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H3+H4 (Steady State long run equilibrium (Golden Rule:f'(k)=𝛿+n+a…
H3+H4
Steady State
long run equilibrium
Each variable at
trend
Fluctations
sf(k)= k(𝛿+n+a)
in steady state
Savings=afschrijvingen
Countries wil converge to ss
Golden Rule:
f'(k)=𝛿+n+a
inefficient: ss rechts golden rule
Efficitent: ss links golden rule
Solow
model reasons for growth
capital accumulation
Population growth
Technological progress
Endogenous growth
Technological progress
Increases GDP per capita
No cost
constant
labour augmenting
Population Growth
Capital delution
Constant
Bigger investment needed for ss
Endogenous growth
No diminishing returns
NO
steady state
Caused by
positive externalities
Converge hypothesis
Countries convert to same ss if s,n,a are equal
In practice: differences exist
Catch up principle
Non-rivalry
Anyone can benefit
removes intensive to produce
Patents, subsidies
Shumpeter: R&D growth in waves
Capital accumulation
S=I (long run)
sf(k)=savings schedule