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Endogenous growth mode - Coggle Diagram
Endogenous growth mode
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AK model
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- This model has no steady-state hence no intersection between lines
- straight-line reflecting constant returns to scale implying constant growth
- A change in s will have a permeant effect on growth rates faster growth through higher s level
- countries that share the same TFP have the same MRk which is why there is no flow of K from R to P as there is no abundance of K
A higher s > leads to a fall in c in the short-run > more investments & capital accumulation > increase in Y & y > c will always increase once again in the long-run more than the previous level (graph)
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Learning-by-doing
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Production fn: Yi= F(Ki, ANi) DMR to K Y=F(K,λKN)
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however,
If K increases by 1% and A by less than this it would imply a diminishing returns & no long-run growth
If K increases by 1% and A by more than 1% this would imply increasing returns to scale which implies endogenous growth
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