451_Problem_Set_1

451_Problem_Set_1 - Problem Set #1 Course 14.451 Macro I...

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1 Problem Set #1 Course 14.451 – Macro I TA: Todd Gormley, tgormley@mit.edu Distributed: February 9, 2005 Due: Wednesday, February 16, 2005 [in class] 1. Human Capital in the Solow Model (based on Mankiw, Romer & Weil 1992) Assume that the production function is given by: ( 29 al -- = 1 Y KH AL where Y is output, K is physical capital, H is human capital, A is the level of technology, and L is labor. Assume a 0 , l 0 and +< 1. L and A grow at constant rates n and g , respectively. Output can be used on a one-for-one basis for consumption or investment in either type of capital. Both types of capital depreciate at the rate d . Assume that gross investment in physical capital is the fraction K s of output and that gross investment in human capital is the fraction H s of output. (a) Let / kK AL and = / hH AL . Obtain the laws of motion for k and h . (b) What are the steady-state values of physical capital, human capital, and output, all per unit of effective labor?
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This note was uploaded on 12/21/2011 for the course ECON 3014 taught by Professor Michaelshaw during the Spring '11 term at HKU.

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451_Problem_Set_1 - Problem Set #1 Course 14.451 Macro I...

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