Chapter8工广.pptVIP

Economic Growth II:Technology, Empirics, and Policy Introduction In the Solow model of Chapter 7, the production technology is held constant. income per capita is constant in the steady state. Neither point is true in the real world: 1904-2004: U.S. real GDP per person grew by a factor of 7.6, or 2% per year. examples of technological progress abound(see next slide). Technological progress in the Solow model A new variable: E = labor efficiency Assume: Technological progress is labor-augmenting: it increases labor efficiency at the exogenous rate g: Technological progress in the Solow model We now write the production function as: Technological progress in the Solow model Notation: y = Y/LE = output per effective worker k = K/LE = capital per effective worker Production function per effective worker: y = f(k) Saving and investment per effective worker: s y = s f(k) Technological progress in the Solow model (? + n + g)k = break-even investment: the amount of investment necessary to keep k constant. Consists of: ? k to replace depreciating capital n k to provide capital for new workers g k to provide capital for the new “effective” workers created by technological progress Technological progress in the Solow model Steady-state growth rates in the Solow model with tech. progress The Golden Rule Endogenous growth theory Solow model: sustained growth in living standards is due to tech progress. the rate of tech progress is exogenous. Endogenous growth theory: a set of models in which the growth rate of productivity and living standards is endogenous. A basic model (The AK model) Production function: Y = A Kwhere A is the amount of output for each unit of capital (A is exogenous constant) Key difference between this model Solow: MPK is constant here, diminishes in Solow Investment: s Y Depreciation: ? K Equation of motion for total capital: ?K = s Y ? ? K A basic model ?K = s Y ? ? K Does capital have diminishing