ECON 100B Lecture Notes - Lecture 12: Endogenous Growth Theory, Capital Accumulation, Human Capital

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mauvesnake211

17 Feb 2017

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Heavy loss in capital occurs through depreciation and war. The saving rate has no effect on the long-run growth rate of output per worker, which is equal to zero. The saving rate determines the level of output per worker in the long run. An increase in the saving rate will lead to higher growth of output per worker for some time, but not forever. Savings rate of 0 and 100 percent is not good for the economy. What matters to people is not production, it is consuption. Governments can affect the saving rate by: Golden-rule level of capital: the level of capital associated with the saving rate that yields the highest level of consumption in steady state. For a saving rate between zero and the golden-rule level, a higher saving rate leads to higher capital per worker, higher output per worker and higher consumption per worker.

Related Questions

Assume that an economy is initially in a steady-state, that population growth and the rate of technological change are both zero, but that capital depreciates at rated. Use the appropriate graphs to illustrate and explain how an increase in the saving rate would affect all of the following:
a. the steady-state capital stock per worker.
b. the steady-state level of output per worker.
c. the steady-state rate of growth of output per worker.
d. the Golden Rule capital stock per worker.
e. the rate of growth of output per worker during the transition from the initial steady-state to the final steady state.

raspberryhound230

In the discussion of German and Japanese postwar growth, the text describes what happens when part of the capital stock is destroyed in a war. By contrast, suppose that a war does not directly affect the capital stock, but that casualties reduce the labor force. Assume the economy was in a steady state before the war, the saving rate is unchanged, and the rate of population growth after the war is the same as it was before.

a. What is the immediate impact of the war on total output and on output per person?

b. What happens subsequently to output per worker in the postwar economy? Is the growth rate of output per worker after the war smaller or greater than it was before the war?

orchidhorse966

4 . In the discussion of German and Japanese postwar growth, we discussed what happens when part of the capital stock is destroyed in a war. By contast, suppose that a war does not aÂ§ect the capital stock, but that casualties reduce the labor force. Assume the economy was in a steady state before the war and the saving rate is unchanged. a) What is the immediate impact of the war on total output and on output per person? b) What happens subsequently to output per worker in the postwar economy? Is the growth rate of output per worker after the war smaller or greater than it was before the war?

ECON 100B Lecture Notes - Lecture 12: Endogenous Growth Theory, Capital Accumulation, Human Capital

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