1. GROWTH AND CRISIS IN THE U.S. Growth Resurgence and European Slowdown
Economics 1490
GROWTH AND CRISIS IN THE
WORLD ECONOMY
with
Professor Dale W. Jorgenson
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
Harvard University Department of Economics - Fall 2016

2. THE WORLD ECONOMY: GROWTH AND CRISIS
Lecture 11: October 6, 2016
]U.S. Growth Resurgence and European Slowdown
THE WORLD ECONOMY: GROWTH AND CRISIS
Comparing Economies across the World and over Time.
2. The Great Debate over the Financial and Economic Crisis.
3. The European Slowdown and the Crisis in Europe.
4. Asian Economic Miracles: Will They Continue?
5. Sustainability of Economic Growth.
6. World Economic Outlook.

3. THE EUROPEAN SLOWDOWN AND CRISIS IN EUROPE
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
THE EUROPEAN SLOWDOWN AND CRISIS IN EUROPE
11. U.S. Growth Resurgence and European Slowdown.
12. European Competitiveness.
13. Europe 2020 and the Single Market.
14. Economic Crisis in Europe.
15. European Policy Response: The Euro.
16. European Policy Response: Brexit

4. U.S. GROWTH RESURGENCE AND EUROPEAN SLOWDOWN
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
U.S. GROWTH RESURGENCE AND EUROPEAN SLOWDOWN
The U.S. Growth Resurgence after 1995 Was Accompanied by a European Slowdown
Europe Converged to the United States until 1995 in Terms of Labor Productivity and Has Subsequently Diverged
More Rapid Growth of U.S. Labor Productivity after 1995 Was Due to the Development of the Knowledge Economy
The Knowledge Economy Consists of Growth in Labor Quality, IT Capital Intensity, and Total Factor Productivity.

5. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
MODEL OF PRODUCTION: Production Possibility Frontier.
where:
I - Investment
C – Consumption
K – Capital
L – Labor
A - Total Factor Productivity (TFP)

6. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
SOURCES OF AVERAGE LABOR PRODUCTIVITY GROWTH
where:
  y = Y/H - Output per Hour Worked (ALP).
  k = K/H - Capital Input per Hour Worked.
CAPITAL DEEPENING: growth of capital input per hour worked, weighted by the share of capital.
LABOR QUALITY GROWTH: growth of labor input per hour worked, weighted by the share of labor.
TOTAL FACTOR PRODUCTIVITY.

7. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
Sources of Growth of the World Economy
Annual percentage growth rates

8. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
Annual Contribution (%)
Sources of World Economic Growth
Annual percentage growth rates

9. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
Sources of G7 Economic Growth
Annual percentage growth rates
Annual Contribution (%)

10. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
Sources of Non-G7 Economic Growth
Annual percentage growth rates
Annual Contribution (%)

11. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

12. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

13. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

14. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
THE MARKET ECONOMY
Market Economy Excludes Education and Health Services As Well As Government General Administration.
Growth of the Knowledge Economy Includes the Following:
Contribution of Labor Quality (Labor Composition)
Contribution of IT Capital Intensity,
Growth of Total Factor Productivity (Multi-Factor Productivity).

15. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

16. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

17. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

18. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

19. THE ROLE OF MARKET SERVICES
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
THE ROLE OF MARKET SERVICES
The Share of Market Services in the GDP Averaged Around 40 Percent in 1995, But Has Been Steadily Growing
The Contribution of IT Capital Input in the U.S. Is Higher Than in Europe; the Contribution of Non-IT Capital Input Is About the Same
The Share of College-Educated (High-Skilled) Workers in Market Services Is Much Higher in the U.S. than in Europe (Except for Finland)
More Rapid Growth of Labor Productivity in U.S. Market Services Is Due To the Contribution of IT Capital and High- Skilled Workers.

20. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

21. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

22. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

23. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

24. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

25. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

26. U.S. Growth Resurgence and
Lecture 11: October 6, 2016
U.S. Growth Resurgence and
European Slowdown

27. U.S. Growth Resurgence and European Slowdown U.S.-EUROPE COMPARISONS
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
U.S.-EUROPE COMPARISONS
FOR THE MARKET ECONOMY
The OECD Has Played an Important Role in Establishing Standards for Productivity Measurement: See Schreyer (2001).
Growth Accounting for Using EU KLEMS; the EU KLEMS Data Base Is Available in the EU KLEMS Website:
The Latest Release Is Through 2012; the Divergence of U.S. and Europe Has Continued up to The Present

28. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

29. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

30. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown

31. U.S. Growth Resurgence and European Slowdown
Lecture 11: October 6, 2016
U.S. Growth Resurgence and European Slowdown
U.S. GROWTH RESURGENCE AND EUROPEAN SLOWDOWN: SUMMARY
European Economic Performance Converged to U.S. Levels through 1995 and Has Since Diverged
This is Due to Differences in Productivity Growth in Market Services Which Constitute a Growing Share of Advanced Economies, Averaging About 40 Percent of GDP in 1995
U.S. Has Superior Economic Performance in Market Services Due to Investment in IT and the Growing Participation of High-Skilled Workers
This Has Continued up to the Present and Can Be Monitored through the EU KLEMS Data Base