(SPXUI ćFPSZ

$)"15&3 

(SPXUI UIFPSZ QSFMJNJOBSJFT

 ] 8IZ EP XF DBSF BCPVU HSPXUI
*U JT IBSE UP QVU JU CFUUFS UIBO /PCFM MBVSFBUF 3PCFSU -VDBT EJE BT IF NVTFE PO UIF JNQPSUBODF
PG UIF TUVEZ PG FDPOPNJD HSPXUI GPS NBDSPFDPOPNJTUT BOE GPS BOZPOF JOUFSFTUFE JO FDPOPNJD
EFWFMPQNFOU
AćF EJWFSTJUZ BDSPTT DPVOUSJFT JO NFBTVSFE QFS DBQJUB JODPNF MFWFMT JT MJUFSBMMZ UPP HSFBU UP
CF CFMJFWFE 
3BUFT PG HSPXUI PG SFBM QFS DBQJUB (/1 BSF BMTP EJWFSTF FWFO PWFS TVTUBJOFE
QFSJPET 'PS o XF PCTFSWF GPS FYBNQMF *OEJB  QFS ZFBS &HZQU  4PVUI ,PSFB
 +BQBO  UIF 6OJUFE 4UBUFT  UIF JOEVTUSJBM FDPOPNJFT BWFSBHFE  
"O
*OEJBO XJMM PO BWFSBHF CF UXJDF BT XFMM PČ BT IJT HSBOEGBUIFS B ,PSFBO  UJNFT 
* EP OPU
TFF IPX POF DBO MPPL BU ĕHVSFT MJLF UIFTF XJUIPVU TFFJOH UIFN BT SFQSFTFOUJOH QPTTJCJMJUJFT
*T UIFSF TPNF BDUJPO B HPWFSONFOU PG *OEJB DPVME UBLF UIBU XPVME MFBE UIF *OEJBO FDPOPNZ
UP HSPX MJLF *OEPOFTJBT PS &HZQUT *G TP XIBU FYBDUMZ *G OPU XIBU JT JU BCPVU UIF AOBUVSF PG
*OEJB UIBU NBLFT JU TP ćF DPOTFRVFODFT GPS IVNBO XFMGBSF JOWPMWFE JO RVFTUJPOT MJLF UIFTF BSF
TJNQMZ TUBHHFSJOH 0ODF POF TUBSUT UP UIJOL BCPVU UIFN JU JT IBSE UP UIJOL BCPVU BOZUIJOH FMTF
-VDBT +S 
FNQIBTJT BEEFE

8IJMF JU JT DPNNPO UP UIJOL BCPVU HSPXUI UPEBZ BT CFJOH TPNFIPX OBUVSBM FWFO FYQFDUFE o JO GBDU
JG XPSME HSPXUI GBMMT GSPN  UP  JU JT QFSDFJWFE BT B CJH DSJTJT o JU JT XPSUIXIJMF UP BDLOPXM
FEHF UIBU UIJT XBT OPU BMXBZT UIF DBTF 1SFUUZ NVDI VOUJM UIF FOE PG UIF UI DFOUVSZ HSPXUI XBT
RVJUF MPX JG JU IBQQFOFE BU BMM *O GBDU JU XBT TP MPX UIBU QFPQMF DPVME OPU TFF JU EVSJOH UIFJS MJGF
UJNFT ćFZ MJWFE JO UIF TBNF XPSME BT UIFJS QBSFOUT BOE HSBOEQBSFOUT 'PS NBOZ ZFBST JU TFFNFE
UIBU HSPXUI XBT BDUVBMMZ CFIJOE BT QFPQMF DPOUFNQMBUFE UIF GFBUT PG BOUJRVJUZ XJUIPVU VOEFSTUBOE
JOH IPX UIFZ DPVME IBWF CFFO BDDPNQMJTIFE ćFO UPXBSET UIF UVSO PG UIF UI DFOUVSZ BT TIPXO JO
'JHVSF  TPNFUIJOH IBQQFOFE UIBU DSFBUFE FYQMPTJWF FDPOPNJD HSPXUI BT UIF XPSME IBE OFWFS TFFO
CFGPSF 6OEFSTUBOEJOH UIJT USBOTJUJPO XJMM CF UIF QVSQPTF PG $IBQUFS  4JODF UIFO HSPXUI IBT
CFDPNF UIF OPSN ćJT JT UIF SFBTPO UIF ĕSTU IBMG PG UIJT CPPL JO GBDU VQ UP $IBQUFS  XJMM EFBM
XJUI VOEFSTUBOEJOH HSPXUI "T XF QSPDFFE XF XJMM BTL BCPVU UIF EFUFSNJOBOUT PG DBQJUBM BDDVNV
MBUJPO $IBQUFST  UISPVHI  BT XFMM BT  BOE 
BOE EJTDVTT UIF QSPDFTT PG UFDIOPMPHJDBM QSPHSFTT
$IBQUFS 
 *OTUJUVUJPOBM GBDUPST XJMM CF BEESFTTFE JO $IBQUFS  ćF HSPXUI QSPDFTT SBJTFT NBOZ JOUFS
FTUJOH RVFTUJPOT TIPVME XF FYQFDU UIJT HSPXUI UP DPOUJOVF 4IPVME XF FYQFDU JU FWFOUVBMMZ UP EFDFM
FSBUF 0S PO UIF DPOUSBSZ XJMM JU BDDFMFSBUF XJUIPVU CPVOE

