lecture5

lecture5 - Previously Solow - III Summary Economics 2:...

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Unformatted text preview: Previously Solow - III Summary Economics 2: Growth (Solow Model -III: Technology) c Kumar Aniket Lecture 5, Week 8 c Kumar Aniket Economics 2: Growth (Solow Model -III: Technology) Previously Solow - III Summary Last Lecture With positive population growth, the model predicts that economy’s √ capital stock and output grow at the rate n X capital stock per worker and output per worker do not grow c Kumar Aniket Economics 2: Growth (Solow Model -III: Technology) Previously Solow - III Summary Last Lecture With positive population growth, the model predicts that economy’s √ capital stock and output grow at the rate n X capital stock per worker and output per worker do not grow ◦ Solow - II gives us steady state growth of capital stock and output ◦ Empirically we observe that the output per worker and capital stock per worker grows at a positive rate which Solow - II cannot explain. c Kumar Aniket Economics 2: Growth (Solow Model -III: Technology) Previously Solow - III Summary Definitions Fundamental Equation -III Steady-State Convergence Dynamics Solow Model - III Definition (Solow Model III) Solow model with positive population growth and technological progress. Assumption a) Positive population growth ⇒ Δ L L = n > b) Positive technological progress ⇒ Δ A A = g > c Kumar Aniket Economics 2: Growth (Solow Model -III: Technology) Previously Solow - III Summary Definitions Fundamental Equation -III Steady-State Convergence Dynamics Technology in Solow Growth Model Definition (Labour-augmenting Technology) Y = F ( K , AL ) ◦ technological progress occurs when A increases over time ◦ a unit of labour becomes more productive with technological progress (as A increases) What happens to the production function as A increases? c Kumar Aniket Economics 2: Growth (Solow Model -III: Technology) Previously Solow - III Summary Definitions Fundamental Equation -III Steady-State Convergence Dynamics Effective Units Definition (Effective Units of Labour) ◦ AL is defined as the efficiency units of labour. c Kumar Aniket Economics 2: Growth (Solow Model -III: Technology) Previously Solow - III Summary Definitions Fundamental Equation -III Steady-State Convergence Dynamics Effective Units Definition (Effective Units of Labour) ◦ AL is defined as the efficiency units of labour. ◦ Labour augmenting technological progress implies more effective units of labour available in the economy. c Kumar Aniket Economics 2: Growth (Solow Model -III: Technology) Previously Solow - III Summary Definitions Fundamental Equation -III Steady-State Convergence Dynamics Effective Units Definition (Effective Units of Labour) ◦ AL is defined as the efficiency units of labour....
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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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lecture5 - Previously Solow - III Summary Economics 2:...

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