growthanddevelopment

growthanddevelopment - CONVERGENCE EC202 Gabriele Gratton...

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CONVERGENCE EC202 Gabriele Gratton
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The Solow growth model predicts that all economies will eventually reach a steady state with growth rates of per capita capital vand per capita income equal to the technological progress. If saving rate, population growth and depreciation rates are equal, then we would expect all countries to converge to the same steady state.
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A problem is that the Solow growth model predicts convergence only if saving rates, population growth and depreciation )and technology are equal. Unfortunately we cannot control for technology, but controlling for s, n and δ shows more convergence. This concept is called ‘conditional convergence’ (conditional on having the same parameters). Again the problem is that all we know about growth is that we know how, but not why.
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ENDOGENOUS GROWTH EC202 Gabriele Gratton
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growth is exogenous, in the sense that it comes from a parameter we do not know, g . It would be better if growth was determined by
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This note was uploaded on 01/28/2010 for the course EC CASEC202 taught by Professor Graton during the Spring '10 term at BU.

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growthanddevelopment - CONVERGENCE EC202 Gabriele Gratton...

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