)PX UP DJUF UIJT CPPL DIBQUFS

$BNQBOUF ' 4UVS[FOFHHFS ' BOE 7FMBTDP "  "EWBODFE .BDSPFDPOPNJDT "O &BTZ (VJEF
$I  A(SPXUI UIFPSZ QSFMJNJOBSJFT QQ o -POEPO -4& 1SFTT
%0* IUUQTEPJPSHMTFQSFTTBNFC -JDFOTF $$#:/$ 
 (3085) 5)&03: 13&-*.*/"3*&4

'JHVSF  ćF FWPMVUJPO PG UIF XPSME (%1 QFS DBQJUB PWFS UIF ZFBST o
8000
7,614
GDP per capita (1990 Intl $)

6000

4000

2000

665

0 250 500 750 1000 1250 1500 1750 2000

Year

'JHVSF  -PH (%1 QFS DBQJUB PG TFMFDUFE DPVOUSJFT o

11

10
Log GDP per capita

1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020
Year
Argentina Brazil India Spain United States
Australia China Republic of Korea United Kingdom

#VU UIF GVOEBNFOUBM QPJOU PG -VDBTT RVPUF JT UP SFBMJTF UIBU UIF NJOECPHHMJOH EJČFSFODFT JO
JODPNF QFS DBQJUB BDSPTT DPVOUSJFT BSF UP B MBSHF FYUFOU EVF UP EJČFSFODFT JO HSPXUI SBUFT PWFS UJNF
BOE UIF QPXFS PG FYQPOFOUJBM HSPXUI NFBOT UIBU FWFO SFMBUJWFMZ TNBMM EJČFSFODFT JO UIF MBUUFS XJMM
CVJME JOUP IVHF EJČFSFODFT JO UIF GPSNFS 'JHVSFT  BOE  NBLF UIJT QPJOU ćF SJDIFTU DPVOUSJFT
(3085) 5)&03: 13&-*.*/"3*&4 

