In the Solow - Diamond model, the dynamics of the economy is characterized by the following equation: kt+1 = 1 B A(1 – a

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In The Solow Diamond Model The Dynamics Of The Economy Is Characterized By The Following Equation Kt 1 1 B A 1 A 1 (105.86 KiB) Viewed 31 times

In the Solow - Diamond model, the dynamics of the economy is characterized by the following equation: kt+1 = 1 B A(1 – a)ka, 1 +n 1+B = K where kt 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, L2+1 = (1 + n)Lt, B B 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 1+B consumption is written as 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, S is the depreciation rate of capital, and n is the population growth rate. Use a = ,ß = 0.8, A = 18.9, n = 0.05, 8 = 0.1. 2' n = Compute the level of consumption at the Golden rule KGR.