Econ 303 - midterm 2

Solow - capital per worker next year

solow - output per worker next year

use given production function per work formula, replacing K with the capital per worker next year

solow - steady state level capital per worker

convergence

Tendency of key macroeconomic variables across countries to move toward their respective steady-state values, or to converge

solow - residuals

Y - GDP, K - capital stock, N - labor force

Growth Rate

n = end year - start year

Contribution to GDP percentage

Absolute convergence

all economies converge to the same steady state (assumes identical parameters)

Conditional convergence

economies converge to their own steady state, which may differ based on their parameters (s, d, n, z)

Capital Endowment

The initial stock of capital (machines, infrastructure, equipment) an economy starts with.

"well endowed" economy

lot of capital per worker

"low endowment"

economy starts with very little.

Divergence

the income gap between rich and poor economies gets larger over time, not smaller.

Malthusian - Steady state population

N* = L / l*

Malthusian - consumption per worker is equal to

output per worker