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Modelo de Crecimiento de Solow
Modelo de Crecimiento de Solow
Modelo de Crecimiento de Solow
Zsófia L. Bárány
Sciences Po
2014 February
Recap of last week
Labor supply
I there are N consumers
I who do not make a labor-leisure choice
I ⇒ each provides his one unit of labor
I ⇒ N is also the size of the labor force
I the population is growing at exogenous constant rate n
N 0 = (1 + n) · N
Consumers/Workers
I Y total output
I z total factor productivity (TFP)
I K stock of capital
I N labor input
Important features:
I output depends on the quantity of labor and capital, and TFP
I no other inputs, such as land or natural resources, matter
Production function is assumed to be neoclassical
I positive, but diminishing marginal products
I Inada conditions
I constant returns to scale (CRS)
Characteristics of the neoclassical production function I.
positive, but diminishing marginal products:
I z · F (K , N) is monotone increasing in K and N
Inada conditions:
I the marginal product of an input goes to zero as that input
goes to infinity (holding all other inputs constant):
limK →∞ FK (K , N) = 0 and limN→∞ FN (K , N) = 0
I the marginal product of an input goes to infinity as that input
goes to zero (holding all other inputs constant):
limK →0 FK (K , N) = ∞ and limN→0 FN (K , N) = ∞
Characteristics of the neoclassical production function III.
constant returns to scale:
Y K
y= N = z · F(K N
N , N ) = z · F ( N , 1) = z · f (k)
| {z }
≡f (k)
Y z · F (K , N)
Y
N
z · F(K
N , 1)
Y
y= N
z · f (k)
K
k= N
Y = z · K α N 1−α
Capital stock
I increases - due to investment
I decreases - due to depreciation, d
K 0 = (1 − d)K + I
How do we determine I ?
K0 F (K , N) K
=s ·z · + (1 − d)
N N N
Equilibrium dynamics of capital per worker/per capita
The equilibrium dynamics of capital is then:
K0 F (K , N) K
=s ·z · + (1 − d)
N N N
N0 K 0 F (K , N) K
0
=s ·z · + (1 − d)
N N
|{z} N N
=1
Equilibrium dynamics of capital per worker/per capita
The equilibrium dynamics of capital is then:
K0 F (K , N) K
=s ·z · + (1 − d)
N N N
N0 K 0 F (K , N) K
0
=s ·z · + (1 − d)
N N
|{z} N N
=1
(1 + n)N K 0 F (K , N) K
=s · z · + (1 − d)
N N0 N N
Equilibrium dynamics of capital per worker/per capita
The equilibrium dynamics of capital is then:
K0 F (K , N) K
=s ·z · + (1 − d)
N N N
N0 K 0 F (K , N) K
0
=s ·z · + (1 − d)
N N
|{z} N N
=1
(1 + n)N K 0 F (K , N) K
=s · z · + (1 − d)
N N0 N N
s · z · f (k) (1 − d)k
k0 = +
1+n 1+n
→ determines capital per worker in the next period as a function
of capital per worker today
k∗ = k0 = k
s · z · f (k ∗ ) (1 − d)k ∗
k∗ = +
1+n 1+n
(1 + n)k = s · z · f (k ) + (1 − d)k ∗
∗ ∗
(n + d)k ∗ = s · z · f (k ∗ )
| {z } | {z }
break-even investment actual investment
break-even investment
actual investment
This graph is very useful for studying the effects of n, s and z
Three important questions about the Solow model:
1. does the steady state exist?
(d + n)k
k
Example 1.
i
(d + n)k
szf (k)
(d + n)k
(d + n)k
szf (k)
(d + n)k
actual investment
steady state:
break-even investment=actual
investment
k∗ = k0 = k
Implications 1.
⇒ conditional convergence
⇒ no absolute convergence
k
Saving rate and the steady state per capita capital
i
(d + n)k
sA zf (k)
k
Saving rate and the steady state per capita capital
i
(d + n)k
sA zf (k)
kA∗ k
Saving rate and the steady state per capita capital
i
(d + n)k
sB zf (k)
sA zf (k)
kA∗ k
Saving rate and the steady state per capita capital
i
(d + n)k
sB zf (k)
sA zf (k)
kA∗ kB∗ k
Saving rate and the steady state per capita capital
i
(d + n)k
sB zf (k)
sA zf (k)
kA∗ kB∗ k
The steady state capital per worker is higher, when the savings
rate is higher.
sA < sB ⇒ kA∗ < kB∗
Data: Real income per capita and the investment rate
→ per capita GDP and the investment rate are positively correlated
Income per capita and saving rate in the model
What is the implication of a higher saving rate in the Solow
model?
I intuitively, a higher saving rate implies that the saving curve,
the actual investment curve is higher
I ⇒ higher steady state k ∗ ⇒ higher y ∗
A change in the savings rate has a long-run level effect, but does
not have a long-run growth effect.
Saving rate and the steady state per capita capital
i zf (k)
szf (k)
k
Consumption and steady state capital
c ∗ = (1 − s)zf (k ∗ ) = zf (k ∗ ) − szf (k ∗ )= zf (k ∗ )−(n + d)k ∗
i zf (k)
(d + n)k
szf (k)
k∗ k
Consumption and steady state capital
c ∗ = (1 − s)zf (k ∗ ) = zf (k ∗ ) − szf (k ∗ )= zf (k ∗ )−(n + d)k ∗
i zf (k)
(d + n)k
c∗
szf (k)
k∗ k
c ∗ = (1 − s) y ∗
|{z} | {z } |{z}
? ↓ ↑
The golden rule
I what are the effects of a higher s on c ∗ ?
I higher s ⇒ higher k ∗ ⇒ higher y ∗
c ∗ = (1 − s) y ∗
|{z} | {z } |{z}
? ↓ ↑
c ∗ = (1 − s) y ∗
|{z} | {z } |{z}
? ↓ ↑
c ∗ = (1 − s) y ∗
|{z} | {z } |{z}
? ↓ ↑
c ∗ = (1 − s) y ∗
|{z} | {z } |{z}
? ↓ ↑
∂c ∗ ∂f (k ∗ ) ∂k ∗ ∂k ∗ ∂k ∗
=z − (n + d) = zf 0 (k ∗ ) − (n + d)
∂s ∂s ∂s ∂s ∂s
∂k ∗
= zf 0 (k ∗ ) − (n + d)
=0
∂s
⇒ zf 0 (k ∗ ) = n + d}
| {z
| {z }
MPk effective depreciation rate
The golden rule
∂c ∗ ∂f (k ∗ ) ∂k ∗ ∂k ∗ ∂k ∗
=z − (n + d) = zf 0 (k ∗ ) − (n + d)
∂s ∂s ∂s ∂s ∂s
∂k ∗
= zf 0 (k ∗ ) − (n + d)
=0
∂s
⇒ zf 0 (k ∗ ) = n + d}
| {z
| {z }
MPk effective depreciation rate
∗
→ First find the k ∗ that maximizes c ∗ (where ∂k
∂c
∗ = 0).
∗
→ Then find the s that achieves this k using the steady state
condition szf (k ∗ ) = (n + d)k ∗ .
The golden rule
Income per capita and technology in the model
Income per capita and technology in the model