The Neoclassical Growth Models Presented By Sanjukta Kar
The Neoclassical Growth Models Presented By : - Sanjukta Kar 1
Introduction I will discuss the Solow Swan model which points out the effects of saving, technological advance and population expansion. Next I go over the Ramsey, Cass and Koopmans's closed economy model with intertemporally utility maximizing infinitely lived generations. Lastly, I discuss a version of the overlapping generations model. 2
The Solow Swan Model of Fixed Savings Solow and Swan (1956) incorporated a supply side to the Keynesian aggregate demand framework. Lets look at the model The new element which is of interest is technological progress. Technological shocks are classified as Hicks Neutral with production function as— where A is the exogenous productivity parameter, Harrod Neutral with production function as— where E is the labor augmenting technological shift parameter and EL is the supply of efficiency units of labor. 3
The demand side-- The economy is closed and there is no government. Private savings S is a fixed fraction s of current income Y. So we can write- 1. We have a closed economy. So domestic savings= domestic investment. The capital accumulation equation is given by – 2. Where delta is the rate of depreciation. The level of Harrod Neutral productivity E grows at the rate 3 a. 4
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The Ramsey- Cass - Koopmans Growth Model with Infinitely Lived Representative Dynasty 10
Dividing by Lt we get 11
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Dynamics of the Model 13
Implications Effect of a decline of the patience factor beta 14
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Effect of a rise in the population growth rate 16
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An Overlapping Generations Growth Model 18
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Dynamics 20
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Comments Questions? Suggestions? 22
- Slides: 22