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Population growth and technology growth Suppose that the economy's production function is Y=K0.25(AN) 0.
Population growth and technology growth
Suppose that the economy's production function is Y=K0.25(AN) 0.75 and that the saving rate (s) is equal to 10% and that the rate of depreciation () is equal to 5%. Further, suppose that the number of workers grows at 1% per year and that the rate of technological progress is 3% per year.
a. Find the steady-state values of:
capital stock per effective worker.
output per effective worker.
consumption per effective worker
the growth rate of output per effective worker.
the growth rate of output per worker.
the growth rate of output.
the growth rate of consumption
b. Suppose that the rate of technological progress doubles to 6% per year. Recompute the answers to part (a). Explain.
c. Now suppose that the rate of technological progress is still equal to 3% per year, but the number of workers now grows at 0% per year. Recalculate the answers to (a). d. Can you tell whether people are better off in a. or in b.? in a. or in c.? Explain.
