4. The catch-up effect
Consider the economies of Sporon and Tralfamadore, both of which produce glops of gloop using only tools and workers. Suppose that, during the course of 20 years, the level of physical capital per worker rises by 5 tools per worker in each economy, but the size of each labor force remains the same.
Complete the following tables by entering productivity (in terms of output per worker) for each economy in 2020 and 2040.
Year |
Sporon |
|||
---|---|---|---|---|
Physical Capital |
Labor Force |
Output |
Productivity |
|
(Tools per worker) |
(Workers) |
(Glops of gloop) |
(Glops per worker) |
|
2020 | 11 | 30 | 1,800 | |
2040 | 16 | 30 | 2,160 |
Year |
Tralfamadore |
|||
---|---|---|---|---|
Physical Capital |
Labor Force |
Output |
Productivity |
|
(Tools per worker) |
(Workers) |
(Glops of gloop) |
(Glops per worker) |
|
2020 | 8 | 30 | 900 | |
2040 | 13 | 30 | 1,620 |
Initially, the number of tools per worker was higher in Sporon than in Tralfamadore. From 2020 to 2040, capital per worker rises by 5 units in each country. The 5-unit change in capital per worker causes productivity in Sporon to rise by a larger/smaller amount than productivity in Tralfamadore. This illustrates the catch-up/natural resource/Human capital/technology effect.
.
Year |
Sporon |
|||
---|---|---|---|---|
Physical Capital |
Labor Force |
Output |
Productivity |
|
(Tools per worker) |
(Workers) |
(Glops of gloop) |
(Glops per worker) |
|
2020 | 11 | 30 | 1,800 | 1800/30 = 60 |
2040 | 16 | 30 | 2,160 | 2160/30 = 72 |
Year |
Tralfamadore |
|||
---|---|---|---|---|
Physical Capital |
Labor Force |
Output |
Productivity |
|
(Tools per worker) |
(Workers) |
(Glops of gloop) |
(Glops per worker) |
|
2020 | 8 | 30 | 900 | 900/30 = 30 |
2040 | 13 | 30 | 1,620 | 1620/30 = 54 |
Initially, the number of tools per worker was higher in Sporon than in Tralfamadore. From 2020 to 2040, capital per worker rises by 5 units in each country. The 5-unit change in capital per worker causes productivity in Sporon to rise by a smaller amount than productivity in Tralfamadore. This illustrates the catch-up effect.
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