Consider a simplified version of endogenous growth model discussed in the class. The growth rate is determined by: a² Region 1: For 0 ≤ 0 ≤ (1 − n), It = H (0), Region 2 and 3: For(1-n) ≤0 ≤ 1, Note that s(R) where H(0)aH_ns(B) -√² B 1- BaH a It = ats(B) ac {0103-107 n + a² Assume the following parameter values: s(B) OaH al 1- |

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Chapter25: Production And Growth
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where H(0) = lq# _]s(ß)
Consider a simplified version of endogenous growth model discussed in the class. The
growth rate is determined by:
Region 1: For 0 s0 s(1 -n),
s(ß)
It = H(8),
+ a'
1-
at
Region 2 and 3: For (1– n) s 0 s 1,
9t = a#s(ß)
%3D
Note that s(ß)
Assume the following parameter values:
1+B°
a# = 2,
a² = 1,
ß = 1,
n = 0.25
Q1: Suppose 0 = 0.25. Derive the economic growth rate.
Q2: Suppose 0 = 0.5. Derive the economic growth rate.
(Q3-Q5 will follow in the next page.)
Transcribed Image Text:where H(0) = lq# _]s(ß) Consider a simplified version of endogenous growth model discussed in the class. The growth rate is determined by: Region 1: For 0 s0 s(1 -n), s(ß) It = H(8), + a' 1- at Region 2 and 3: For (1– n) s 0 s 1, 9t = a#s(ß) %3D Note that s(ß) Assume the following parameter values: 1+B° a# = 2, a² = 1, ß = 1, n = 0.25 Q1: Suppose 0 = 0.25. Derive the economic growth rate. Q2: Suppose 0 = 0.5. Derive the economic growth rate. (Q3-Q5 will follow in the next page.)
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