Lecture13 - Announcements Economic growth Solow model with...

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Announcements Economic growth • Solow model with growth: – Population (review) – Technology (new topic) – Growth accounting (new topic) Announcements Main readings for this week Mankiw, Chapters 7-8 WSJ article of TIPS and inflation Announcements • PS #5 available on CTOOLS • Due Tuesday November 2 in lecture
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Technological Progress Y = F(K,L·E) E = efficiency units of labor E growing at rate g so E t+1 = (1+g)E t Lowercase letters denote quantities per efficieny unit of labor! y = Y/ (L·E) k = K/ (L·E) f(k) = F(K/ (L·E), 1 ) Capital acculation identify with technological progress Recall: k is capital per efficiency units of labor Capital accumulation required for additional workers and for their increases efficiency: Δ k= i ( δ +n+g ) k Absent investment, k would decline
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Growth in Solow Model: n+g Analytics identical to stationary model, but Δ k = sf(k) −δ k replaced with Δ k = sf(k) ( δ +n+g ) k and steady state condition Æ sf(k * )= ( δ +n+g ) k * Technological progress in the Solow model Investment, saving Capital per worker, k sf(k) ( δ + n + g ) * Δ = s f(k) ( δ + n + ) Marginal products revisited =⋅ (, ) () ( , 1 ) YF K LE K LEF
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Marginal products revisited =⋅ = ⋅⋅ (, ) () ( , 1 ) 1 ) YF K LE K LEF K MPK F Marginal products revisited = ) ( , 1 ) 1 ) K K K MPK F = MPK f k Marginal Product of Labor ) zY F zK zL E
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Marginal Product of Labor =⋅ ==⋅ + (, ) zY F zK zL E dzY YKM P KLM P L dz Marginal Product of Labor + =+ ⋅⋅ ) 1 F zK zL E dzY P P L dz YK MPK MPL LE LE E Marginal Product of Labor + ) 1 1 () () F zK zL E dzY P P L dz MPK MPL E fk kf k
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This note was uploaded on 12/31/2011 for the course ECON 402 taught by Professor House during the Fall '08 term at University of Michigan.

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Lecture13 - Announcements Economic growth Solow model with...

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