'JHVSF  -PH (%1 QFS DBQJUB PG TFMFDUFE DPVOUSJFT o

11

10
Log GDP per capita

1960 1970 1980 1990 2000 2010 2020

Year
Argentina China India United.States
Botswana Guatemala Singapore Venezuela

IBWF CFFO HSPXJOH TUFBEJMZ PWFS UIF MBTU UXP DFOUVSJFT BOE TPNF DPVOUSJFT IBWF NBOBHFE UP DPOWFSHF
UP UIFJS JODPNF MFWFMT 4PNF PG UIF QFSGPSNBODFT BSF SFBMMZ TUFMMBS 'JHVSF  TIPXT IPX 4PVUI ,PSFB
XJUI BO JODPNF MFWFM UIBU XBT  PG UIBU PG UIF 64 JO  NBOBHFE UP DBUDI VQ JO KVTU B GFX EFD
BEFT 5PEBZ JUT JODPNF JT  DPNQBSFE UP UIF 64 -JLFXJTF 4QBJOT JODPNF JO  XBT  UIBU
PG UIF 64 5PEBZ JU JT  "U UIF TBNF UJNF PUIFS DPVOUSJFT MBHHFE "SHFOUJOB GPS FYBNQMF ESPQQFE
GSPN BO JODPNF MFWFM UIBU XBT  PG 64 JODPNF BU UIF UVSO PG UIF DFOUVSZ UP  UPEBZ
'JHVSF  TIPXT TPNF EJWFSTJUZ EVSJOH SFDFOU UJNFT ćF TQFDUBDVMBS QFSGPSNBODFT PG #PUTXBOB
4JOHBQPSF PS NPSF SFDFOUMZ PG $IJOB BOE *OEJB DPOUSBTU XJUI UIF TUBHOBUJPO PG (VBUFNBMB "SHFOUJOB
PS 7FOF[VFMB *O  UIF JODPNF PG UIF BWFSBHF .PUTXBOB BT TPNFPOF GSPN #PUTXBOB JT DBMMFE
XBT
POMZ  BT SJDI BT UIF BWFSBHF 7FOF[VFMBO *O  IF PS TIF XBT  SJDIFS
ćFTF BSF DSVDJBM SFBTPOT XIZ XF XJMM TQFOE BCPVU UIF JOJUJBM IBMG PG UIJT CPPL JO VOEFSTUBOEJOH
HSPXUI #VU UIPTF BSF OPU UIF POMZ SFBTPOT :PV NBZ CF BXBSF UIBU NBDSPFDPOPNJTUT EJTBHSFF PO B MPU
PG UIJOHT IPXFWFS UIF JTTVF PG FDPOPNJD HSPXUI JT POF XIFSF UIFSF JT NVDI NPSF PG B DPOTFOTVT *U JT
UIVT IFMQGVM UP TUBSU PČ PO UIJT SFMBUJWFMZ NPSF TPMJE GPPUJOH &WFO NPSF JNQPSUBOUMZ UIF TUVEZ PG FDP
OPNJD HSPXUI CSJOHT UP UIF GPSFGSPOU UXP LFZ JOHSFEJFOUT PG FTTFOUJBMMZ BMM PG NBDSPFDPOPNJD BOBMZTJT
HFOFSBM FRVJMJCSJVN BOE EZOBNJDT 'JSTU VOEFSTUBOEJOH UIF CFIBWJPVS PG BO FOUJSF FDPOPNZ SFRVJSFT
UIJOLJOH BCPVU IPX EJČFSFOU NBSLFUT JOUFSBDU BOE BČFDU POF BOPUIFS XIJDI JOFWJUBCMZ SFRVJSFT B HFO
FSBM FRVJMJCSJVN BQQSPBDI 4FDPOE UP UIJOL TFSJPVTMZ BCPVU IPX BO FDPOPNZ FWPMWFT PWFS UJNF XF
NVTU DPOTJEFS IPX UPEBZT DIPJDFT BČFDU UPNPSSPXT o JO PUIFS XPSET XF NVTU UIJOL EZOBNJDBMMZ "T
TVDI FDPOPNJD HSPXUI JT UIF QFSGFDU CBDLHSPVOE VQPO XIJDI UP EFWFMPQ UIF NBJO NFUIPEPMPHJDBM
UPPMT JO NBDSPFDPOPNJDT UIF NPEFM PG JOUFSUFNQPSBM PQUJNJTBUJPO LOPXO BT UIF OFPDMBTTJDBM HSPXUI
NPEFM /(. GPS TIPSU BMTP LOPXO BT UIF 3BNTFZ NPEFM
BOE UIF PWFSMBQQJOH HFOFSBUJPOT NPEFM
XFMM DBMM JU UIF 0-( NPEFM
 " MPU PG XIBU XF XJMM EP MBUFS BT XF FYQMPSF EJČFSFOU NBDSPFDPOPNJD
QPMJDZ JTTVFT XJMM JOWPMWF BQQMJDBUJPOT PG UIFTF EZOBNJD HFOFSBMFRVJMJCSJVN UPPMT UIBU XF XJMM MFBSO
JO UIF DPOUFYU PG TUVEZJOH FDPOPNJD HSPXUI
4P XJUIPVU GVSUIFS EFMBZ UP UIJT XF UVSO
 (3085) 5)&03: 13&-*.*/"3*&4

 ] ćF ,BMEPS GBDUT

8IBU BSF UIF LFZ TUZMJTFE GBDUT BCPVU HSPXUI UIBU PVS NPEFMT TIPVME USZ UP NBUDI ćBU UIFSF JT HSPXUI
JO PVUQVU BOE DBQJUBM QFS XPSLFS XJUI SFMBUJWFMZ TUBCMF JODPNF TIBSFT

ćF NPEFSO TUVEZ PG FDPOPNJD HSPXUI TUBSUT JO UIF QPTUXBS QFSJPE BOE XBT NPTUMZ NPUJWBUFE CZ UIF
FYQFSJFODF PG UIF EFWFMPQFE XPSME *O IJT DMBTTJDBM BSUJDMF ,BMEPS 
/JDPMBT ,BMEPS TUBUFE TPNF
CBTJD GBDUT UIBU IF PCTFSWFE FDPOPNJD HSPXUI TFFNFE UP TBUJTGZ BU MFBTU JO UIPTF DPVOUSJFT ćFTF DBNF
UP CF LOPXO BT UIF ,BMEPS GBDUT BOE UIF NBJO DIBMMFOHF PG HSPXUI UIFPSZ BT JOJUJBMMZ DPOTUJUVUFE XBT
UP BDDPVOU TJNVMUBOFPVTMZ GPS BMM UIFTF GBDUT #VU XIBU XFSF UIFTF ,BMEPS GBDUT )FSF UIFZ BSF

