1. ANTHONY PATRICK O’BRIEN
R. GLENN HUBBARD
ANTHONY PATRICK O’BRIEN
Macroeconomics
FOURTH EDITION

2. 11 Long-Run Economic Growth: Sources and Policies Chapter Outline and
Learning Objectives
11.1
Economic Growth over Time and around the World
11.2
What Determines How Fast Economies Grow?
11.3
Economic Growth in the United States
11.4
Why Isn’t the Whole World
Rich?
11.5
Growth Policies

3. Google’s Dilemma in China
After agreeing to censor Internet searches when expanding into China in 2006, Google suspected Chinese officials were stealing important intellectual property and stopped cooperating with their government by 2010.
This highlighted a Chinese paradox of recent years: Government regulations can stifle very rapid economic growth.
From the time the Communist Party seized control of China in 1949 until the late 1970s, the government controlled production, and the country experienced very little economic growth.
China moved away from a centrally planned economy in 1978, and real GDP per capita today is 10 times higher than it was 50 years ago.
But without a fully established rule of law, the long-term prospects of the Chinese economy are problematic.
Read AN INSIDE LOOK AT POLICY on page 366 for a discussion of China’s long-term plan to decrease its reliance on investment spending as a means of achieving sustainable economic growth.

4. Economics in Your Life Would You Be Better Off without China?
Suppose that you could choose to live and work in a world with the Chinese economy growing very rapidly or in a world with the Chinese economy as it was before 1978—very poor and growing slowly.
See if you can answer these questions by the end of the chapter:
Which world would you choose to live in?
How does the current high-growth, high-export Chinese economy affect you as a consumer?
How does it affect you as someone about to start a career?
In this chapter, we will develop a model of economic growth.

5. Economic Growth over Time and around the World
11.1 LEARNING OBJECTIVE
Define economic growth, calculate economic growth rates, and describe global trends in economic growth.

6. Economic Growth from 1,000,000 B.C. to the Present
No sustained economic growth occurred between 1,000,000 B.C. and 1300 A.D.
Industrial Revolution The application of mechanical power to the production of goods, beginning in England around 1750.
Following the Industrial Revolution, other countries in addition to England, such as the United States, France, and Germany, experienced long-run economic growth, with sustained increases in real GDP per capita that eventually raised living standards in those countries to the high levels of today.

7. Making the Connection
Why Did the Industrial Revolution Begin in England?
Nobel Laureate Douglass North of Washington University points to the Glorious Revolution of as greatly aiding economic growth in England.
After that date, the British court system became independent of the king, and the British Parliament took control of the government.
As a result, the British government was credible when it committed to upholding private property, protecting wealth, and eliminating arbitrary increases in taxes.
These institutional changes gave entrepreneurs the incentive to make the investments necessary to use the important technological developments of the second half of the eighteenth century.
Your Turn: Test your understanding by doing related problem 1.3 at the end of this chapter.
MyEconLab

8. World economic growth was essentially zero in the years before 1300,
Figure 11.1
Average Annual Growth Rates for the World Economy
World economic growth was essentially zero in the years before 1300,
and it was very slow—an average of only 0.2 percent per year—before 1800.
The Industrial Revolution made possible the sustained increases in real GDP per capita that have allowed some countries to attain high standards of living.

9. Small Differences in Growth Rates Are Important
The process known as compounding magnifies even small differences in interest rates over long periods of time.
In the long run, small differences in economic growth rates result in big differences in living standards.
Why Do Growth Rates Matter?
Growth rates matter because an economy that grows too slowly fails to raise living standards.
Don’t Let This Happen to You
Don’t Confuse the Average Annual Percentage Change with the Total Percentage Change
Growth rates over a period of more than one year are average annual percentage changes and
not total percentage changes.
For example, in the United States, real GDP per capita was $13,213 in 1950 and $42,205 in 2010.
The percentage change in real GDP per capita between these two years is
This is not the growth rate between the two years.
The growth rate between these two years is the rate at which $13,213 in 1950 would have to grow on average each year to end up as $42,205 in 2010, which is 2.0 percent.
Your Turn: Test your understanding by doing related problem 1.6 at the end of this chapter.
MyEconLab

10. “The Rich Get Richer and . . . ”
We can divide the world’s economies into two groups: the high-income countries, sometimes also referred to as the industrial countries, and the poorer countries, or developing countries.
In the 1980s and 1990s, a small group of mostly East Asian countries experienced high rates of growth and are sometimes referred to as the newly industrializing countries.
Figure 11.2
GDP per Capita, 2010
GDP per capita is measured in U.S. dollars, corrected for differences across countries in the cost of living.

