321LecNote11Ch8

# 321LecNote11Ch8 - Instructor Kim H.H Fall 2009 Intermediate...

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Instructor : Kim, H.H. Intermediate Macro Analysis Fall 2009 Economics 01:220:321 1 Chapter 8. Economic Growth II: Technology, Empirics and Policy In this chapter, you will learn: how to incorporate technological progress in the Solow model about policies to promote growth about growth empirics: confronting the theory with facts two simple models in which the rate of technological progress is endogenous Introduction In the Solow model of Chapter 7, the production technology is held _____________. income per capita is __________________________. Neither point is true in the real world: 1908-2008: U.S. real GDP per person grew by a factor of 7.8, or 2.05% per year. examples of technological progress abound (see next slide). Examples of technological progress From 1950 to 2000, U.S. farm sector productivity nearly tripled. The real price of computer power has fallen an average of 30% per year over the past three decades. Percentage of U.S. households with 1 computers: 8% in 1984, 62% in 2003 1981: 213 computers connected to the Internet 2000: 60 million computers connected to the Internet 2001: iPod capacity = 5gb, 1000 songs. Not capable of playing episodes of True Blood . 2009: iPod capacity = 120gb, 30,000 songs. Can play episodes of True Blood .

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Instructor : Kim, H.H. Intermediate Macro Analysis Fall 2009 Economics 01:220:321 2 Technological progress in the Solow model A new variable: E = _________________ Assume: Technological progress is _________________: it increases labor efficiency at the _________________: Technological progress in the Solow model We now write the production function as: ± where L × E = __________________________________ ± Increases in labor efficiency have the _________________ effect on output as increases in the labor force. Technological progress in the Solow model Notation: y = Y/LE = output per effective worker k = K/LE = __________________________________ Production function per effective worker: _________________ Saving and investment per effective worker: _________________ Technological progress in the Solow model ___________________________________________________ the amount of investment necessary to keep k constant. Consists of: δ k to replace __________________________________ n k to provide __________________________________ g k to provide capital for the new “effective” workers created by technological progress
Instructor : Kim, H.H. Intermediate Macro Analysis Fall 2009 Economics 01:220:321 3 Technological progress in the Solow model ___________________________________________________ Steady-state growth rates in the Solow model with tech. progress The Golden Rule with technological progress To find the Golden Rule capital stock, express c * in terms of k * : c * = _________________ = __________________________________ Investment, break- even investment Capital per worker, k Total output Output per worker Output per effective worker Capital per effective worker

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Instructor : Kim, H.H.
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321LecNote11Ch8 - Instructor Kim H.H Fall 2009 Intermediate...

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