 0VUQVU QFS XPSLFS TIPXT DPOUJOVPVT HSPXUI XJUI OP UFOEFODZ UP GBMM

 ćF DBQJUBMPVUQVU SBUJP JT OFBSMZ DPOTUBOU (#VU XIBU JT DBQJUBM

 $BQJUBM QFS XPSLFS TIPXT DPOUJOVPVT HSPXUI  GPMMPXT GSPN UIF PUIFS UXP

 ćF SBUF PG SFUVSO PO DBQJUBM JT OFBSMZ DPOTUBOU SFBM JOUFSFTU SBUFT BSF ĘBU

 -BCPVS BOE DBQJUBM SFDFJWF DPOTUBOU TIBSFT PG UPUBM JODPNF
 ćF HSPXUI SBUF PG PVUQVU QFS XPSLFS EJČFST TVCTUBOUJBMMZ BDSPTT DPVOUSJFT BOE PWFS UJNF XF DBO
BEE NJSBDMFT BOE EJTBTUFST


.PTU PG UIFTF GBDUT IBWF BHFE XFMM #VU OPU BMM PG UIFN 'PS FYBNQMF XF OPX LOPX UIF DPOTUBODZ PG
UIF JOUFSFTU SBUF JT OPU TP XIFO TFFO GSPN B CJH IJTUPSJDBM TXFFQ *O GBDU JOUFSFTU SBUFT IBWF CFFO PO B
TFDVMBS EPXOXBSE USFOE UIBU DBO CF EBUFE CBDL UP UIF T 4DINFM[JOH 
 0G DPVSTF SBUFT BSF
XBZ EPXO OPX TP UIF RVFTUJPO JT IPX NVDI MPXFS DBO UIFZ HP
8F XJMM TIPX ZPV UIF EBUB JO B GFX
QBHFT
*O BEEJUJPO JO SFDFOU ZFBST QBSUJDVMBSMZ TJODF UIF FBSMZ T UIF MBCPVS TIBSF IBT GBMMFO TJHOJĕD
BOUMZ JO NPTU DPVOUSJFT BOE JOEVTUSJFT ćFSF JT NVDI BSHVNFOU JO UIF MJUFSBUVSF BT UP UIF SFBTPOT XIZ
TFF ,BSBCBSCPVOJT BOE /FJNBO 
GPS B EJTDVTTJPO PO UIJT
BOE UIF XIPMF EFCBUF BCPVU JODPNF
EJTUSJCVUJPO USFOET SFDFOUMZ TQFBSIFBEFE CZ 1JLFUUZ 
IBT UP EP XJUI UIJT JTTVF 8F XJMM DPNF CBDL
UP JU TIPSUMZ
"T JU UVSOT PVU 3PCFSU 4PMPX FTUBCMJTIFE B TJNQMF NPEFM 4PMPX 
UIBU CFDBNF UIF ĕSTU XPSL
JOH NPEFM PG FDPOPNJD HSPXUI 4PMPXT DPOUSJCVUJPO CFDBNF UIF GPVOEBUJPO PG UIF /(. BOE UIF
CBDLCPOF PG NPEFSO HSPXUI UIFPSZ BT JU TFFNFE UP ĕU UIF ,BMEPS GBDUT "OZ TUVEZ PG HSPXUI NVTU
TUBSU XJUI UIJT NPEFM SFWJFXJOH XIBU JU FYQMBJOT o BOE KVTU BT DSVDJBMMZ XIBU JU GBJMT UP FYQMBJO

 ] ćF 4PMPX NPEFM

8F PVUMJOF BOE TPMWF UIF CBTJD 4PMPX NPEFM JOUSPEVDJOH UIF LFZ DPODFQUT PG UIF OFPDMBTTJDBM
QSPEVDUJPO GVODUJPO UIF CBMBODFE HSPXUI QBUI USBOTJUJPOBM EZOBNJDT EZOBNJD JOFďDJFODZ BOE
DPOWFSHFODF

$POTJEFS BO FDPOPNZ XJUI POMZ UXP JOQVUT QIZTJDBM DBQJUBM , BOE MBCPVS - ćF QSPEVDUJPO
GVODUJPO JT

: = ' (,, -, U) , ()

(3085) 5)&03: 13&-*.*/"3*&4 

XIFSF : JT UIF ĘPX PG PVUQVU QSPEVDFE "TTVNF PVUQVU JT B IPNPHFOFPVT HPPE UIBU DBO CF DPOTVNFE
$ PS JOWFTUFE * UP DSFBUF OFX VOJUT PG QIZTJDBM DBQJUBM
-FU T CF UIF GSBDUJPO PG PVUQVU UIBU JT TBWFE o UIBU JT UIF TBWJOH SBUF o TP UIBU  − T JT UIF GSBDUJPO PG
PVUQVU UIBU JT DPOTVNFE /PUF UIBU  ≤ T ≤ 
"TTVNF UIBU DBQJUBM EFQSFDJBUFT BU UIF DPOTUBOU SBUF 𝛿 >  ćF OFU JODSFBTF JO UIF TUPDL PG QIZTJDBM
DBQJUBM BU B QPJOU JO UJNF FRVBMT HSPTT JOWFTUNFOU MFTT EFQSFDJBUJPO
,̇ = * − 𝛿, = T ⋅ '(,, -, U) − 𝛿, ()
̇ EFOPUFT EJČFSFOUJBUJPO XJUI SFTQFDU UP UJNF &RVBUJPO 