11. Making the Connection Is Income All That Matters?
Some economists argue that if we look beyond income to other measures of the standard of living, we can see that even the poorest countries have made significant progress in recent decades.
Over time, increases in income within a particular country typically have very little effect on the country’s standard of living in terms of health, education, individual rights, political stability, and similar factors.
There are limits, of course, to how much living standards can increase if incomes stagnate. Ultimately, much higher rates of economic growth will be necessary for low-income countries to significantly close the gap in living standards with high-income countries.
In sub-Saharan Africa and other parts of the world, increases in technology and knowledge are leading to improvements in health care and the standard of living.
Your Turn: Test your understanding by doing related problems 1.7 and 1.8 at the end of this chapter.
MyEconLab

12. What Determines How Fast Economies Grow?
11.2 LEARNING OBJECTIVE
Use the economic growth model to explain why growth rates differ across countries.

13. Economic growth model A model that explains growth rates in real GDP per capita over the long run.
Labor productivity The quantity of goods and services that can be produced by one worker or by one hour of work.
Economists believe two key factors determine labor productivity:
The quantity of capital per hour worked
The level of technology
The economic growth model focuses on changes in these factors to explain changes in real GDP per capita.
Technological change A change in the quantity of output a firm can produce using a given quantity of inputs.

14. There are three main sources of technological change:
• Better machinery and equipment. Beginning with the steam engine during the Industrial Revolution, the invention of new machinery has been an important source of rising labor productivity.
• Increases in human capital. The more physical capital workers have available, the more output they can produce; the more educated workers are, the greater their human capital is and thus their productivity.
Human capital The accumulated knowledge and skills that workers acquire from education and training or from their life experiences.
• Better means of organizing and managing production. The just-in-time system, first developed by Toyota Motor Corporation, led to less reliance on workers while increasing the quantity of goods produced per hour worked.
Note that technological change is not the same thing as more physical capital.

15. Per-worker production function The relationship between real GDP per hour worked and capital per hour worked, holding the level of technology constant.
Figure 11.3
The Per-Worker Production Function
The per-worker production function shows the relationship between capital per hour worked
and real GDP per hour worked, holding technology constant.
Increases in capital per hour worked increase output per hour worked but at a diminishing rate.
For example, an increase in capital per hour worked from $20,000 to $30,000 increases real GDP per hour worked from $200 to $350.
An increase in capital per hour worked from $30,000 to $40,000 increases real GDP per hour worked only from $350 to $475.
Each additional $10,000 increase in capital per hour worked results in a progressively smaller increase in output per hour worked.

16. At very high levels of capital per hour worked, further increases in capital per hour worked will not result in any increase in real GDP per hour worked.
This effect results from the law of diminishing returns, which states that as we add more of one input—in this case, capital—to a fixed quantity of another input—in this case, labor—output increases by smaller additional amounts.
Which Is More Important for Economic Growth: More Capital or Technological Change?
Technological change more efficiently helps economies avoid diminishing returns to capital.
Replacing existing capital with more productive capital and reorganizing how production takes place so as to increase output are examples of technological change.

17. Technological Change: The Key to Sustaining Economic Growth
Figure 11.4
Technological Change Increases Output per Hour Worked
Technological change shifts up the production function and allows more output per hour worked with the same amount of capital per hour worked.
For example, along Production function1 with $50,000 in capital per hour worked, the economy can produce $575 in real GDP per hour worked.
However, an increase in technology that shifts the economy to Production function2 makes it possible to produce $675 in real GDP per hour worked with the same level of capital per hour worked.
In the long run, a country will experience an increasing standard of living only if it experiences continuing technological change.

