FIRST GGENERAATTION

MODELS
OF ENDOGENOUS GROWTH IS

PROBLEM A
O
UH c g N O H h l human capital
p o

in investment in human capital

a r.at w h e in
p 0 Y t
KATH a I

KIO 1110120 given Sk Sh

1 HH's optimisation exercise

H In Sa H
In terms
per capita
 per capita
in in Su h

HH's maximisation problem

it
II
Max
f e at

sub to Ci d rat wh c in
ii in in Sen h
is Estrin du
It ace z o

RCO heon given

Choice variables c in
State variables K h

2 Hamiltonian
H Xa wh in
frat
c c

Auc in Suh
O o
0 C ta o c Aa
21
7 ta an 0
ta ta
3410
in pea
Fa Iaas ran
Aacr p Ia

Ii er
p

int pan ta w
Satu int pan
a Da
But Da
Anew su p in
 P h

Ii Cw su p

Ta Tu
KI Iga's su p
w r
f
r w su
At the
egm net return on both
types
of capital are
equal
O
Xa E
Using o
e in oc i
o E r
Ig
oc
p
co
a
OE p
 I of
Optimum consumption Path

TVC ta a O h o
Ga Wah
3 Profit maximisation
a of firms
Y KaH rt 8h

IT Ct KCH HEH WH HCE RI KIM

4kt H su o
3ft
risk
4
4 r ar
i
Sn
 d
K ti wer o

JI wet C a R

4 KH
Optimal ofvalue if Sh Sh
in
substituting
aka su p
E of
From r w Su
w rt Su
artSatsu C1 a R

Su su ka C1 a
q
Cl 9
Sh Sky
I
 K
E
Kay Ea
art su p
I
n

to
K T a
substituting
su r
E to Ea
a
al E su p
Cet clog et
5 Conditions for BGP
 for
we can have a BGP when
sis ik so

to E su p
so

sus p
ally
Utility is bounded

it at
f ccI
U e

s
ease'd 1
t
g
O
Jetta
1
This is bounded when
a
su p
I GET
e
p

But p su
if
e x

p
t
su c a

a
From Sn
tf
a
p iz p

Sr p Su
p su f YE
a

p tsk it s t a tsk
E
a
pt su to Osu
pay ay
 I ol 1 1
To

pts ust tosu

o
ayyy y
PROBLEM B
Uca Me n 0 p 0

Tilt A Kilt K L a I

K stock S
agg capital

1 HH's maximisation problem

luc it
Max f e

sub to cis a ra C
why
 act strive du

dilly
e o

2 Hamiltonian
H en c e Pt Mtl rat W C

0
21
0
Et pct
0
yet Est

picH D Mct r je et
It r

But eft
if
MCH

en tu en
to ft
I e t i E p
f p
 ex I c f
µ
But e
pig
r
Etp
i r p
E
TVC alt o
ft Mit
3 Decentralized Egm
Yi Aki K Li
a
Li Ari it

Yi AE Kt
Ii A kik Li rts ki w.li

OIL Aa kit K Li rt 8 o
 C
Iki
rt 8 Ax kit CK Li put M Pe

d
C D Aki K Li w o
Jtg
W Alt M K
11,5
At egm kik identical
firms are

Yi y
a
AR ki
Y
A AKI
KII KID
ta
 AL AP
y
AP is invariant in K but I in L

From rts Ax K
f
rts Axl
From W k
Alif
Putting these values in
a
Axe
E
r s
p E p
T
i A L Growth
E
a S Balanced
p
Path
For closed a K
economy
R rkt w c
a
Aai 8 k c

Rtf
AWE
SR C
Aly Ya
K A Sk C

i R All ok SR C

Parametric conditions
i the
rog Aug pts
 g P
ga
Utility bounded
U en eco eat J e Pt at
J
a Alis ett at
film
econ
p

This is bounded when p 70

4 Pareto
Optimality
For social planner
k y Sk c

K CAN TR SK C

Max U l at
S And e
 sub to k AL TR SK C

Cet 3 O
Kool given

H he e Ptt M Al Tk Sk C

É
o
o m

M
EE
it
pi
É feet
e

É
 E p
a
pi g p Alt s pi
2g a
Ai s
pg
t Art I s
g
i p
a
AL s
E p