1. GROWTH AND CRISIS IN THE European Competitiveness
Economics 1490
GROWTH AND CRISIS IN THE
WORLD ECONOMY
with
Professor Dale W. Jorgenson
Lecture 12: October 11, 2016
European Competitiveness
Harvard University Department of Economics - Fall 2016

2. European Competitiveness THE WORLD ECONOMY: GROWTH AND CRISIS
Lecture 12: October 11, 2016
European Competitiveness
THE WORLD ECONOMY: GROWTH AND CRISIS
Comparing Economies across the World and over Time.
2. The Great Debate over the Financial and Economic Crisis.
3. The European Slowdown and the Crisis in Europe.
4. Asian Economic Miracles: Will They Continue?
5. Sustainability of Economic Growth.
6. World Economic Outlook.

3. European Competitiveness THE EUROPEAN SLOWDOWN AND CRISIS IN EUROPE
Lecture 12: October 11, 2016
European Competitiveness
THE EUROPEAN SLOWDOWN AND CRISIS IN EUROPE
11. U.S. Growth Resurgence and European Slowdown.
12. European Competitiveness.
13. Europe 2020 and the Single Market.
14. European Policy Response: The Euro.
15. European Policy Response: Brexit

4. European Competitiveness THE EUROPEAN FINANCIAL AND ECONOMIC CRISIS
Lecture 12: October 11, 2016
European Competitiveness
THE EUROPEAN FINANCIAL AND ECONOMIC CRISIS
The economic and financial crisis which started in 2008/09 has thrown the European economy into a “double-dip” recession and overall stagnant growth for a lengthy period of time, in terms of significantly slower growth, a decline in employment, and a negative growth rate in total factor productivity. However, the perils which the crisis inflicted on the European economy can by no means be seen independently from the pre-crisis period. Well before the crisis hit, most European countries exhibited a significant slowdown in their long-term trend growth, driven primarily by slowing productivity growth especially in the “original” EU-15 economies and the Euro Area.
Bart van Ark and Mary O’Mahony.

5. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness

6. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness

7. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness

8. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness

9. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness

10. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness

11. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
Investment Intensity of Intangible Assets as a % of value added in the market sector, EU15 and the US,
2a: European Union-15*

12. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
Investment Intensity of Intangible Assets as a % of value added in the market sector, EU15 and the US,
2b: United States
Note: computerized information includes software and databases, innovative property includes scientific R&D, mineral exploration, entertain and artistic originals, other new product developments (e.g. design and financial innovations), and economic competencies includes workforce training, improvements in organizational structures, and brands and reputation (incl. market research and advertising).
EU-15* refers to pre-2004 membership of EU
Source: Corrado, Haskel, Jonas-Lasinio and Iommi (2013). Intan-Invest project

13. INFORMATION TECHNOLOGY AND THE KNOWLEDGE ECONOMY
Lecture 12: October 11, 2016
European Competitiveness
INFORMATION TECHNOLOGY AND THE KNOWLEDGE ECONOMY
Investment in Information Technology Is One of the Key Elements of the Knowledge Economy.
The Rapid Development of the Knowledge Economy Was an Important Source of the American Economic Resurgence.
The Slowdown in European Economic Growth Can Be Attributed to Europe’s Failure to Develop a Knowledge Economy.

14. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
CAPITAL INPUT AND THE COST OF CAPITAL
PERPETUAL INVENTORY METHOD
where:
K - capital stock
I – investment
 - depreciation rate
RENTAL PRICE OF CAPITAL INPUT
  where:
  c - price of capital input
P - price of investment
r - rate of return
 - asset-specific inflation rate

15. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
Contribution of Information Technology to U.S. Capital Input Growth
Average annual growth rates, weighted by the income share.

16. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
World Capital Input Contribution of Information Technology
Annual percentage growth rates, weighted by income shares
Annual Contribution (%)

17. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
G7 Capital Input Contribution of Information Technology
Annual percentage growth rates, weighted by income shares
Annual Contribution (%)

18. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
Non-G7 Capital Input Contribution of Information Technology
Annual percentage growth rates, weighted by income shares
Annual Contribution (%)

19. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
INVESTMENT IN INFORMATION TECHNOLOGY: SUMMARY
Information Technology Has Developed Very Rapidly Since the Invention of the Transistor in 1947, the Integrated Circuit in 1958, and the Microprocessor in This is Captured by Moore's Law, Doubling the Number of Transistors on a Chip Every Months.
The Economics of Information Technology is Captured by IT Prices, Which Have Declined Very Rapidly Since the Commercialization of the Electronic Computer in 1959 (18 Percent Per Year for Computers; 40 Percent Per Year for Logic Chips).
However,the Improvement of Computing Performance has Slowed Drastically Since 2004.
The Impact of Information Technology Depends on the Growth of Capital Stocks and Their Rental Prices. Until Recently Economists Have Used Asset Prices to Try to Represent This, But This Underestimates the Impact of IT Investment by a Factor of 7.5!

20. European Competitiveness PATTERNS OF WORLD TRADE
Lecture 12: October 11, 2016
European Competitiveness
PATTERNS OF WORLD TRADE
The Value Added Approach to Trade
Shifting Patterns of World Trade
Inward and Outward Foreign Direct Investment

21. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness

22. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness

23. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness

24. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness

25. European Competitiveness EUROPEAN COMPETITIVENESS
Lecture 12: October 11, 2016
European Competitiveness
EUROPEAN COMPETITIVENESS
International Fragmentation of Production
Regional Shares of Global Manufacturing
Revealed Comparative Advantage of the EU27

26. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
Value added and workers involved in production of German transport equipment

27. European Competitiveness International fragmentation of production
Lecture 12: October 11, 2016
European Competitiveness
International fragmentation of production

28. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
Regional shares in world GVC income for all manufactures (%)

29. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
Revealed comparative advantage of EU27, by group of final manufactures (%)

30. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness
Change in employment versus change in real wage in manufacturing GVCs, (1995=1).

31. European Competitiveness
Lecture 12: October 11, 2016
European Competitiveness

32. European Competitiveness COMPARATIVE ADVANTAGE AND COMPETITIVENESS
Lecture 12: October 11, 2016
European Competitiveness
COMPARATIVE ADVANTAGE AND COMPETITIVENESS
 Global Value Chains and Patterns of World Trade
Revealed Comparative Advantage
European Competitiveness and the Knowledge Economy