18. Making the Connection
What Explains the Economic Failure of the Soviet Union?
Capital per hour worked grew rapidly in the Soviet Union from 1950 through the 1980s, but diminishing returns to capital resulted in smaller and smaller increases in real GDP per hour worked due to a slow rate of technological change.
Soviet managers had little incentive to adopt new ways of doing things because they didn’t have to worry about competition and because their pay didn’t depend on discovering new, better, and lower-cost ways to produce goods.
Developing and using new technologies is an important way to gain a competitive edge and higher profits, the drive for which provides an incentive for technological change that centrally planned economies are unable to duplicate.
Contemporary Russia now has a more market-oriented system, although the government continues to play a large role in the economy.
The fall of the Berlin Wall in 1989 symbolized the failure of Communism.
Your Turn: Test your understanding by doing related problem 2.10 at the end of this chapter.
MyEconLab

19. Solved Problem 11.2
Using the Economic Growth Model to Analyze the Failure of the Soviet Economy
Use the economic growth model and the information in the preceding Making the Connection to analyze the economic problems the Soviet Union encountered.
Solving the Problem
Step 1: Review the chapter material.
Step 2: Draw a graph like Figure 11.3 to illustrate the economic problems of the Soviet Union.
For simplicity, assume that the Soviet Union experienced no technological change.
The Soviet Union experienced rapid increases in capital per hour worked from 1950 through the 1980s, but its failure to implement new technology meant that output per hour worked grew at a slower and slower rate.

20. Solved Problem 11.2
Using the Economic Growth Model to Analyze the Failure of the Soviet Economy
Its strategy for raising the standard of living of its citizens was to make continuous increases in the quantity of capital available to its workers.
The economic growth model helps us understand the flaws in this policy for achieving economic growth.
Your Turn: For more practice, do related problems 2.7 and 2.8 at the end of this chapter.
MyEconLab

21. New growth theory A model of long-run economic growth that emphasizes that technological change is influenced by economic incentives and so is determined by the working of the market system.
Paul Romer, an economist at Stanford University who developed the new growth theory, argues that while the accumulation of knowledge capital is subject to diminishing returns at the firm level, it is subject to increasing returns at the level of the entire economy once knowledge becomes available to everyone.
The use of knowledge capital is nonrival because one firm’s using that knowledge does not prevent another firm from using it, and it is nonexcludable because once something becomes known, it becomes widely available for other firms to use (unless the government gives a firm the legal right to exclusive use).
Because knowledge capital is nonrival and nonexcludable, firms can free ride on the research and development of other firms by benefiting from results they didn’t pay for.
Romer points out that firms are unlikely to invest in research and development up to the point where the marginal cost of the research equals the marginal return from the knowledge gained because other firms gain much of the marginal return, resulting in an inefficiently small amount of research and development that slows the accumulation of knowledge capital and economic growth.

22. • Protecting intellectual property with patents and copyrights.
Government policy can help increase the accumulation of knowledge capital and bring it closer to the optimal level in three ways:
• Protecting intellectual property with patents and copyrights.
Patent The exclusive right to produce a product for a period of 20 years from the date the patent is applied for.
To prevent information from entering the public record, a firm may try to keep the results of its research a trade secret, without patenting it.
Just as a new product or a new method of making a product receives patent protection, books, films, and other artistic works receive copyright protection.
• Subsidizing research and development. The government uses subsidies to increase the quantity of research and development that takes place and provides tax benefits to firms that invest in it.
• Subsidizing education. By subsidizing education, the government increases the number of workers who have technical training and higher learning.

23. Joseph Schumpeter and Creative Destruction
The new growth theory has revived interest in the ideas of Joseph Schumpeter.
Schumpeter developed a model of growth emphasizing his view that new products unleash a “gale of creative destruction” that drives older products—and, often, the firms that produced them—out of the market.
According to Schumpeter, the key to rising living standards is not small changes to existing products but, rather, new products that meet consumer wants in qualitatively better ways.
To Schumpeter, the entrepreneur is central to economic growth.
The profits an entrepreneur hopes to earn provide the incentive for bringing together the factors of production—labor, capital, and natural resources—to start new firms and introduce new goods and services.
Successful entrepreneurs are better able to attract funds from investors.

24. Economic Growth in the United States
11.3 LEARNING OBJECTIVE
Discuss fluctuations in productivity growth in the United States.

25. Economic Growth in the United States since 1950
Figure 11.5
Average Annual Growth Rates in Real GDP per Hour Worked in the United States
The growth rate in the United States increased from 1800 through the mid-1970s.
Then, for more than 20 years, growth slowed before increasing again in the mid-1990s.
Economic Growth in the United States since 1950
Continuing technological change allowed the U.S. economy to avoid the diminishing returns to capital that stifled growth in the Soviet economy.

