this question is from the article below by Brandon Fuller A nation\'s GDP is det
ID: 1230927 • Letter: T
Question
this question is from the article belowby Brandon Fuller
A nation's GDP is determined by its labor force, its capital stock, and its technological knowledge. An increase in the amount of capital per worker increases a nation's GDP. An improvement in technology allows a nation to get more GDP out of its existing capital stock. Technology refers to the way an economy organizes its labor and capital to produce goods and services. If two nations have the same number of workers and capital but one nation uses better technology to get more out of its labor and capital, it will generate more GDP. The nation with better technology has higher productivity--it gets more output per hour of labor input.
A recent Hal Varian commentary in the New York Times focused on the role of technological knowledge in explaining the different productivity experiences of Europe and the United States. Compared to Europe, the United States experienced much stronger growth in output per labor hour over the past decade. Why? The evidence suggests that American firms integrate information technology more quickly than their European counterparts. Follow the link to find out more: Productivity
Explanation / Answer
breakdown: GDP = labor force + capital stock + technological knowledge increase in capital/worker = increase GDP increase technology = increase GDP technology = utilization and organization of labor/capital Q) What happened to the rate of productivity growth in the United States over the past four decades? investment in tangible assets has been the dominant source of growth over the past four decades, while the contribution of technical progress as measured by the Solow residual has been relatively modest. From 1959 to 1998, output grew 3.63 percent per year, reflecting 1.59 percent annual growth in hours and 2.04 percent growth in labor productivity ( q) What industries have been fueling productivity growth in the United States? the big returns to information technology use by American companies operating in Britain were in wholesale and retail trade - the same industries that have been so productive in the United States. Why the difference in effective use of information technology? This is still something of a mystery, but part of the answer seems to be managerial practices. According to the authors, American companies are more likely than European companies to adopt practices like merit-based promotion and pay, lean manufacturing techniques, performance management and employee autonomy. Personally, I have found that American managers are much more comfortable with computers than their European counterparts
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