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# Consider the Solow model with an aggregate production function Y = AKL12 with 01, a depreciation rate and a saving rate is s. Besides technology,...

Consider the Solow model with an aggregate production function Y = AKαL1−2α with 0<α<1, a depreciation rate δ and a saving rate is s. Besides technology, A, all other factors of production can change. (Make sure to show all your work!)

- Does this economy have increasing, decreasing or constant returns to scale?
- What is the per capita form of the production function?
- Find the steady-state levels k∗ and y∗. How does y∗ depend on the size of the labor force? Why?
- Now think of the production function Y = AKαL1−2αXα where X represents land. Does this economy have increasing, decreasing or constant returns to scale? What is the per- capita form of the production function? (Hint: define x=X/L.) What if X is fixed?