26. What Caused the Productivity Slowdown of 1973–1994?
Some economists argue that productivity really didn’t slow down; it only appears to have because of problems in measuring productivity accurately.
There may also be a measurement problem in accounting for improvements in the environment and in health and safety.
Other economists argue that deterioration in the U.S. educational system may have contributed to the slowdown in growth.
But because all high-income economies experienced a growth slowdown between the mid-1970s and the mid-1990s, and they were all enacting stricter environmental regulations and producing more services and fewer goods at about the same time, measurement problems give a plausible explanation.
Can the United States Maintain High Rates of Productivity Growth?
Some economists argue that the development of a “new economy” based on information technology caused the higher productivity growth that began in the mid-1990s, and many expect it to continue.
Others are skeptical, arguing that by the early 2000s, innovations in information and communications technology were having a greater effect on consumer products than on labor productivity.

27. Why Isn’t the Whole World Rich?
11.4 LEARNING OBJECTIVE
Explain economic catch-up and discuss why many poor countries have not experienced rapid economic growth.

28. Catch-up: Sometimes, but Not Always
Catch-up The prediction that the level of GDP per capita (or income per capita) in poor countries will grow faster than in rich countries.
Catch-up: Sometimes, but Not Always
Figure 11.6
The Catch-up Predicted by the Economic Growth Model
According to the economic growth model, countries that start with lower levels of real GDP per capita should grow faster (points near the top of the line)
than countries that start with higher levels of real GDP per capita (points near the bottom of the line).

29. If we look only at countries that currently have high incomes,
Figure 11.7
There Has Been Catch-up among High-Income Countries
If we look only at countries that currently have high incomes,
we see that countries such as Taiwan, Korea, and Singapore that had the lowest incomes in grew the fastest between and 2009.
Countries such as Switzerland and the United States that had the highest incomes in grew the slowest.
Note: Data are real GDP per capita in 2005 dollars.
Each point in the figure represents one high-income country.

30. Are the Developing Countries Catching Up to the High-Income Countries?
Figure 11.8
Most of the World Hasn’t Been Catching Up
If we look at all countries for which statistics are available,
we do not see the catch-up predicted by the economic growth model.
Some countries that had low levels of real GDP per capita in 1960,
such as Niger, Madagascar, and the Democratic Republic of the Congo, actually experienced negative economic growth.
Other countries that started with low levels of real GDP per capita, such as Malaysia and South Korea, grew rapidly.
Some middle-income countries in 1960, such as Venezuela, hardly grew between 1960 and 2009, while others, such as Israel, experienced significant growth.
Note: Data are real GDP per capita in 2005 dollars.
Each point in the figure represents one country.

31. Solved Problem 11.4 The Economic Growth Model’s Prediction of Catch-up
The economic growth model makes predictions about the relationship between an economy’s initial level of real GDP per capita relative to other economies and how fast the economy will grow in the future.
a. Consider the statistics in the following table:
Country
Real GDP per Capita
in 1960 (2005 dollars)
Annual Growth in Real
GDP per Capita, 1960–2009
Taiwan
$1,826
5.78%
Panama
2,171
3.21
Brazil
2,877
2.43
Algeria
4,077
0.81
Venezuela
6,662
0.64
Are these statistics consistent with the economic growth model? Briefly explain.
Solving the Problem
Step 1: Review the chapter material.
Step 2: Explain whether the statistics in the table are consistent with the economic growth model.
These statistics are consistent with the economic growth model.
The countries with the lowest levels of real GDP per capita in 1960 had the fastest growth rates between 1960 and 2009, and the countries with the highest levels of real GDP per capita had the slowest growth rates.

32. Solved Problem 11.4 The Economic Growth Model’s Prediction of Catch-up
b. Now consider the statistics in the following table:
Country
Real GDP per Capita
in 1960 (2005 dollars)
Annual Growth in Real
GDP per Capita, 1960–2009
Japan
$6,094
3.44%
Belgium
10,241
2.52
United Kingdom
12,842
1.97
New Zealand
13,803
1.44
Are these statistics consistent with the economic growth model?
Briefly explain.
Step 3: Explain whether the statistics in the table in part b. are consistent with the economic growth model.
These statistics are also consistent with the economic growth model.
Once again, the countries with the lowest levels of real GDP per capita in 1960 had the fastest growth rates between 1960 and 2009, and the countries with the highest levels of real GDP per capita had the slowest growth rates.
c. Construct a new table that lists all nine countries, from lowest real GDP per capita in to highest, along with their growth rates.

