Status Updates From Pop Internationalism (Mit P...

Note n/n:

I don't get this logic. 1st of all, if there exists such a high marginal return to labour, why don't these capital-intensive firms add more labour until there's 0 marginal return to labour in equilibrium? Secondly, I want a 2025 update on the industries ranked by value-added per worker. My intuition is that modern tech may have higher human capital-augmenting effects, so as to raise the value-add of labour

Note 2/n:

Apparently this result 'does not surprise conventional economists'. Capital-intensive industries would have the highest value-added per WORKER cuz:
i) They have low marginal returns to capital
ii) They must earn a normal return
iii) Thus they must charge higher markups over labour costs than labour-intensive industries

Note 1/n:
According to pg 740–744 of the 1991 'Statistical Abstract', it turns out that US industries with the highest value-added per WORKER are: (ranked)
i) Cigarettes
ii) Petroleum refining
iii) Autos
iv) Steel

...
the point is that the highest value-added per WORKER industries are not high tech as we might expect!

And Krugman here provides a bunch of numbers that broadly prove his point that GNP trends in the US, Europe and Japan generally track domestic productivity growth.

How's this possible in our globalized world? Krugman says that it's cuz the world ain't as interdependent as we might think – he quotes how at the time, apparently US exports were only 10% of the value-added in the economy. I'm pretty shocked.

Note 3/3:
... outweighed by deteriorating terms of trade.

Krugman provides a numerical example that illustrates this – REFER TO THIS

Note 2/3:
But even when trade expands in the economy, the same logic (perhaps unintuitively to many, hence the reason for this essay) holds! Even for a growing economy, for it to stay 'competitive' on the world markets, it would need to continuously devalue its currency. Hence, the standard of living (crucially, as measured by the purchasing power in terms of imports), declines. Productivity growth is ...

Note 1/3:
A simple model to think about this:

First consider an economy with very little trade. The ability to balance trade is mostly a function of getting the exchange rate right. But since trade is a very small factor in this economy, the exchange rate is a small influence on living standards. Hence, all that drives the standard of living is domestic productivity growth.