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讲授课件1

The document discusses the Solow Model of economic growth, outlining its assumptions, including a closed economy and constant savings rate. It details the dynamics of physical capital, production functions, and the conditions for steady state and transitional dynamics, emphasizing the independence of growth rates from various factors. Additionally, it addresses policy implications, convergence theories, and the concept of dynamic inefficiency related to capital accumulation.

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12 views9 pages

讲授课件1

The document discusses the Solow Model of economic growth, outlining its assumptions, including a closed economy and constant savings rate. It details the dynamics of physical capital, production functions, and the conditions for steady state and transitional dynamics, emphasizing the independence of growth rates from various factors. Additionally, it addresses policy implications, convergence theories, and the concept of dynamic inefficiency related to capital accumulation.

Uploaded by

ye13467267506
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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III Economic Growth (Continued)

B The Solow Model

1 Assumptions

• Closed economy
• Household/producer
Y (t) = F [K(t), L(t), t]
• Homogeneous good
• Constant savings rate
s(t) = s, 0 < s < 1
• Constant capital depreciation (δ, 0 < δ < 1)
• Constant population growth
L(t) = ent, L(0) ≡ 1

2 Physical Capital Path

K̇ = I − δK = sF (K, L, t) − δK

3 The Neoclassical Production Function

• Production function
Y = F (K, L)
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• Properties
‡ Positive and diminishing marginal products
∂F ∂F
> 0, >0
∂K ∂L
∂ 2F ∂ 2F
< 0, <0
∂K 2 ∂L2
‡ Constant returns to scale

F (λK, λL) = λF (K, L), ∀λ > 0

‡ Inada conditions

lim FK = lim FL = ∞
K→0 L→0

lim FK = lim FL = 0
K→∞ L→∞

• Intensive form of production function

y = f (k), where y ≡ Y /L, k ≡ K/L, f (k) ≡ F (k, 1)

‡ Properties of f (k)
∂Y ∂Y
= f 0(k), = f (k) − kf 0(k)
∂K ∂L
lim f 0(k) = ∞, lim f 0(k) = 0
k→0 k→∞

• An example : Cobb-Douglas production function

Y = AK α L1−α , y = Ak α

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4 The Fundamental Dynamic Equation for the Capital Stock

K̇
= sf (k) − δk
L
d(K/L) K̇
k̇ ≡ = − nk
dt L
⇒
k̇ = sf (k) − (n + δ)k

5 The Steady State

• A steady state – all variables grow at constant rates (Figure 1)

k̇/k = 0 ⇒ sf (k ∗) = (n + δ)k ∗ ⇒ k ∗

⇒ y ∗ = f (k ∗), c∗ = (1 − s)f (k ∗)

⇒ γk∗ = γy∗ = γc∗ = 0


∗
⇒ γK = γY∗ = γC∗ = n

• Conclusion: The steady state growth rates of per capita out-


put, capital and consumption are all independent of changes in
the level of technology, the saving rate, the rate of population
growth, and the depreciation rate.

35
6 Transitional Dynamics

• The process of an economy converging to its steady state (Figure


2)
k̇ = sf (k) − (n + δ)k
k̇ sf (k)
⇒ γk ≡ = − (n + δ)
k k
ẏ f 0(k)k̇ kf 0(k)
γy ≡ = =[ ]γk
y f (k) f (k)

0 kf 0(k)
⇒ γy = sf (k) − (n + δ)Sh(k), Sh(k) ≡
f (k)
∂γy f 00(k)k (n + δ)f 0(k)
= γk − [1 − Sh(k)]
∂k f (k) f (k)
∂γy
⇒ ∂k < 0 if (a) k < k ∗, or (b) k is close to k ∗ if k > k ∗.

• Conclusion: Less-advanced economies have higher growth rates.

7 Policy Experiments

• A permanent increase in the saving rate (Figure 3)


⇒ Temporary positive growth in per capita output
⇒ Permanently higher levels of per capita capital and output
⇒ No change in the long-run growth rates of per capita capital
and output

36
8 Absolute and Conditional Convergence

• Absolute convergence:
∂γk
= s[f 0(k) − f (k)/k]/k < 0
∂k
‡ Note: Empirical studies provide mixed results.
• Conditional convergence:
f (k)/k
γk = (n + δ)[ − 1]
f (k ∗)/k ∗
‡ Note: Empirical evidence supports the hypothesis of con-
ditional convergence.

9 The Solow Model with Labor-Augmenting Technological Progress

K̇ = sF [K, LA(t)] − δK, A(t) = A(0)ext


⇒ k̇ = sF [k, A(t)] − (n + δ)k
• Steady state

γk∗ = x

γy∗ = F [k, A(t)] = kF [1, A(t)/k] = x

γc∗ = x
∗
⇒ γK = γY∗ = γC∗ = x + n

37
‡ Conclusion: The steady state growth rates of per
capita output, capital and consumption grow at the same rate
as the exogenous technological progress. They are all
independent of changes in the level of technology, the saving
rate, the rate of population growth, and the depreciation rate.
• Transitional dynamics
‡ Notations: k̂ ≡ k/A(t), ŷ ≡ Y /[LA(t)]

ŷ = F (k̂, 1) ≡ f (k̂)

γk̂ = sf (k̂)/k̂ − (x + n + δ)

‡ The transitional dynamics are similar to the case where


there is no technological progress

10 Dynamic Inefficiency and the Golden Rule

Since c∗ = (1 − s)f (k ∗) and sf (k ∗) = (δ + n)k ∗, we have


c∗(s) = f (k ∗(s)) − (δ + n)k ∗(s)
Choosing s to maximize c∗(s) gives the golden rule of capital
accumulation
f 0(kgold) = δ + n
where kgold = k ∗(sgold). If s > sgold, then c∗ < cgold. That is, the
economy is oversaving in the sense that per capita consumption at
all points in time can be raised by lowering the saving rate. An
economy that oversaves is said to be dynamically inefficient.

38

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