Endogenous Growth Models
Endogenous Growth Models Topics • Learning-by-Doing • Human Capital • Research and Development • International Technology Transfer
Reading
• Reasons for going beyond Solow model (3) • Learning-by-doing model • Learning-by-doing algebraically
• Learning-by-doing vs. Solow model
Learning-by-Doing • You should know the 3 reasons for going beyond the Solow model • There is a steady state where everyone who shares the same technology will have the same growth rate ○ The growth rate will be determined exogenously • When we talk about the AK model, the power of K is the thing we focus on ○ K^1 tells us the MPK will independent of the level of K i.e. very rich with lots of capital, MPK can still be high ○ However, microeconomists do not like brute force modelling • Why at aggregate level can production function be AK? ○ These are the three stories we discuss in this lecture • Bromer (1986) - JEP ○ made the Learning by Doing model more user friendly • The learning by doing method differentiates the micro and macro level ○ At micro level we have diminishing MPK ○ At aggregate (macro) level because of spill over we have constant MPK ○ We can write this in algebraic form or graphically • When a firm invests, other firms learn from its experience too ○ The key to the learning by doing method is this positive externality Learning-by-doing algebraically ○ How do we capture this difference between micro and macro level? ○ We use subscript (i) to express an individual firm ○ At micro level: When a
Reading
• Reasons for going beyond Solow model (3) • Learning-by-doing model • Learning-by-doing algebraically
• Learning-by-doing vs. Solow model
Learning-by-Doing • You should know the 3 reasons for going beyond the Solow model • There is a steady state where everyone who shares the same technology will have the same growth rate ○ The growth rate will be determined exogenously • When we talk about the AK model, the power of K is the thing we focus on ○ K^1 tells us the MPK will independent of the level of K i.e. very rich with lots of capital, MPK can still be high ○ However, microeconomists do not like brute force modelling • Why at aggregate level can production function be AK? ○ These are the three stories we discuss in this lecture • Bromer (1986) - JEP ○ made the Learning by Doing model more user friendly • The learning by doing method differentiates the micro and macro level ○ At micro level we have diminishing MPK ○ At aggregate (macro) level because of spill over we have constant MPK ○ We can write this in algebraic form or graphically • When a firm invests, other firms learn from its experience too ○ The key to the learning by doing method is this positive externality Learning-by-doing algebraically ○ How do we capture this difference between micro and macro level? ○ We use subscript (i) to express an individual firm ○ At micro level: When a
