Econ Growth Notes on Slides

# Econ Growth Notes on Slides - Harrod-Domar Model s/v = n...

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Harrod-Domar Model ----------- s/v = n+lambda Everything is exogenous Runs on a knife edge At a higher saving ratio, which increases capital stock (or lower capital-output ratio, result in a higher s/v. Output is a function capital stock only Solow --------- Output is a function of Captial per effective worker: Q = Q(K,E) divide through E Q/E = Q(K/E,1) = Q(K/E) for k to be constant we must find q=0, now Effective labor E = n + lambda, and k = K/E, so K = E then Kk=Ek -> I/E = (n+lamda)k An increase in the saving rate increase s/v above natural rate, but since 1/v (capital output ratio) has fallen bc output has risen proportionately less than capital. thus growth rate only temp increased. s-s growth is invariant to the saving rate, and growth is determined by natural rate, n+lambda. Stages of growth------------- Traditional Stage: hierarchial social structure, argiculture, low ceilling on production. Prospored under increasing land use & new techniques Precondition for Take-off: Education broadens, new aggresive people develop

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