Lecture+4 - Lecture 4 Modern Growth Theories Prof....

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Lecture 4 Modern Growth Theories Prof. Paczkowski Lecture 4 Modern Growth Theories Prof. Paczkowski Rutgers University Spring, 2010 Prof. Paczkowski (Rutgers University) Lecture 4 Modern Growth Theories Spring, 2010 1 / 116
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Lecture 4 Modern Growth Theories Prof. Paczkowski Reading Assignments Part I Reading Assignments Prof. Paczkowski (Rutgers University) Lecture 4 Modern Growth Theories Spring, 2010 2 / 116
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Lecture 4 Modern Growth Theories Prof. Paczkowski Reading Assignments Reading Assignments Solows Noble Announcement http:www.nobel.seeconomicslaureates1987press.html ”Financing growth and development in the transition economies: the role of domestic savings” Economic Analysis Division, UN/ECE” http:www.unece.orgpressspecialevent00rcmfd documentssavinv.pdf ”The ghost of financing gap: testing the growth model used in the international financial institutions” William Easterly J. of Development Economics Volume 60, Issue 2 (December 1999) Pages 423-438 Prof. Paczkowski (Rutgers University) Lecture 4 Modern Growth Theories Spring, 2010 3 / 116
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Lecture 4 Modern Growth Theories Prof. Paczkowski Introduction Part II Introduction Prof. Paczkowski (Rutgers University) Lecture 4 Modern Growth Theories Spring, 2010 4 / 116
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Lecture 4 Modern Growth Theories Prof. Paczkowski Introduction Introduction We will study two modern growth theories. . . 1 Harrod-Domar Growth Model 2 Solow Neoclassical Growth Theory Later, we will discuss endogenous growth theory. Prof. Paczkowski (Rutgers University) Lecture 4 Modern Growth Theories Spring, 2010 5 / 116
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Lecture 4 Modern Growth Theories Prof. Paczkowski Harrod-Domar Warranted Rate of Growth Equilibrium Part III Harrod-Domar Prof. Paczkowski (Rutgers University) Lecture 4 Modern Growth Theories Spring, 2010 6 / 116
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Lecture 4 Modern Growth Theories Prof. Paczkowski Harrod-Domar Warranted Rate of Growth Equilibrium Harrod-Domar Harrod-Domar model developed during the early days of the post-World War II Keynesian Revolution in the 1940s Harrod (1939) and Domar (1947) Extension of Keynesian theory to growth Prof. Paczkowski (Rutgers University) Lecture 4 Modern Growth Theories Spring, 2010 7 / 116
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Lecture 4 Modern Growth Theories Prof. Paczkowski Harrod-Domar Warranted Rate of Growth Equilibrium Harrod-Domar (Continued) The model assumes a fixed proportions production function An aggregate production function with fixed technical coefficients Q t = min ± K t v , E t u ² where Q t = output net of depreciation of capital at time t K t = real physical capital stock at time t v = utilized capital - output ratio ( constant ) E t = effective labor force ( not body count ) at time t u = employed effective labor - output ratio ( constant ) Prof. Paczkowski (Rutgers University) Lecture 4 Modern Growth Theories Spring, 2010 8 / 116
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Lecture 4 Modern Growth Theories Prof. Paczkowski Harrod-Domar Warranted Rate of Growth Equilibrium Harrod-Domar (Continued) We will use effective labor, E, rather than a body count, L This modification results from viewing labor as a composite of skills, not just brute force Labor per se brings more to production than just muscle Effective labor embodies.
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Lecture+4 - Lecture 4 Modern Growth Theories Prof....

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