XIFSF B EPU PWFS B WBSJBCMF TVDI BT ,

EFUFSNJOFT UIF EZOBNJDT PG , GPS B HJWFO UFDIOPMPHZ BOE MBCPVS GPSDF
̇
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O ≥  *G XF OPSNBMJTF UIF OVNCFS PG QFPQMF BU UJNF  UP  UIFO
-U = FOU  ()
XIFSF -U JT MBCPVS BU UJNF U
*G -U JT HJWFO GSPN 
BOE UFDIOPMPHJDBM QSPHSFTT JT BCTFOU UIFO 
EFUFSNJOFT UIF UJNF QBUIT
PG DBQJUBM , BOE PVUQVU : 4VDI CFIBWJPVS EFQFOET DSVDJBMMZ PO UIF QSPQFSUJFT PG UIF QSPEVDUJPO
GVODUJPO ' (⋅) "QQBSFOUMZ NJOPS EJČFSFODFT JO BTTVNQUJPOT BCPVU ' (⋅) DBO HFOFSBUF SBEJDBMMZ EJČFSFOU
UIFPSJFT PG FDPOPNJD HSPXUI

 ] ćF OFPDMBTTJDBM
QSPEVDUJPO GVODUJPO
'PS OPX OFHMFDU UFDIOPMPHJDBM QSPHSFTT ćBU JT BTTVNF UIBU '(⋅) JT JOEFQFOEFOU PG U ćJT BTTVNQUJPO
XJMM CF SFMBYFE MBUFS ćFO UIF QSPEVDUJPO GVODUJPO 
UBLFT UIF GPSN
: = '(,, -) ()
"TTVNF BMTP UIF GPMMPXJOH UISFF QSPQFSUJFT BSF TBUJTĕFE 'JSTU GPS BMM , >  BOE - >  ' (⋅) FYIJCJUT
QPTJUJWF BOE EJNJOJTIJOH NBSHJOBM QSPEVDUT XJUI SFTQFDU UP FBDI JOQVU
𝜕' 𝜕'
> , <
𝜕, 𝜕, 
𝜕' 𝜕'
> , < 
𝜕- 𝜕- 
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ćJSE UIF NBSHJOBM QSPEVDU PG DBQJUBM PS MBCPVS
BQQSPBDIFT JOĕOJUZ BT DBQJUBM PS MBCPVS
HPFT UP 
BOE BQQSPBDIFT  BT DBQJUBM PS MBCPVS
HPFT UP JOĕOJUZ
𝜕' 𝜕'
MJN = MJN = ∞,
,→ 𝜕, -→ 𝜕-
𝜕' 𝜕'
MJN = MJN = .
,→∞ 𝜕, -→∞ 𝜕-

ćFTF MBTU QSPQFSUJFT BSF DBMMFE *OBEB DPOEJUJPOT

8F XJMM SFGFS UP QSPEVDUJPO GVODUJPOT TBUJTGZJOH UIPTF UISFF TFUT PG DPOEJUJPOT BT OFPDMBTTJDBM QSP
EVDUJPO GVODUJPOT
 (3085) 5)&03: 13&-*.*/"3*&4

ćF DPOEJUJPO PG DPOTUBOU SFUVSOT UP TDBMF IBT UIF DPOWFOJFOU QSPQFSUZ UIBU PVUQVU DBO CF
XSJUUFO BT
: = ' (,, -) = - ⋅ ' (,∕-, ) = - ⋅ G (L) ()
XIFSF L ≡ ,∕- JT UIF DBQJUBMMBCPVS SBUJP BOE UIF GVODUJPO G (L) JT EFĕOFE UP FRVBM '(L, ) ćF QSP
EVDUJPO GVODUJPO DBO CF XSJUUFO BT
Z = G (L) , ()
XIFSF Z ≡ :∕- JT QFS DBQJUB PVUQVU
0OF TJNQMF QSPEVDUJPO GVODUJPO UIBU TBUJTĕFT BMM PG UIF BCPWF BOE JT PęFO UIPVHIU UP QSPWJEF B
SFBTPOBCMF EFTDSJQUJPO PG BDUVBM FDPOPNJFT JT UIF $PCC%PVHMBT GVODUJPO

: = ",𝛼 -−𝛼 , ()

