Question

Which of the following will result in a movement along China's per-worker production function, and which will result in a shift of China's per-worker production function? Briefly explain. a. Capital per hour worked increases from 200 yuan per hour worked to 250 yuan per hour worked. b. The Chinese government doubles its spending on support for university research. c. A reform of the Chinese school system results in more highly trained Chinese workers.

Short answer

a. Will result in a movement along China's per-worker production function as the amount of capital used per worker changes. b. Will result in a shift in China's per-worker production function due to potential improvements in technology resulting from enhanced research capabilities. c. Will result in a shift in China's per-worker production function as the quality of labor improves due to better education and training.

Step-by-step solution

Capital per hour worked increases from 200 yuan per hour worked to 250 yuan per hour worked

Given the definition of per-worker production function, an increase of capital per hour worked, assuming the technology level is held constant, will result in a movement along the function. The production potential at each level of labor input increases, and therefore, the function indicates a higher value of output.

The Chinese government doubles its spending on support for university research

Increase in government spending on university research can lead to advancements in technology and new methods of production. Hence, it can potentially increase the productivity of each worker and could result in a shift of the per-worker production function upward. The shift indicates that productivity has increased at every level of labor input.

Reform of the Chinese school system results in more highly trained Chinese workers

An improvement in the quality of worker training increases the productivity of labor. As a result, for each given level of capital per worker, more output can be produced. This leads to an upward shift in the per-worker production function, indicating technology or education enhancements.

Key concepts

Capital per Hour Worked

Understanding the relationship between capital usage and worker productivity is crucial in economics. Capital per hour worked refers to the amount of capital that is used by an employee within each hour of labor. This capital can come in different forms, such as machinery, equipment, or technology necessary to complete tasks. An increase in this capital typically makes work more efficient, allowing the same worker to produce more goods or services in the same amount of time. For instance, if a worker has access to better tools (from 200 yuan to 250 yuan worth), they can perform tasks faster or with higher precision, leading to a movement along the per-worker production function. This demonstrates increased efficiency without altering the underlying technology or production capabilities.

It's like having a more powerful computer for data analysis; the analyst can work faster, but the methods they use remain the same. Therefore, the per-worker production function shows an increase in output for the same amount of labor, which paves the way for economic growth and potentially higher wages.

Government Spending on University Research

Investing in research is an investment in a country's future. Government spending on university research plays a pivotal role in fostering innovation and technological advancement. When a government, like China's, decides to double its funding for academic research, it effectively catalyzes the generation of new knowledge. These can include groundbreaking technologies or processes that significantly enhance productivity across multiple sectors of the economy.

The rippling effect of such investments might not be immediate, but over time, the increased research can lead to an upward shift in the per-worker production function. This is because the newfound knowledge equips workers with superior methods or tools, allowing them to create more value. It's akin to discovering a new software that automates a previously manual task, which suddenly increases the amount of work a person can accomplish in an hour. This is a structural change that heightens the productivity at every existing level of worker and capital input.

Worker Productivity

The engine of economic growth is often said to be worker productivity, which is the measure of the output each worker can produce over a given period. Factors influencing productivity include the skill level of the workforce, the technology and tools available, as well as the overall work environment. It's not just about working harder, but smarter. Productivity growth can lead to more goods and services being available, improving living standards and bolstering the economy.

Productivity can be enhanced through investments in human capital—such as education or training programs—to better equip workers for their roles. Additionally, improvements in technology, such as automation or computational tools, can dramatically accelerate productivity by reducing the time and effort required to complete tasks. When workers are able to produce more with less, it translates into a thriving economy with competitive businesses and better job opportunities. In practical terms, if you give a bricklayer a machine that lays bricks automatically, they can build more houses in less time, exemplifying increased worker productivity.

Education System Reform

Reforms in an education system can have profound impacts on a nation's workforce and its economic trajectory. A well-planned and executed reform can enhance the quality of education, ensuring that students acquire the necessary skills and knowledge to succeed in the modern workforce. This, in turn, leads to a more competent and efficient labor pool ready to meet the demands of evolving industries.

For example, if a country overhauls its curriculum to include more STEM (Science, Technology, Engineering, and Mathematics) education, it can lead to a workforce better equipped to handle jobs in high-tech fields. Over time, such reforms contribute to an upward shift in the per-worker production function, as a result of the increased human capital. The workforce becomes more adaptable and innovative, driving productivity and economic growth. This shift is similar to upgrading the overall 'software' of the workforce, rendering it capable of performing more complex and value-adding tasks, ultimately empowering the workforce to push the frontier of production possibilities.