 Describe the long-term growth trends in

countries at different income levels

 Identify the main sources of long-term real

GDP growth

 Public policies and growth

2
Source: World Development Indicators 2017
3
Source: World Development Indicators 2017
4
Source: World
Development
Indicators 2017 5
6
 Economic growth refers to a long-term increase in
standard of living, which is expressed by GDP per
capita.

*100 (%)

(%)

7
 Convergence is the process by which poorer countries
close the gap with richer countries in term of real GDP
per capita
 Japan, Italy and France have grown more rapidly than US and
narrowed the gap in per capita incomes
 Pakistan and Zambia have grown still less than US and the
gap in per capita incomes is widened
 In the last 20 years, there has been little convergence

8
 GDP per capita

Labor productivity Labor utilization

Capital
Natural Human • Participant rate
per Technology Institutions
resources capital • Employment rate
worker

Policies
10
Source: World Bank (1999): World Development Report 1998/1999: Knowledge for Development
 GDP per person employed,
PPP adjusted in 1990 US$

$0
$5,000
$10,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000

$15,000
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source: CIEM and NUS (2011), Vietnam Competitiveness Index 2010

2004
2005
2006
2007
2008
2009
China
Thailand

Indonesia

Vietnam
South Korea
Labor productivity of Viet Nam and selected countries

Source: VERP & GRIPS (2020), Vietnam Productivity Report 2020

Các nước Châu Á và Châu Mỹ Latin
mắc bẫy thu nhập trung bình

Nguồn: Ngân hàng Thế giới (2012)

 Natural resources
 advantageous to the development of the socio-economy and
technology
 Early age of human: Egypt, China, India are located near the river

 Nowadays, Saudi Arabia and many oil-exporting countries

 Rich natural resources sometimes can become the barrier to

the development
 Low efforts

 Corruption/War

15
 Technological progress

 It means an economy operates more efficiently by producing

more output without using any more inputs

 Technological progress can be considered as the birth of new

ideas, which enable us to rearrange our economic affairs and
become more productive

16
Output Real wage Labor supply

Y2 A technological
innovation

w2 Labor
Y1
demand

w1

L L
Labor Labor

17
Tăng trưởng thấp hơn do đầu tư vào R&D thấp

Nguồn: Gill và cộng sự (2007)

 Institutions

 The private ownership is the engine of development

 Individuals in the process of seeking benefit for his own can bring
more benefit to the whole society

 QUESTION: Among the feudalism – the Capitalism – the

Communism, which can be most likely to bring about the
prosperity of the whole society?

19
 Entrepreneurship

 is the ability to get things done, involving creativity, vision,

willingness to accept risk, and a talent for translating that
vision into reality

 Entrepreneurs like Thomas Edison, Henry Ford, or Bill Gates

contribute to the development of many industries in US
such as generation and electricity, transportation industry,
and computer industry

20
 Capital

 Amount of machines equipped for each labor

 Infrastructure

 Capital deepening
 An increase in supply of capital will shift the production
function upward,

 The demand for labor will increase and as a result, real wage
will increase.

21
Output Real wage
Labor supply

Y2 An increase in
capital

w2
Y1 Labor
demand
w1

L L
Labor Labor

22
 Human capital
 Knowledge and skills that workers acquire through education,
training, and experience

 Most rich countries such as Japan, Korea, Singapore and others

have a well-educated and skillful labor force

23
 Bảng 6. Năng suất lao động được cải thiện rõ rệt, 1960-1990
Nhật
Thống kê Hàn Quốc Đài Loan Singapore Thái Lan Indonesia
Bản
Tăng trưởng về lực lượng lao động, 1960-90 (%)
Nông nghiệp -3,9 -1,2 -1,9 -6,5 2,0 1,5
Phi nông nghiệp 2,3 5,4 5,4 3,7 5,5 4,5

Phần trăm của lao động trong ngành sản xuất ,dich vụ trong tổng lực lượng lao động
1960 66,9 38,7 43,9 92,6 16,3 25,2
1990 92,7 81,9 87,4 99,6 35,9 44,8

Năng suất lao động: Tăng trưởng GDP hàng năm / lao động, 1960-90 (%)
Nông nghiệp 4,5 4,4 4,1 5,9 1,8 1,2
Phi nông nghiệp 4,2 3,7 4,4 4,6 2,9 3,2
Nguồn: Mason (2001)
 Labor competitiveness indices
for Malaysia (left) and Thailand (right)

