- In The Solow Diamond Model The Dynamics Of The Economy Is Characterized By The Following Equation 1 B Kt 1 A 1 A 1 (61.67 KiB) Viewed 37 times
In the Solow - Diamond model, the dynamics of the economy is characterized by the following equation: 1 B kt+1 = A(1 - aky, 1 +n 1+B where k, = 쓴 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, is the discount factor, 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 1+1 c= AK" - (n+8)k, where c is the steady-state per capita consumption, A is the productivity level, k is the per capita capital stock, 8 is the depreciation rate of capital, and n is the population growth rate. Use a = = 3,6= 0.8, A = 18.9,1 = 0.05,8 = 0.1. Compute the growth rate of the aggregate capital stock, K+1-K K in steady state where K is the stock of capital at time t and K +1 is the stock of capital at timet +1