14.451 Lecture Notes Economic Growth

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• Note that George-Marios Angeletos x ∗ 1 − = x · α 1−α >x That is, the optimal level of production of intermediate goods is higher in the Pareto optimum than in the market equilibrium. This reflects simply the fact that, due to the monopolistic distortion, production of intermediate goods is inefficiently low in the market equilibrium. Naturally, the gap x ∗ /x is an increasing function of the mark-up 1/α. • Similarly, R ∗ 1 − = R · α 1−α >R. That is, the market return on savings (R) falls short of the social return on savings (R ∗ ), the gap again arising because of the monopolistic distortion in the intermediate good sector. It follows that 1+γ ∗ > 1+γ, so that the equilibrium growth rate is too low as compared to the Pareto optimal growth rate. • Policy exercise: Consider three different types of government intervention: A subsidy on the production of intermediate inputs; an subsidy on the production of final goods (or the demand for intermediate inputs); and a subsidy on R&D. Which of these policies could achieve an increase in the market return and the equilibrium growth rate? Which of these policies could achieve an increases in the output of the intermediate good sector? Which one, or which combination of these policies can implement the first best allocations as a market equilibrium? 134
14.451 Lecture Notes 7.1.9 Introducing Skilled Labor and Human Capital topic covered in class notes to be completed 7.1.10 International Trade, Technology Diffusion, and other im- plications notes to be completed 7.2 Improving Product Quality: A Simple Model • Before analyzing the full-fledge Aghion-Howitt model, we consider a simplified version that delivers most of the insights. • The economy is populated by a large number of finitely-lived households. • Eachproducerintheeconomyisan“entrepreneur”. Helives(bepresentinthemarket) for 1+T periods, where T is random. In particular, conditional on being alive in the present period, there is probability 1 − n that the producer will be alive in the next period and a probability n that he will die (exit the market). n is constant over time and independent of the age of the producer. • In each period, a mass n of existing producers dies, and a mass n of new producers is born. The population of producers is thus constant. • In the first period of life, the producer is “endowed” with the aggregate level of knowl- edge in the economy. In the first period of life, he also has a “fresh mind” and may 135
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14.451 Lecture Notes Economic Growt
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Contents Preface ix 1 Introduction
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14.451 Lecture Notes 3.1.4 OptimalC
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14.451 Lecture Notes 5.2 SomeExampl
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Preface This is the set of lecture
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Chapter 1 IntroductionandGrowthFact
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14.451 Lecture Notes 1.2 The World
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14.451 Lecture Notes • Figure 4 3
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14.451 Lecture Notes 9. Openness: I
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Chapter 2 The Solow Growth Model (a
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14.451 Lecture Notes • We say tha
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14.451 Lecture Notes 2.1.3 The Reso
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whereas consumption is given by 14.
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14.451 Lecture Notes where the latt
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14.451 Lecture Notes 2.2 Decentrali
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14.451 Lecture Notes • Let K m t
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Equivalently, 14.451 Lecture Notes
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14.451 Lecture Notes where Kt ≡ R
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14.451 Lecture Notes Proof. Follows
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14.451 Lecture Notes • Combining
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14.451 Lecture Notes We would expec
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• Straightforward algebra gives W
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14.451 Lecture Notes • Suppose th
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2.6 Miscellaneous 14.451 Lecture No
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14.451 Lecture Notes 2.6.3 Introduc
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Chapter 3 The Neoclassical Growth M
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14.451 Lecture Notes ut+1 : There i
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14.451 Lecture Notes • Combining
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Equivalently, taking (kt,kt+2) as g
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equivalently 14.451 Lecture Notes
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14.451 Lecture Notes • Let B be t
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14.451 Lecture Notes 3.2 Decentrali
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14.451 Lecture Notes only the total
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14.451 Lecture Notes • Finally, i
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14.451 Lecture Notes The constraint
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14.451 Lecture Notes where f(k) ≡
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14.451 Lecture Notes Proposition 15
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14.451 Lecture Notes individual’s
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14.451 Lecture Notes 3.3 Steady Sta
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3.3.2 Transitional Dynamics 14.451
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14.451 Lecture Notes Proof. The pol
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14.451 Lecture Notes • The ˙c =0
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14.451 Lecture Notes 3.5 Comparativ
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14.451 Lecture Notes • We conclud
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where At denotes TFP. Note that 14.
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14.451 Lecture Notes • Note that
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Page 97 and 98: 14.451 Lecture Notes bles. We can t
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Page 101 and 102: 14.451 Lecture Notes • More gener
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Page 113 and 114: Note that Recall that ∂m ∂R 14.
Page 115 and 116: where the scalar ζ>0 is given by 1
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Page 119 and 120: Chapter 6 Endogenous Growth I: AK,
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Page 129 and 130: 14.451 Lecture Notes Combining the
Page 131 and 132: 14.451 Lecture Notes • Households
Page 133 and 134: 14.451 Lecture Notes Proposition 25
Page 135 and 136: Chapter 7 Endogenous Growth II: R&D
Page 137 and 138: 14.451 Lecture Notes More generally
Page 139 and 140: 14.451 Lecture Notes you can think
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Page 147 and 148: 7.2.2 The Value of Innovation 14.45
Page 149 and 150: 14.451 Lecture Notes It follows tha
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