1
Q
solow swan model of growth
A
- focus’ on role of capital accumulation to explain countries growth periods
- Y= A F(L,K)
- > Y = real GDP
- > L = Labour
- > K = Capital
2
Q
GDP per worker
A
- depends on the level of total factor productivity (A)
- capital intensity (K/L)
3
Q
types of investment
A
- Replacement
- > plant and equipment replacing worn-out capital or to provide new capital for the growing population
- Net Investment
- > Investment that exceeds replacement of capital
4
Q
Investment and Capital Stock
A
- replacement investment
- > contributes to keep the capital stock at its initial level
- Net investment
- > increases capital stock
5
Q
Replacing capital
A
- Before stock of capital changes
- > new workers need to be equipped with capital so that capital-ratio does not fall
-> fraction of capital worn needs to be replaced
- population and workers grow at a constant n
- capital depreciates at constant d
- RI=(n+d)k
6
Q
diminishing marginal productivity
A
- y k model
- increasing the capital - labour ratio from 100 to 110 leads to a larger increase in per capita thhan increasing from 1000 to 1100
