ECON 2202 Lecture 19: Ch4 The Malthusian Model

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31 May 2019
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Chapter 4 The Malthusian Model
How useful is the Malthusian Model?
Given what was known in 1798, the model could be judged to be successful.
No growth
Positive correlation between population growth and income
-
However, it is tow far to permissitic from the perspective of the 21th century.
Sustain growth
Little correlation between population growth and income
-
Why is the Malthusian Model wrong?
Didn't allow for the effect of increase in the capital stock on production.
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Capital reproduce itself.
Didn't account for all of the effects of economic forces on population growth.
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For example, as economy develops, there are better opportunities for working
outside home. Higher wages increase the opportunity costs of raising children.
Chapter5. The Solow Model
By Robert Solow
Very simple. Yet it makes sharp prediction about the future growth.
Much more optimistic. About the prospects for long-run improvement in standard of
living.
The firm:
Aggregate production function
! " #$α%&'α
Y= output; z=TFP; L= labor; K= capital
Constant return to scale:
(! " #
)
($
*
α
)
(%
*
&'α
Capital accumulation
$+"
)
, - .
*
$ / 0
Where K' is future capital, I is income
-
The consumers:
Exogenous population growth
)
*
N- current population, n-net population growth rate
-
Lecture1
Wednesday, November 14, 2018
11:15 AM
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