33. Solved Problem 11.4 The Economic Growth Model’s Prediction of Catch-up
Step 4: Construct a table that includes all nine countries from the tables in parts a. and b. and discuss the results.
Country
Real GDP per Capita in 1960 (2005 dollars)
Annual Growth in Real GDP per Capita, 1960–2009
Taiwan
$1,826
5.78%
Panama
2,171
3.21
Brazil
2,877
2.43
Algeria
4,077
0.81
Japan
6,094
3.44
Venezuela
6,662
0.64
Belgium
10,241
2.52
United Kingdom
12,842
1.97
New Zealand
13,803
1.44
Are the statistics in your new table consistent with the economic growth model?
The statistics in the new table are not consistent with the predictions of the economic growth model.
There has been catch-up among the high-income countries, but there has not been catch-up if we include in the analysis all the countries of the world.
Your Turn: For more practice, do problems 4.5 and 4.6 at the end of this chapter.
MyEconLab

34. Why Haven’t Most Western European Countries, Canada, and Japan Caught Up to the United States?
Figure 11.9
Other High-Income Countries Have Stopped Catching Up to the United States
The blue bars show real GDP per capita in 1990 relative to the United States.
The red bars show real GDP per capita in 2010 relative to the United States.
In each case, relative levels of real GDP per capita are lower in 2010 than they were in 1990, which means that these countries have ceased catching up to the United States.

35. Many economists believe that the greater flexibility of U. S
Many economists believe that the greater flexibility of U.S. labor markets and the greater efficiency of the U.S. financial system mainly explain why other high-income countries haven’t caught up with the United States in real GDP per capita.
The level of legal protection of investors is relatively high in U.S. financial markets, which encourages both U.S. and foreign investors to buy stocks and bonds issued by U.S. firms.
The volume of trading in U.S. financial markets also ensures that investors will be able to quickly sell the stocks and bonds they buy.
This liquidity serves to attract investors to U.S. markets.
The ability of venture capital firms to finance technology-driven “start-up” firms may be giving the United States an advantage in bringing new products and new processes to market.
Aside from the severe problems it suffered between 2007 and 2009, the U.S. financial system has succeeded in efficiently allocating investment funds over the long run.

36. Why Don’t More Low-Income Countries Experience Rapid Growth?
Most economists point to four key factors in explaining why many low-income countries are growing so slowly:
Failure to enforce the rule of law
Wars and revolutions
Poor public education and health
Low rates of saving and investment
Failure to Enforce the Rule of Law
Property rights The rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it.
Rule of law The ability of a government to enforce the laws of the country, particularly with respect to protecting private property and enforcing contracts.

37. Wars and Revolutions Wars and violent revolutions have made it impossible for countries to accumulate capital or adopt new technologies.
Poor Public Education and Health Many low-income countries have weak public school systems, so many workers are unable to read and write or acquire skills necessary to use the latest technology.
Poor health also has a significant negative effect on the human capital of workers in developing countries.
Low Rates of Saving and Investment In most developing countries, stock and bond markets do not exist, and often the banking system is very weak.
Many households barely survive on their incomes and, therefore, have little or no savings.
The low savings rates in developing countries can contribute to a vicious cycle of poverty.

38. Making the Connection
What Do Parking Tickets in New York City Tell Us about Poverty in the Developing World?
GDP per capita is more than 10 times higher in the 20 least corrupt countries than in the 20 most corrupt countries.
Every country in the world sends delegates to the United Nations in New York City.
Two economists gathered statistics on the number of parking violations per delegate and compared them to the World Bank’s index of corruption.
They found that as the level of corruption in a country increases, so does the number of parking violations by the country’s United Nations delegates.
Your Turn: Test your understanding by doing related problem 4.8 at the end of this chapter.
MyEconLab

39. The Benefits of Globalization
One way for a developing country to break out of the vicious cycle of low saving and investment and low growth is through foreign investment.
Foreign direct investment (FDI) The purchase or building by a corporation of a facility in a foreign country.
Foreign portfolio investment The purchase by an individual or a firm of stocks or bonds issued in another country.
Foreign direct investment and foreign portfolio investment can give a low-income country access to funds and technology that otherwise would not
be available.
Globalization The process of countries becoming more open to foreign trade and investment.

