ECO325H1 Lecture Notes - Lecture 4: Balanced-Growth Equilibrium, Growth Accounting, Production Function
Document Summary
Where (k*) is elasticity of y with respect to k in steady state. When difference is larger, k is growing faster. Speed of growth slows down as we move towards k* steady state. Determined by difference between actual and breakeven investment. To determine behaviour of , examine first order taylor series approximation of around. We know along balanced growth path, so only a matters. Difference in amount of capital per worker (input issue) Difference in effectiveness of productivity of labor, a. Solow growth model identifies two sources of output per worker. With no growth in a, there is no growth in output per person. Only thing that matters in long run is a. Given population growth is 2%, growth in output per worker is 2%, depreciation is 2%, and. We have a series of elasticities multiplied by growth rates so: How long will it take to get halfway along balanced growth path.
