Economics 2165F/G Chapter Notes -Ronald Coase, Coase Theorem, Marginal Product
10 Jan 2013
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Charles i. jones (with chao wei and jesse czelusta) A decrease in the investment rate causes the s~y curve to shift down: at any given level of ~k, the investment-technology ratio is lower at the new rate of sav- ing/investment. Assuming the economy began in steady state, the capital-technology ratio is now higher than is consistent with the reduced saving rate, so it declines gradually, as shown in figure 1. Figure 1: a decrease in the investment rate (n+g+d)k s"y s"" y k** k* The log of output per worker y evolves as in figure 2, and the dynamics of the growth rate are shown in figure 3. Recall that log ~y = (cid:11) log ~k and _~k=~k = s00~k(cid:11)(cid:0)1 (cid:0) (n + g + d). rate per worker is only temporarily reduced and will return to g in the long run. The policy permanently reduces the level of output per worker, but the growth.
