In the Solow - Diamond model, the dynamics of the economy is characterized by the following equation 1 kr+1 = A(1 - a) 1

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In The Solow Diamond Model The Dynamics Of The Economy Is Characterized By The Following Equation 1 Kr 1 A 1 A 1 1 (27.36 KiB) Viewed 32 times

In the Solow - Diamond model, the dynamics of the economy is characterized by the following equation 1 kr+1 = A(1 - a) 1+1+B where k, = is per capita capital stock at date t, K, is the aggregate capital stock, L, is the size of the population and grows at the rate of n. L.+1 = (1 + n)L. Bis the discount factor. To is the saving rate. A is the productivity of the economy, 1 - a is labor share, and a is capital share. The steady-state per capita consumption is written as c = Ak" - (n + 5)k, 1+ where c is the steady-state per capita consumption, A is the productivity level, k is the per capita capital stock, 6 is the depreciation rate of capital and n is the population growth rate. Use 1 .8 -0.8, A = 18.9,1 = 0.05,6 = 0.1. Compute the steady-state value of k. Note that in steady state, kkus = 40 holds KC is the steady state per capita capital stock in the competitive economy Antwer