# L3 - Within and beyond the Solow model Chapters 4-5 book 1...

This preview shows pages 1–5. Sign up to view the full content.

Within and beyond the Solow model Chapters 4-5, book 1 Within the Solow model Technological progress (increasing A t ) Eﬀects of s , A , L 0 , and n A side point: The Malthus model The model predictions and data Beyond the Solow model Long run growth without technological progress: AK model Long run growth with endogenous technological progress 1

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Technological progress: increasing A t Recall that k t +1 = s · A t · ( k t ) β 1 + n + (1 - δ ) · k t 1 + n . The case of interest: A t = (1 + γ ) t · A 0 and γ 0 γ = 0 , no technological progress (the numerical example in L2). γ > 0 , constant but positive technological progress. 2
For this case, the economy is in a steady state at t if y t +1 /y t = k t +1 /k t . Because y t = A t k β t and y t +1 = A t +1 k β t +1 and A t +1 /A t = 1 + γ , y t +1 /y t = k t +1 /k t implies (1 + γ ) k β t +1 k β t = k t +1 k t , and so k t +1 k t = (1 + γ ) 1 1 - β . (If γ = 0 , then k t +1 = k t . So this new deﬁnition of steady state encompasses the deﬁnition in L2.) To solve the steady-state value of k t , use k t +1 /k t = (1 + γ ) 1 1 - β and (1 + n ) k t +1 = (1 - δ ) k t + sA t k β t . 3

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Eﬀects of s,A,n and L 0 First consider γ = 0 . An important equation: k * = ( sA n + δ ) 1 1 - β .
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 04/02/2009 for the course ECON 3140 taught by Professor Mbiekop during the Spring '07 term at Cornell.

### Page1 / 16

L3 - Within and beyond the Solow model Chapters 4-5 book 1...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online