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英国essay代写范文-Elements behind productivity growth

2017-08-10 | 来源:51due教员组 | 类别:Essay代写范文

本篇英国essay代写范文-Elements behind productivity growth 讲了Coors成立于1873年,由Adolph Coors,Sr.成立。Coors的业务分为多个部分,包括瓷器,食品,酿造等。然而,根据Bill Coors主席的声明,Coors的酿造行业被视为战略业务和“可预见的未来”。作为世界第七大酿酒公司,Coors在科罗拉多州设有酿造厂。本篇essay代写由51due代写平台整理,供大家参考阅读。


Executive summary

From the Bureau of Labor Statistics website, we can see that in the past 20 years, although the labor productivity is increasing in general, the growth rate of productivity is high from 1995 to 2006, and relatively lower from 2007 until now. As learned in class, under competitive markets and constant returns to scale, productivity is increased by increases in capital deepening, labor quality growth, and growth in total factor productivity.  This paper discusses about some possible explanations behind this phenomena. The primary reason for the 1995 to 2006 growth is the emergence of internet and the main reason for the downturn was the subprime mortgage crisis in 2008. This paper will discuss how those two significant events changed those fundamental drivers as proposed by economists in their labor economics models. 

PART 1, 1995-2006

This time period can actually be broken down into two different time period due to different growth drivers. From 1995-2000, the dot-com bubble and the emergence of new technology contributed more to the growth in productivity. From 2000-2006, the total factor productivity increase generated from other non-IT industries contributed more to productivity increase. That is to say, the innovation in the IT industry had a positive externality and affected other industries as well.

From 1990 to 1995, the Bureau of Labor Statistics reported that labor productivity only grew at 1%.  Then experts expected that with all those uncertainty about technological innovation such as the internet and the computers, labor productivity will only grow at 1.2% from 1995 to 2000. However, the truth was that productivity growth rate hit 2.8%  in the US. During this time period, an important technological innovation hit our lives. The emergence and prevalence of the internet greatly improved labor productivity. Computer science engineers started to emerge in colleges and coding for the internet became more and more popular. As a result, engineers could write programs to do many calculations that were previous done by human beings. Here, two things occurred to increase the growth of productivity, capital deepening since the labor is better educated, and the total factor productivity in the IT industry since computers can apparently work faster than humans. 

Apart from this apparent reason, both monetary and fiscal policies followed up quickly to suit the changing environment. Without the support of those policies, productivity would not have grown at such a high rate. With the rapid growth of the IT industry, assets related to that area decreased in price because they were cheaper to make. Supply increased and as the supply curve shifted rightwards, quantity produced increased while price decreased. This contributed to lower inflation and high real economic growth. Investments in the IT industry also increased from 13.5% from 1987-1995 to 22.25 from 1995-2000 . In short, other factors such as government policies and investment opportunities also contributed to the growth of productivity.

From 1995 to 2000, I would say that the main source of contribution to the productivity growth rate is the innovations in the IT industry. However, from 2000 and onwards, a different source is found because the IT bubble soon collapsed. The dot com bubble was from 1995 to 2001, when the stock prices of IT firms increased significantly. Although it is true that those IT firms were generating more value to the society, they are actually not worth that much as it was a bubble that their stock prices were such so high. From 1999 to 2001, the bubble finally collapsed and some firms went bankrupt. Those firms that were really strong stayed and became even stronger nowadays. With the collapse of the bubble, the main growth driver became an increase in total factor productivity growth in areas other than the IT industry. 

People soon discovered that they could leverage up the benefits from the innovation in the IT industry and apply it into other practices as well. They innovated the business organization, made organizational strategies to improve the efficiency in their supply chain and operations systems, invested more in human capital and other intangible assets.  

According to Jorgenson, Ho and Stiroh and their paper in 2008, they separated the sources of productivity growth into capital deepening, labor quality and total factor productivity. More specifically, they separated out capital deepening and TFP from the generated from the IT industry and from other industries. The result is summarized in the pie charts below. As we can see from the graph, labor quality accounted for more in the 2000-2006. Growth from the IT industry together, no matter TFP or capital deepening, accounted for more in 1995-2000. 

