income, employment across industries, sectors and states over time and reflect changes in preferences of buyers and decisions made by firms

Question 4

Productivity definition

Answer 4

Efficiency with which business convert productive resources into output of g+s (Output/Input)

Question 5

Labour Productivity definition

Answer 5

Output relative to number of hours worked (grows @ 2.2% per year)

Question 6

Multifactor Productivity definition

Answer 6

Value/volume of output from bundle of input (labour and capital)
Output / labour hours + inputs + capital + energy + misc

Question 7

Australia’s contemporary productive history

Answer 7

• slow rise in labour productivity (2.2%)
• productivity varies depending on sectors (high in mining but low in retail)
  90s - fast grow due to internet
  00s - less tech advances, GFC, more redtape
  10s - computing, smartphones, mining boom

Question 8

Labour Market and Productivity - AUS

Answer 8

• Australian labour market highly regulated by industry awards (Fair Work Act: centralised determination of wages and conditions)
• deregulation doesn’t work as isn’t homogenous good, is hard to innovate

Question 9

Trade Liberalisation and Productivity - AUS

Answer 9

• inefficiency from 1980s gradually reduced as domestic economies are forced to develop competitive advantage
• WTO and ChAFTA work to cut tariffs
• as economies transition to more efficient areas so does resource flow

Question 10

Research and Innovation and Productivity - AUS

Answer 10

2.1% of GDP spent on research - reduces cost of production and gain advantage over competitors
BASIC - increase knowledge in existing fields
APPLIED - practical applications of knowledge (biosecurity)
EXPERIMENTAL - research into new fields

Question 11

Factors that influence productivity

Answer 11

Investment in capital and infrastructure
Innovation
Investment in human capital
Enterprise
Competition

Question 12

Australia’s contemporary structural change history

Answer 12

• Agriculture declined from 1940 onwards – improvements in tech reduced need for quantity of labour (pre-industrial)
• Manufacturing’s share of employment peaked in 1950, and has gradually declined since then (industrial)
• Services have trended upwards since 1940, and now account for 80% of workers (post-industrial)

Household spending on rent/house twice proportion of income from 50yrs ago

Question 13

Impact of structural change

Answer 13

increased d for skilled workers, decreased d for manufacturing workers
vertical disintegration in supply chain (specialise and interdependent)
challenges in training skilled workers

Question 14

Three types of efficiency

Answer 14

Technical - ability to produce more output from given unit of input
Allocative - effective allocation of resources to their “most valued uses”, hence having least opportunity cost
Dynamic - Ability of economy to adapt to change overtime (innovate, R&D)