Chapter 14 Endogenous Growth Theory GDP person as

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Chapter 14 Endogenous Growth Theory

Chapter 14 Endogenous Growth Theory

GDP person as percentage of U. S. GDP person GDP per Person Relative to

GDP person as percentage of U. S. GDP person GDP per Person Relative to U. S. GDP per Person for Five Countries United States 100 80 Great Britain 60 40 Mexico Turkey India 20 0 1960 Figure 14. 2 ’ 65 ’ 70 ’ 75 ’ 80 ’ 85 2 © 1999 South-Western College Publishing

GDP per capita as a percentage of U. S. GDP per capita Investment and

GDP per capita as a percentage of U. S. GDP per capita Investment and GDP per Person Panel A 100 U. S. Canada Germany 80 60 40 U. K. Chile Sweden France Holland Italy Mexico Japan Turkey 20 Ghana 0 0. 10 Box 14. 1 A S. Korea Nigeria Philippines India 0. 15 0. 20 0. 25 0. 30 0. 35 3 Ratio of investment to GDP © 1999 South-Western College Publishing

GDP per capita as a percentage of U. S. GDP per capita Investment and

GDP per capita as a percentage of U. S. GDP per capita Investment and GDP per Person Panel B 100 U. S. Canada France Germany Sweden Holland U. K. Italy 80 60 40 Mexico Turkey Ghana Nig. 20 0 1 2 Japan Chile S. Korea Philippines India 3 4 5 4 Investment ratio adjusted for population growth Box 14. 1 B © 1999 South-Western College Publishing

The Social Production Function GDP Panel A Capital Figure 14. 4 A 5 ©

The Social Production Function GDP Panel A Capital Figure 14. 4 A 5 © 1999 South-Western College Publishing

The Private Production Function GDP Panel B Capital Figure 14. 4 B 6 ©

The Private Production Function GDP Panel B Capital Figure 14. 4 B 6 © 1999 South-Western College Publishing

Endogenous Growth Kt + 1 = (1 - + As) Kt Kt + 1

Endogenous Growth Kt + 1 = (1 - + As) Kt Kt + 1 = Kt This economy will grow forever. Figure 14. 5 K 0 Kt 7 © 1999 South-Western College Publishing

Two Economies with the Same Growth Rate but Different Initial Conditions Kt + 1

Two Economies with the Same Growth Rate but Different Initial Conditions Kt + 1 = (1 - + As) Kt Economy B Kt + 1 Economy A Kt + 1 = Kt A K 0 Figure 14. 6 B K 0 Kt 8 © 1999 South-Western College Publishing

Two Economies with the Same Initial Condition but Different Savings Rates Kt + 1

Two Economies with the Same Initial Condition but Different Savings Rates Kt + 1 = (1 - + s. AA) Kt Economy A Kt + 1 = (1 - + s. BA) Kt Kt + 1 = K t Economy B A K 0 = Figure 14. 7 KB 0 Kt + 1 9 © 1999 South-Western College Publishing

Growth Rate of GDP per Person 8 6 4 2 0 Average Investment and

Growth Rate of GDP per Person 8 6 4 2 0 Average Investment and Growth for 17 Countries, 1960– 1988 Japan France, Germany, & Canada Italy Sweden Turkey Mexico & U. S. Holland U. K. India Philippines Chile Nigeria -2 0. 10 Figure 14. 8 S. Korea Ghana 0. 15 0. 20 0. 25 0. 30 0. 35 Ratio of investment to GDP 10 © 1999 South-Western College Publishing

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