40. Figure 11.10
Globalization and Growth
Developing countries that were more open to foreign trade and investment grew much faster during the 1990s than developing countries that were less open.

41. Growth Policies
11.5 LEARNING OBJECTIVE
Discuss government policies that foster economic growth.

42. Enhancing Property Rights and the Rule of Law
A market system cannot work well unless property rights are enforced.
In many developing countries, the rule of law and property rights are undermined by government corruption.
In some developing countries, it is impossible for an entrepreneur to obtain a permit to start a business without paying bribes, often to several different government officials.
In the late nineteenth and early twentieth centuries, corruption was also a significant problem in the United States until political reform movements and crusading newspapers helped reduce it to relatively low levels by the 1920s.
Along those lines, there is some hope for reform movements that aim to reduce corruption in developing countries today.

43. Making the Connection
Will China’s Standard of Living Ever Exceed That of the United States?
For China to maintain its
high rates of growth in real GDP per capita, it would have to maintain high rates of productivity growth, which is unlikely.
While the United States invests more in activities that result in new technologies and increases in productivity, much of China’s growth may be due to the transition from a centrally planned economy to a market economy, so its growth rate is likely to decrease as the transition is completed.
Also, because of China’s low birthrate, the country will soon experience a decline in its labor force. Meanwhile, it remains autocratic, with the Communist Party rejecting meaningful elections and limiting freedom of expression.
And by employing policies that have resulted in investment being 50 percent of GDP, the government may have boosted short-term growth at the expense of the health of the economy in the long term.
Some economists argue that China may have overinvested in physical capital, such as bullet trains.
Your Turn: Test your understanding by doing related problem 5.4 at the end of this chapter.
MyEconLab

44. Improving Health and Education
As people’s health improves and they become stronger and less susceptible to disease, they also become more productive.
Recent initiatives in developing countries to increase vaccinations against infectious diseases, to improve access to treated water, and to improve sanitation have begun to reduce rates of illness and death.
The rising incomes that result from government subsidies for education can lessen the brain drain, which refers to highly educated and successful individuals leaving developing countries for high-income countries.
Policies That Promote Technological Change
For developing countries, the easiest way to gain access to technology is through foreign direct investment, where foreign firms are allowed to build new facilities or to buy domestic firms.
In high-income countries, governments can aid the growth of technology by providing grants and tax breaks to universities and firms undertaking research and development. They can also conduct some research and development on their own, as does the U.S. federal government.

45. Policies That Promote Saving and Investment
Saving and investing will increase the equilibrium level of loanable funds and may increase the level of real GDP per capita.
Governments can increase incentives for firms to engage in investment in physical capital by using investment tax credits, which allow firms to deduct from their taxes some fraction of the funds they have spent on investment, thereby increasing its after-tax return.
Is Economic Growth Good or Bad?
It seems undeniable that increasing the growth rates of very low-income countries would help relieve the daily suffering that many people in those countries endure, but many people are concerned that economic growth may contribute to global warming, deforestation, and other environmental problems.
Some people see multinational firms that locate in low-income countries as unethical because they claim the firms are paying very low wages and are failing to follow the same safety and environmental regulations they are required to follow in high-income countries.
Whether economic growth is good or bad is a normative question still debated.

46. Economics in Your Life Would You Be Better Off without China?
At the beginning of the chapter, we asked you to imagine that you could choose to live and work in a world with the Chinese economy growing very rapidly or in a world with the Chinese economy as it was before 1978—very poor and growing slowly.
Which world would you choose to live in?
How does the current high-growth, high-export Chinese economy affect you as a consumer?
How does it affect you as someone about to start a career?
The rapid economic growth that has enabled Chinese firms to be competitive with firms in the United States has benefited you as a consumer: You have lower-priced goods and better goods available for purchase than you would if China had remained very poor.
As you begin your career, there are some U.S. industries that, because of competition from Chinese firms, will have fewer jobs to offer. But expanding trade does not affect the total number of jobs. So, the economic rise of China will affect the mix of jobs available to you in the United States but will not make finding a job any more difficult.

47. AN INSIDE LOOK AT POLICY
Despite a Plan for Change, Investment Still Spurs China’s Growth
Continuous increases in capital per hour worked lead to smaller and smaller increases in output per hour worked.