It appears that low income countries grow faster than high income countries

It appears that low income countries grow faster than

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It appears that low income countries grow faster than high income countries. This is particularly true for Asian countries. Convergence (thus far) has not been the rule in Africa (but we may get there!) 13
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| faculty of economics and business 20-12-2016 The Solow growth model (1) In order to understand where economic growth comes from, we build a new model. This model will show that: Capital accumulation (through saving) can cause growth of income per worker,…but it cannot sustain it. Sustained growth of income per worker is the consequence of technological progress. 14
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| faculty of economics and business 20-12-2016 The Solow growth model (2) The relation between output and inputs is given by the aggregate production function: where: Y = output K = capital N = labour A = “state of technology” (how much can be produced from a given amount of capital and labour at any time) The function F tells us how much is produced given the amounts of capital and labour and the state of technology 15 ) , , ( ) ( ) ( ) ( + + + = A N K F Y
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| faculty of economics and business 20-12-2016 Technological progress The level of technology determines how much can be produced with a certain amount of capital and labour at any time. Therefore, technology influences the production function. Today, we assume that there is no technological progress. Next lecture, we drop this assumption. 16
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