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Unformatted text preview: research and development etc.). Recall the growth accounting equation from Section II.B. Up until now we have assumed that , but now we assume that , where g > 0. Using the key equation for capital accumulation from the Solow model we can write the growth equation as . For the economy to experience steady state growth where y grows at a constant rate, f ( k )/ k = y / k must be constant. This means that y and k must grow at the same rate, or . Substituting this condition for the steady into the growth accounting equation we started with and solving for the growth rate in y gives us the formula for steady state growth...
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This note was uploaded on 02/19/2011 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.
- Spring '08