Page 2 in the Solow - Diamond model, the dynamics of the economy is characterized by the following equation: kt+1 to 201

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Page 2 In The Solow Diamond Model The Dynamics Of The Economy Is Characterized By The Following Equation Kt 1 To 201 1 (119.78 KiB) Viewed 27 times

Page 2 in the Solow - Diamond model, the dynamics of the economy is characterized by the following equation: kt+1 to 2012 ok. 1 B A(1 – a)ką, 1+n1+B = K where kt 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, Lt+1 = (1 + n)Lt, B L is the discount factor, B 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= Aka – (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 1 a = = B = 0.8, A = 18.9, n = 0.05, 8 = 0.1. 2' ,B3 = = = By comparing kCE with KGR, is the competitive economy Pareto optimal ?