
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
Capital
per
worker
Natural
resources
Human
capital
Labor utilization
Technology
• Participant rate
• Employment rate
Institutions
Policies
10
Source: World Bank (1999): World Development Report 1998/1999: Knowledge for Development
Source: CIEM and NUS (2011), Vietnam Competitiveness Index 2010
$40,000
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
GDP per person employed,
PPP adjusted in 1990 US$
$45,000
South Korea
$35,000
$30,000
$25,000
$20,000
$15,000
Thailand
$10,000
China
Indonesia
$5,000
Vietnam
$0
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
Y2
Labor supply
A technological
innovation
w2
Y1
Labor
demand
w1
L
L
Labor
17
Labor
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
Y2
Labor supply
An increase in
capital
w2
Y1
Labor
demand
w1
L
L
Labor
22
Labor
 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
Hàn Quốc
Đài Loan
Bản
Tăng trưởng về lực lượng lao động, 1960-90 (%)
Nông nghiệp
-3,9
-1,2
-1,9
Phi nông nghiệp
2,3
5,4
5,4
Thống kê
Singapore
Thái Lan
Indonesia
-6,5
3,7
2,0
5,5
1,5
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
1990
92,7
81,9
87,4
99,6
35,9
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
Phi nông nghiệp
4,2
3,7
4,4
4,6
2,9
Nguồn: Mason (2001)
25,2
44,8
1,2
3,2
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
Vốn
GDP
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
6
Percent
6
TFP
Capital deepening
Human capital
Productivity (RHS)
5
4
5
4
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
TFP
6
Capital deepening
5
Human capital
4
Productivity (RHS)
3
Percent
6
5
4
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
Trade
1
Other service
0
Manuf.
Transport
Other industry
Finance
-1
-2
-3
-4
Advanced
economies
EMDEs
LICs
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