[nassuh]

Would someone please explain the question to me and provide me with some pointers? What exactly is factor productivity growth?


"Assess the view that factor productivity growth is the main determinant of economic growth in post-war Europe."

[.ACS.]

Factor productivity is regarded as technology. An example would be the industrial revolution. Malthus hypothesised we would all die due to a lack of food for a growing population, and subsequently suggested the poor have fewer children, but he failed to account for factor productivity growth - otherwise put, technological advances.

So now consider the technological advances in post-war Europe. These advances could be physical capital related (new machines or technologies, etc.) or human capital related (education, etc.).

Hope that helps!

[nassuh]

(Original post by .ACS.)
Factor productivity is regarded as technology. An example would be the industrial revolution. Malthus hypothesised we would all die due to a lack of food for a growing population, and subsequently suggested the poor have fewer children, but he failed to account for factor productivity growth - otherwise put, technological advances.

So now consider the technological advances in post-war Europe. These advances could be physical capital related (new machines or technologies, etc.) or human capital related (education, etc.).

Hope that helps!

Thank you so much! That's helped me tremendously

[MagicNMedicine]

Yes ACS is correct, just one other point to mention to expand on it.

If you think of factors like capital and labour coming together to get output, then there are two ways you could get more output:

1. Get more of those factors
2. Have the same amount of factors but those factors being more productive

In practice growth will come from a bit of both, but if you get more growth than you would have expected given the amount of extra factors you have accumulated, that suggests its down to factor productivity growth.

[nassuh]

(Original post by MagicNMedicine)
Yes ACS is correct, just one other point to mention to expand on it.

If you think of factors like capital and labour coming together to get output, then there are two ways you could get more output:

1. Get more of those factors
2. Have the same amount of factors but those factors being more productive

In practice growth will come from a bit of both, but if you get more growth than you would have expected given the amount of extra factors you have accumulated, that suggests its down to factor productivity growth.

I had to read this a few times before I actually understood lol, thank you so much!

[nassuh]

I've been reading 'Economic growth in Europe since 1945' by N.F.R Crafts and he states that, aside from catch up the reason for Europes post war growth miracle was high investment. Is investment a productivity growth? How would I relate it to the question. I'm sorry if my question dosnt make sense, I'm just so confused.

[Sternumator]

Productivity growth means you can produce more stuff from the same factors. In the long run growth is limited to productivity growth because you can only have so much capital per woker. However, if the economy is not at its optimum level of investment then changing this can temporarily increase growth. Are you familiar with the solow growth model?

I think the common view is that after the war countries had low levels of capital because it was all destroyed, especially in Germany. Because of diminishing returns, increasing investment allowed much more growth than it did before the war so rapid growth could be achieved. Investment was the main determinant. The logic is if you have loads of labour and very little capital then by increasing capital through investment you can get a lot more growth of than if you were at the optimum ration of labour to capital.

[nassuh]

(Original post by Sternumator)
Productivity growth means you can produce more stuff from the same factors. In the long run growth is limited to productivity growth because you can only have so much capital per woker. However, if the economy is not at its optimum level of investment then changing this can temporarily increase growth. Are you familiar with the solow growth model?

I think the common view is that after the war countries had low levels of capital because it was all destroyed, especially in Germany. Because of diminishing returns, increasing investment allowed much more growth than it did before the war so rapid growth could be achieved. Investment was the main determinant. The logic is if you have loads of labour and very little capital then by increasing capital through investment you can get a lot more growth of than if you were at the optimum ration of labour to capital.

Thanks alot for this. I'm not familiar with the model you've mentioned. To be honest, I've been quite ill this yr and in and out of hospital but my University has given me the opportunity to take some supplementary exams. Looking at some of the essays I've been given though, I think it woul be better for me to do the year again. I'm finding it very difficult. Thankyou for all your help though.