14.451 Lecture Notes Economic Growth

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George-Marios Angeletos 4 Applications 85 4.1 Arrow-DebreuMarketsandConsumptionSmoothing ............. 85 4.1.1 TheIntertemporalBudget........................ 85 4.1.2 Arrow-DebreuversusRadner ...................... 86 4.1.3 TheConsumptionProblemwithCEIS ................. 87 4.1.4 Intertemporal Consumption Smoothing, with No Uncertainty . . . . . 88 4.1.5 IncompleteMarketsandSelf-Insurance................. 91 4.2 AggregationandtheRepresentativeConsumer................. 91 4.3 FiscalPolicy.................................... 94 4.3.1 RicardianEquilivalence.......................... 94 4.3.2 TaxSmoothingandDebtManagement................. 96 4.4 RiskSharingandCCAPM............................ 96 4.4.1 RiskSharing................................ 96 4.4.2 AssetPricingandCCAPM........................ 96 4.5 Ramsey Meets Tobin: Adjustment Costs and q ................. 96 4.6 RamseyMeetsLaibson:HyperbolicDiscounting................ 96 4.6.1 ImplicationsforLong-RunSavings ................... 96 4.6.2 ImplicationsforSelf-Insurance...................... 97 5 Overlapping Generations Models 99 5.1 OLGandLife-CycleSavings........................... 99 5.1.1 Households ................................ 99 5.1.2 PopulationGrowth............................ 101 5.1.3 FirmsandMarketClearing ....................... 102 5.1.4 GeneralEquilibrium ........................... 102 vi
14.451 Lecture Notes 5.2 SomeExamples.................................. 104 5.2.1 Log Utility and Cobb-Douglas Technology . . . ............ 104 5.2.2 SteadyState................................ 105 5.2.3 NoLaborIncomeWhenOld:TheDiamondModel .......... 106 5.2.4 PerpetualYouth:TheBlanchardModel................. 107 5.3 RamseyMeetsDiamond:TheBlanchardModel ................ 108 5.4 VariousImplications ............................... 108 6 Endogenous Growth I: AK, H, and G 109 6.1 The Simple AK Model.............................. 109 6.1.1 ParetoAllocations ............................ 109 6.1.2 TheFrictionlessCompetitiveEconomy ................. 112 6.2 ASimpleModelofHumanCapital ....................... 113 6.2.1 ParetoAllocations ............................ 113 6.2.2 MarketAllocations ............................ 118 6.3 LearningbyEducation(OzawaandLucas)................... 119 6.4 LearningbyDoingandKnowledgeSpillovers(ArrowandRomer) ...... 120 6.4.1 MarketAllocations ............................ 120 6.4.2 ParetoAllocationsandPolicyImplications............... 122 6.5 GovernmentServices(Barro)........................... 123 7 Endogenous Growth II: R&D and Technological Change 125 7.1 ExpandingProductVariety:TheRomerModel ................ 125 7.1.1 Technology ................................ 126 7.1.2 FinalGoodSector ............................ 127 7.1.3 IntermediateGoodSector ........................ 128 vii
Page 1 and 2: 14.451 Lecture Notes Economic Growt
Page 3 and 4: Contents Preface ix 1 Introduction
Page 5: 14.451 Lecture Notes 3.1.4 OptimalC
Page 9 and 10: Preface This is the set of lecture
Page 11 and 12: Chapter 1 IntroductionandGrowthFact
Page 13 and 14: 14.451 Lecture Notes 1.2 The World
Page 15 and 16: 14.451 Lecture Notes • Figure 4 3
Page 17 and 18: 14.451 Lecture Notes 9. Openness: I
Page 19 and 20: Chapter 2 The Solow Growth Model (a
Page 21 and 22: 14.451 Lecture Notes • We say tha
Page 23 and 24: 14.451 Lecture Notes 2.1.3 The Reso
Page 25 and 26: whereas consumption is given by 14.
Page 27 and 28: 14.451 Lecture Notes where the latt
Page 29 and 30: 14.451 Lecture Notes 2.2 Decentrali
Page 31 and 32: 14.451 Lecture Notes • Let K m t
Page 33 and 34: Equivalently, 14.451 Lecture Notes
Page 35 and 36: 14.451 Lecture Notes where Kt ≡ R
Page 37 and 38: 14.451 Lecture Notes Proof. Follows
Page 39 and 40: 14.451 Lecture Notes • Combining
Page 41 and 42: 14.451 Lecture Notes We would expec
Page 43 and 44: • Straightforward algebra gives W
Page 45 and 46: 14.451 Lecture Notes • Suppose th
Page 47 and 48: 2.6 Miscellaneous 14.451 Lecture No
Page 49 and 50: 14.451 Lecture Notes 2.6.3 Introduc
Page 51 and 52: Chapter 3 The Neoclassical Growth M
Page 53 and 54: 14.451 Lecture Notes ut+1 : There i
Page 55 and 56: 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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14.451 Lecture Notes 3.6.2 Impulse
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Chapter 4 Applications 4.1 Arrow-De
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14.451 Lecture Notes bles. We can t
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14.451 Lecture Notes • Then, the
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14.451 Lecture Notes • More gener
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14.451 Lecture Notes • Consider n
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14.451 Lecture Notes aggregate path
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14.451 Lecture Notes notes to be co
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Chapter 5 Overlapping Generations M
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14.451 Lecture Notes Life-cycle con
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Note that Recall that ∂m ∂R 14.
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where the scalar ζ>0 is given by 1
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14.451 Lecture Notes • Finally, n
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Chapter 6 Endogenous Growth I: AK,
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14.451 Lecture Notes so that consum
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14.451 Lecture Notes • Finally, t
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14.451 Lecture Notes • Combining
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14.451 Lecture Notes Like in the si
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14.451 Lecture Notes Combining the
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14.451 Lecture Notes • Households
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14.451 Lecture Notes Proposition 25
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Chapter 7 Endogenous Growth II: R&D
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14.451 Lecture Notes More generally
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14.451 Lecture Notes you can think
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14.451 Lecture Notes Free entry in
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14.451 Lecture Notes 7.1.8 Pareto A
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14.451 Lecture Notes 7.1.9 Introduc
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7.2.2 The Value of Innovation 14.45
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14.451 Lecture Notes It follows tha
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14.451 Lecture Notes • Compare no
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