    

PART 2, 2007-2016

As we all know, the subprime mortgage crisis broke out in 2008 and soon negatively impacted not only the US economy, but also the world economy as a whole. The crisis broke out due to how mortgages were bundled together to form Mortgage Backed Securities (MBS). Theoretically, from a portfolio management’s point of view, as long as you do not put all of your eggs in one basket and diversify your investment, the risk can be decreased. This is the principle behind how the MBS, although consisting of thousands and thousands of junk grade bonds, those portfolios were able to fool the credit rating firms and were sold into the market. However, a thousand junk bonds bundled together will not decrease the default rate because everyone will default. When the day really came, the stock market fell about 50%, houses were no longer valuable, and many financial services firms had to be bailout or went bankrupt. This event impacted the world productivity in several ways.

First, during a crisis, it is hard for firms to receive loans that are necessary for growth and investment activities because nobody has the money to borrow to them. As a result, firms are not generating enough revenue or cash flow to support their daily functions or seek out new investment opportunities. From the accounting point of view, if there is not enough revenue and profitability is low, the firm will be incentivized to cut spending and recalculate the budget to pass those hard times. One of the ways that firms save their costs could be to fire people, sell their equipment or cut their office spaces and etc. as there is not enough business going on. Firms can also defer their payments to their employees or stop paying dividends to their shareholders all together. This is a negative cycle because when firms act that way, morale is low in the firm and the employees are not in the mood of working whole heartily for the firm. They do not have the incentive to work and can cut their productivity easily. 

The reasoning in the paragraph above happened once again around 2014 to 2015, when the price of crude oil dropped to an unexpectedly low level. The price of crude oil affects many index and sectors in the world economy. First, although it is the Middle East who saw a drop in oil price, countries all over the world import from the Middle East and that was how the US was affected. Second, not only do industries that use crude oil for production were affected, but also those who trade commodities in the financial market was also affected. Commodity firms such as Glencore and other financial services firms suffered from losses due to the negative oil price. Then the whole cycle analysed in the previous paragraph happens again. 

From an economics perspective, we all know that there is a trade-off theory between work and leisure. With only a limited amount of time per day, a rationally behaving individual will make his choice between whether to work or to leisure based on the returns of working and leisure. The return of working is of course wage rate. When the wage rate decreases in a crisis, individuals are not incentivized to work anymore and they turn to use their time on leisure instead.

However, when economies reach a trough, they will eventually rise up again. According to Curi and Lozano-Vivas’s 2015 paper titled “Financial center productivity and innovation prior to and during the financial crisis”, they found that shortly after the financial crisis, firms, especially those in the financial services industry, adopted better technology to avoid fatal errors such as the one that caused the financial crisis. As a result of those new technology, the labor productivity increased back up again and saw a faster growth rate. What is more, smaller banks have the tendency to catch up with larger banks because with the same technological change, smaller banks also emphasized more on pure efficiency changes. So despite terrible events such as the financial crisis, I am still confident about the economy in the future.

CONCLUSION

In conclusion, due to technological innovation of the internet, productivity growth rate was higher during the time period of 1995-2006. Due to the financial crisis, fewer capital, high unemployment, and unstable energy prices, the US productivity growth rate was relatively low from 2007 to now.

In the future, on the one hand, we should learn from our mistakes and try to avoid errors such as those that led to a world-wide financial crisis. On the other hand, policies and measures that we had done previously that worked well should be studied and could give us a clue of what to do in the future. With more and more people studying economics, the US economy will become stronger and stronger in the future.

Reference

Curi, Claudia, and Ana Lozanovivas. "Financial center productivity and innovation prior to and during the financial crisis." Journal of Productivity Analysis 43.3 (2015): 351-365.

Ehrenberg and Smith, "Modern Labor Economics", HarperCollins, 2008

Jorgenson, Dale W., Mun S. Ho, and Kevin J. Stiroh. "A Retrospective Look at the U.S. Productivity Growth Resurgence." Journal of Economic Perspectives 22.1 (2008): 3-24.

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