XIFSF " >  JT UIF MFWFM PG UIF UFDIOPMPHZ BOE 𝛼 JT B DPOTUBOU XJUI  < 𝛼 <  ćF $PCC%PVHMBT
GVODUJPO DBO CF XSJUUFO BT
Z = "L𝛼 . ()
/PUF UIBU G ′ (L) = "𝛼L𝛼− >  G ′′ (L) = −"𝛼( − 𝛼)L𝛼− <  MJNL→∞ G ′ (L) =  BOE MJNL→ G ′ (L) = ∞
*O TIPSU UIF $PCC%PVHMBT TQFDJĕDBUJPO TBUJTĕFT UIF QSPQFSUJFT PG B OFPDMBTTJDBM QSPEVDUJPO
GVODUJPO

 ] ćF MBX PG NPUJPO PG DBQJUBM

ćF DIBOHF JO UIF DBQJUBM TUPDL PWFS UJNF JT HJWFO CZ 
 *G XF EJWJEF CPUI TJEFT PG UIJT FRVBUJPO CZ
- UIFO XF HFU
̇
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ćF SJHIUIBOE TJEF DPOUBJOT QFS DBQJUB WBSJBCMFT POMZ CVU UIF MFęIBOE TJEF EPFT OPU 8F DBO XSJUF
̇
,∕- BT B GVODUJPO PG L CZ VTJOH UIF GBDU UIBU
E (,∕-)
L̇ ≡ ̇
= ,∕- − OL ()
EU
̇
XIFSF O = -∕- ̇
*G XF TVCTUJUVUF 
JOUP UIF FYQSFTTJPO GPS ,∕- UIFO XF DBO SFBSSBOHF UFSNT UP HFU
L̇ = T ⋅ G (L) − (O + 𝛿) ⋅ L ()
ćF UFSN O + 𝛿 PO UIF SJHIUIBOE TJEF PG 
DBO CF UIPVHIU PG BT UIF FČFDUJWF EFQSFDJBUJPO SBUF
GPS UIF DBQJUBMMBCPVS SBUJP L ≡ ,∕- *G UIF TBWJOH SBUF T XFSF  UIFO L XPVME EFDMJOF QBSUMZ EVF UP
EFQSFDJBUJPO PG , BU UIF SBUF 𝛿 BOE QBSUMZ EVF UP UIF HSPXUI PG - BU UIF SBUF O
'JHVSF  TIPXT UIF XPSLJOHT PG 
 ćF VQQFS DVSWF JT UIF QSPEVDUJPO GVODUJPO G (L) ćF
UFSN T ⋅ G (L) MPPLT MJLF UIF QSPEVDUJPO GVODUJPO FYDFQU GPS UIF NVMUJQMJDBUJPO CZ UIF QPTJUJWF GSBDUJPO
T ćF T ⋅ G (L) DVSWF TUBSUT GSPN UIF PSJHJO CFDBVTF G () = 
IBT B QPTJUJWF TMPQF CFDBVTF G ′ (L) > 

BOE HFUT ĘBUUFS BT L SJTFT CFDBVTF G ′′ (L) < 
 ćF *OBEB DPOEJUJPOT JNQMZ UIBU UIF T ⋅ G (L) DVSWF JT
WFSUJDBM BU L =  BOE CFDPNFT QFSGFDUMZ ĘBU BT L BQQSPBDIFT JOĕOJUZ ćF PUIFS UFSN JO 
(O+𝛿)⋅L
BQQFBST JO 'JHVSF  BT B TUSBJHIU MJOF GSPN UIF PSJHJO XJUI UIF QPTJUJWF TMPQF O + 𝛿
(3085) 5)&03: 13&-*.*/"3*&4 

'JHVSF  %ZOBNJDT JO UIF 4PMPX NPEFM

s, δ

(n + δ)k
f (k)

s.f (k)

