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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 SteadyState 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 SteadyState Convergence Dynamics Technology in Solow Growth Model Definition (Labouraugmenting 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 SteadyState 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 SteadyState 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 SteadyState 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.
 Spring '11
 Michaelshaw
 Economics

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