Week 5: TFP

Question 1

What affects TFP?

Answer 1

Human Capital
Health
Tech
Institutions
Misallocation …

Question 2

What is human capital?

Answer 2

Stock of skills thta humans accumulate to make them more productive
Education and training

Question 3

How do we increase human capital?
Are there any examples?

Answer 3

Subsiding schools, or mandating state schools
In US, every year of schooling boosts wages by 10%

Question 4

How does health and nutrition affect human capital?

Answer 4

In countries with signfiicant malnourishment, raising worker’s caloric intake boosted productivity

Question 5

How do institutions impact human capital?

Answer 5

Some institutions foster human capital by protecting property
Legislating property rates leads to rule of law leading to contract enforcment

Question 6

What are extractive institutions? Give examples:

Answer 6

Institutions where there is no incentive to benefit the local population
1. Slavery
2. Plantations
3. Gold Mines

Question 7

How do we encourage technological process?

Answer 7

patent laws
tax incentives
grants for research

Question 8

What is a model for the utility derived from the factors of TFP?

Answer 8

U(c,n,e) = (1-α)*ln(c) + α[ln(n) + ln(e)]
where
e is the education
c is the consumption
n is the number of kids

Question 9

What is a budget constraint with these variables?

Answer 9

c = w (1-bn-ten)

where en is the product of the education coefficient and the number of kids
where b and t are fraction of the wage that doing these things beneifits by

Question 10

What is the first order condition?
What is the relationship between n and education?

Answer 10

we find that n = α/( b + te)

This tells us that n and e are inversely proportional and so an increase in e results in a decrease in n