k(0) k* k

 ] 'JOEJOH B CBMBODFE HSPXUI QBUI

" CBMBODFE HSPXUI QBUI #(1
JT B TJUVBUJPO JO XIJDI UIF WBSJPVT RVBOUJUJFT HSPX BU DPOTUBOU SBUFT *O
UIF 4PMPX NPEFM UIF #(1 DPSSFTQPOET UP L̇ =  JO 
 8F ĕOE JU BU UIF JOUFSTFDUJPO PG UIF T ⋅ G (L)
DVSWF XJUI UIF (O + 𝛿) ⋅ L MJOF JO 'JHVSF  ćF DPSSFTQPOEJOH WBMVF PG L JT EFOPUFE L∗  "MHFCSBJDBMMZ
L∗ TBUJTĕFT UIF DPOEJUJPO
T ⋅ G (L∗ ) = (O + 𝛿) ⋅ L∗  ()
4JODF L JT DPOTUBOU JO UIF #(1 Z BOE D BSF BMTP DPOTUBOU BU UIF WBMVFT Z∗= G(L∗ ) BOE D∗
= ( − T) ⋅ G(L∗ )
SFTQFDUJWFMZ )FODF JO UIF 4PMPX NPEFM UIF QFS DBQJUB RVBOUJUJFT L Z BOE D EP OPU HSPX JO UIF #(1
JU JT B HSPXUI NPEFM XJUIPVU MPOHUFSN
HSPXUI
/PX UIBUT OPU RVJUF SJHIU UIF DPOTUBODZ PG UIF QFS DBQJUB NBHOJUVEFT NFBOT UIBU UIF MFWFMT PG
WBSJBCMFT o , : BOE $ o HSPX JO UIF #(1 BU UIF SBUF PG QPQVMBUJPO HSPXUI O *O BEEJUJPO DIBOHFT JO
UIF MFWFM PG UFDIOPMPHZ SFQSFTFOUFE CZ TIJęT PG UIF QSPEVDUJPO GVODUJPO G(⋅) JO UIF TBWJOH SBUF T JO
UIF SBUF PG QPQVMBUJPO HSPXUI O BOE JO UIF EFQSFDJBUJPO SBUF 𝛿 BMM IBWF FČFDUT PO UIF QFS DBQJUB MFWFMT
PG UIF WBSJPVT RVBOUJUJFT JO UIF #(1
8F DBO JMMVTUSBUF UIF SFTVMUT GPS UIF DBTF PG B $PCC%PVHMBT QSPEVDUJPO GVODUJPO ćF DBQJUBM
MBCPVS SBUJP PO UIF #(1 JT EFUFSNJOFE GSPN 
BT
( ) 
T" −𝛼
L∗ =  ()
O+𝛿
/PUF UIBU BT XF TBX HSBQIJDBMMZ GPS B NPSF HFOFSBM QSPEVDUJPO GVODUJPO G (L) L∗ SJTFT XJUI UIF TBWJOH
SBUF T BOE UIF MFWFM PG UFDIOPMPHZ " BOE GBMMT XJUI UIF SBUF PG QPQVMBUJPO HSPXUI O BOE UIF EFQSF
DJBUJPO SBUF 𝛿 0VUQVU QFS DBQJUB PO UIF #(1 JT HJWFO CZ
( ) 𝛼
 T
Z∗ = " −𝛼 ⋅
−𝛼
 ()
O+𝛿
ćVT Z∗ JT B QPTJUJWF GVODUJPO PG T BOE " BOE B OFHBUJWF GVODUJPO PG O BOE 𝛿
 (3085) 5)&03: 13&-*.*/"3*&4

 ] 5SBOTJUJPOBM EZOBNJDT

.PSFPWFS UIF 4PMPX NPEFM EPFT HFOFSBUF HSPXUI JO UIF USBOTJUJPO UP UIF #(1 5P TFF UIF JNQMJDBUJPOT
JO UIJT SFHBSE OPUF UIBU EJWJEJOH CPUI TJEFT PG 
CZ L JNQMJFT UIBU UIF HSPXUI SBUF PG L JT HJWFO CZ
L̇ T ⋅ G (L)
𝛾L ≡ = − (O + 𝛿) . ()
L L
&RVBUJPO 
TBZT UIBU 𝛾L FRVBMT UIF EJČFSFODF CFUXFFO UXP UFSNT T ⋅ G (L) ∕L BOE (O + 𝛿) XIJDI XF
QMPU BHBJOTU L JO 'JHVSF  ćF ĕSTU UFSN JT B EPXOXBSETMPQJOH DVSWF XIJDI BTZNQUPUFT UP JOĕOJUZ
BU L =  BOE BQQSPBDIFT  BT L UFOET UP JOĕOJUZ ćF TFDPOE UFSN JT B IPSJ[POUBM MJOF DSPTTJOH UIF
WFSUJDBM BYJT BU O + 𝛿 ćF WFSUJDBM EJTUBODF CFUXFFO UIF DVSWF BOE UIF MJOF FRVBMT UIF HSPXUI SBUF PG
DBQJUBM QFS QFSTPO BOE UIF DSPTTJOH QPJOU DPSSFTQPOET UP UIF #(1 4JODF O + 𝛿 >  BOE T ⋅ G (L) ∕L GBMMT
NPOPUPOJDBMMZ GSPN JOĕOJUZ UP  UIF DVSWF BOE UIF MJOF JOUFSTFDU PODF BOE POMZ PODF )FODF FYDFQU
GPS UIF USJWJBM TPMVUJPO L∗ =  XIFSF DBQJUBM TUBZT BU [FSP GPSFWFS
UIF #(1 DBQJUBMMBCPVS SBUJP L∗ > 
FYJTUT BOE JT VOJRVF
/PUF BMTP UIBU PVUQVU NPWFT BDDPSEJOH UP
Ż L̇
= 𝛼 = 𝛼𝛾L . ()
Z L
" GPSNBM USFBUNFOU PG EZOBNJDT GPMMPXT 'SPN 
POF DBO DBMDVMBUF
EL̇
= T ⋅ G ′ (L) − (O + 𝛿) ()
EL
8F XBOU UP TUVEZ EZOBNJDT JO UIF OFJHICPVSIPPE PG UIF #(1 TP XF FWBMVBUF UIJT BU L∗ 
EL̇ ||
= T ⋅ G ′ (L∗ ) − (O + 𝛿) ()
EL ||L=L∗