Source: Tran Van Tho (2013) calculated from UN database in various years
 Growth accounting method
 Introduced by Robert Solow and used to decompose the
contribution to economic growth from increased capital,
labor, and technological progress

 1−
Y = AK L
A: Technology variable L: Productive Labor

K: Stock of capital : parameters which is in

the range (0,1)

26
 Nước Tăng Giai đoạn 1985-2000 Tăng Giai đoạn 2000-2011
trưởng Các yếu tố tạo ra tăng trưởng trưởng Các yếu tố tạo ra tăng trưởng
GDP Vốn Lao động TFP GDP Vốn Lao động TFP

Đóng góp tính theo điểm phần trăm hàng năm (ppa)
Việt Nam 6,7 2,1 1,8 2,8 6,9 4,6 1,0 1,3
Trung Quốc 9,0 4,2 1,3 3,5 9,8 5,6 0,3 3,9
Indonesia 5,3 3,3 1,4 0,6 5,2 2,4 1,7 1,1
Malaysia 7,0 5,1 1,4 0,5 4,7 2,6 1,0 1,1
Philippines 3,4 1,8 0,9 0,7 4,6 2,0 1,3 1,3
Thái Lan 6,3 3,8 1,2 1,3 4,1 1,2 1,0 1,9
Tỷ trọng đóng góp
Việt Nam 100% 31% 27% 42% 100% 66% 15% 19%
Trung Quốc 100% 47% 15% 39% 100% 57% 3% 40%
Indonesia 100% 62% 27% 29% 100% 47% 12% 41%
Malaysia 100% 73% 20% 7% 100% 56% 21% 24%
Philippines 100% 53% 28% 20% 100% 43% 28% 28%
Thái Lan 100% 60% 19% 21% 100% 30% 23% 47%

Source: VID-MPI (2015)

27
Decomposition of GDP growth into labor productivity and employment growth

Source: VERP & GRIPS (2020), Vietnam Productivity Report 2020

28
 Factors contributing to economic growth
in advanced countries
Percentage points Percent
6 6
TFP
5 Capital deepening 5

4 Human capital 4
Productivity (RHS)
3 3

2 2

1 1

0 0
1980s 1990s 2003-07 2013-18
Source: Barro and Lee (2015); International Monetary Fund; Penn World Tables; United Nations;
World Bank, World Development Indicators.
Note: Productivity defined as output per worker in U.S. dollars (at 2010 prices and exchange rates). The sample
includes 29 advanced economies.
29
 Factors contributing to economic growth
in emerging market and developing economies
Percentage points Percent
6 TFP 6
Capital deepening
5 5
Human capital
4 4
Productivity (RHS)
3 3
2 2
1 1
0 0
-1 -1
1980s 1990s 2003-08 2013-18
Source: Barro and Lee (2015); International Monetary Fund; Penn World Tables; United Nations;
World Bank, World Development Indicators.
Note: Productivity defined as output per worker in U.S. dollars (at 2010 prices and exchange rates). Sample
included 74 emerging market and developing economies including 11 low-income countries.
30
Sectors contributing to economic growth, 2013-17
Percentage points
Agriculture Manuf. Other industry
1 Trade Transport Finance
Other service
0
-1
-2
-3
-4
Advanced EMDEs LICs
economies
Sources: APO; EASD; GGDC; ILO; KLEMS; national sources; OECD; United Nations; World Bank.
Note: “Other industry” includes mining, utilities, and construction; “Finance” includes business services; “Other
service” includes government and personal services. All medians.

31
 Saving and Investment
 In a closed economy, investment must be equal to saving

 Higher saving, which leads to higher gross investment, will tend

to increase the stock of capital available for production if it
exceeds the depreciation.

 Law of diminishing return

 The benefit from additional investment tends to decrease overtime

32
33
 Governmental Role

 Creating a proper economic environment through designing

the institutions in which individuals and firms work, save, and
invest.

 Enforcement of property rights to create firms’ incentives to

invest in the future – the essence of economic growth.

 Motivate the inflow of foreign investment

34
 What causes technological progress?
 Research and Development Funding

 Monopolies that spur innovation

 The scale of the market

 Induced innovations

 Education, Human Capital, and the Accumulation of

Knowledge

35
 Investment in education
 Investment in healthcare system
 Protect property rights
 Political stability
 Free trade
 Inward-oriented policies
 Outward-oriented policies

 Control of population growth

 Research and development

36