Question

a. Describe the three pillars of productivity growth. b.Why is a market economy susceptible to coordination failures that can lead to unemployment and inflation? What do you think can be done to rectify these failures? c. Unemployment is socially wasteful. Why? Does the existence of unemployment insurance eliminate the economic costs of unemployment? c. Several countries in the world have failed to "converge" with industrialized countries. What does this mean about their economic growth rates? Explain why poorer countries have failed to catch up", in terms of the pillars of economic growth. Are there any special problems facing these countries?

Answer 1

( a ) The three pillars of productivity growth are following:-

( I ) Engagement:-

Engagement isn't only communicating something. It’s facilitating ways and means for all the stakeholders to communicate conveniently and efficiently. Enablinging a two-way communication is a must for productivity growth.

Researches conducted by Harter, Schmidt and Hayes say those employees who were more engaged were up to 51% more productive. By improving engagement, an organisation can change or improve as per requirement.

( II ) Intergation- It is very important for an organisation to integrate all the data and operations in order to provide smooth analysis and functioning of the organisation.

( III ) Process improvement- An organisation needs to focus on process improvement according to the needs of the business which will lead to a higher productivity growth.

( b )

A market economy allows firms and businesses to set their own prices whereas workers are free to decide their wage rates to work. Many times too much freedom and lack of coordination in a market economy leads to market failure. A market economy is more susceptible because their are many actors and in order to achieve best equilibrium level requires it coordination between all these actors.

( c )

Unemployment is socially wasteful as it leads to wastage of labor available. Labor just like any other factor of production is very important for a firm in its production process. If a nation has unemployed workers, it means the avalailable resources are not being utilized.

No, unemployment insurance do not eliminate the economic costs of unemployment since an economy doesn't gain any increase in production. The insuarnce only helps the worker economically as well as mentally, however the nation doesn't gain economically.

( d ) Several poor countries in Asia and Africa are still poor. It means that their economic growth has not kept pace with industrialised countries. These nations started with very low base of capital. lack of capital has led to these nations facing vicious circle of poverty.

Social problems in these countries are lack of employment opportunities, lack of literacy and skills, which hinders their over all development.