'JHVSF  %ZOBNJDT JO UIF 4PMPX NPEFM BHBJO

s

Growth
rate > 0

n+δ
Growth
rate < 0
s.f (k)/k

kpoor krich k* k
(3085) 5)&03: 13&-*.*/"3*&4 

ćF DBQJUBM TUPDL XJMM DPOWFSHF UP JUT #(1 JG L̇ >  XIFO L < L∗ BOE L̇ <  XIFO L > L∗  )FODF UIJT
̇|
SFRVJSFT UIBU EELL | ∗ < 
|L=L

*O UIF $PCC%PVHMBT DBTF UIF DPOEJUJPO JT TJNQMF /PUF UIBU

( )
EL̇ || T" −
| = T ⋅ "𝛼 − (O + 𝛿) = (O + 𝛿) (𝛼 − ) ()
EL |L=L∗ O+𝛿
̇|
TP UIBU EELL | ∗ <  SFRVJSFT 𝛼 <  ćBU JT SFBDIJOH UIF #(1 SFRVJSFT EJNJOJTIJOH SFUVSOT
|L=L

8JUI EJNJOJTIJOH SFUVSOT XIFO L JT SFMBUJWFMZ MPX UIF NBSHJOBM QSPEVDU PG DBQJUBM G ′ (L) JT SFMBU
JWFMZ IJHI #Z BTTVNQUJPO IPVTFIPMET TBWF BOE JOWFTU B DPOTUBOU GSBDUJPO T PG UIJT QSPEVDU )FODF
XIFO L JT SFMBUJWFMZ MPX UIF NBSHJOBM SFUVSO UP JOWFTUNFOU T ⋅ G ′ (L) JT SFMBUJWFMZ IJHI $BQJUBM QFS
XPSLFS L FČFDUJWFMZ EFQSFDJBUFT BU UIF DPOTUBOU SBUF O + 𝛿 $POTFRVFOUMZ UIF HSPXUI PG DBQJUBM L ̇ JT
BMTP SFMBUJWFMZ IJHI *O GBDU GPS L < L∗ JU JT QPTJUJWF $POWFSTFMZ GPS L > L∗ JU JT OFHBUJWF

 ] 1PMJDZ FYQFSJNFOUT

4VQQPTF UIBU UIF FDPOPNZ JT JOJUJBMMZ PO B #(1 XJUI DBQJUBM QFS QFSTPO L∗  *NBHJOF UIBU UIF HPWFSO
NFOU UIFO JOUSPEVDFT TPNF QPMJDZ UIBU SBJTFT UIF TBWJOH SBUF QFSNBOFOUMZ GSPN T UP B IJHIFS WBMVF T 
'JHVSF  TIPXT UIBU UIF T ⋅ G (L) ∕L TDIFEVMF TIJęT UP UIF SJHIU )FODF UIF JOUFSTFDUJPO XJUI UIF O + 𝛿
MJOF BMTP TIJęT UP UIF SJHIU BOE UIF OFX #(1 DBQJUBM TUPDL L∗ FYDFFET L∗  "O JODSFBTF JO UIF TBWJOH
SBUF HFOFSBUFT UFNQPSBSJMZ QPTJUJWF QFS DBQJUB HSPXUI SBUFT *O UIF MPOH SVO UIF MFWFMT PG L BOE Z BSF
QFSNBOFOUMZ IJHIFS CVU UIF QFS DBQJUB HSPXUI SBUFT SFUVSO UP 
" QFSNBOFOU JNQSPWFNFOU JO UIF MFWFM PG UIF UFDIOPMPHZ IBT TJNJMBS UFNQPSBSZ FČFDUT PO UIF QFS
DBQJUB HSPXUI SBUFT *G UIF QSPEVDUJPO GVODUJPO G (L) TIJęT VQXBSE JO B QSPQPSUJPOBM NBOOFS UIFO UIF

'JHVSF  ćF FČFDUT PG BO JODSFBTF JO UIF TBWJOHT SBUF

s

n+δ
s2.f (k)/k
s1.f (k)/k

k1* k2* k