Cap 3 Weil - Solutions

3/17/2019 Economic Growth - David N.
Weil - RESPOSTAS | Passei Direto

    PREMIUM  Buscar material de estudo e e…  Salvo
Materiais de estudo
 Solutions to Problems
Perguntas e respostas
1. The key characteristics of physical capital are that it is productive, it is produced, its use is lim
it can earn a return, and it wears out.
Minhas disciplinas
a. A delivery truck is physical capital because it is productive, i.e., by allowing a delivery m
drive instead of walk it increases his output (deliveries made); it has been produced itsel
Matemática Financeira
rival in its use, i.e., only one person can drive it to use it at a time; it can earn a return if
out; and it suffers wear and tear (depreciation) for the period of its use.
Microeconomia
b. Milk is not physical capital because it is not productive. (To be slightly technical, milk is
Macroeconomia making other things—for example, cheese. But in this case milk is a raw material rather
factor of production. In economic terms, “cheese production” is the value added resultin
História Econômica G…
using capital and labor to turn milk into cheese.)
c.
Econometria I Farmland is not physical capital because even though it allows a worker to produce more
it has not been produced itself.
d. The Pythagorean Theorem is not physical capital because it is non-rival in its use. That i
Meus materiais
unlimited amount of people can use it at the same time.
 Listas 2
2. To find the steady-state value of the country, we refer to Equation (3.3) on page 63.
 Histórico
α
1
 Enviados  γ 1 − α
yss = A 1− α
  .
δ 
Plugging in values: A = 1, α = 0.5, γ = 0.5, and δ = 0.05, we get:

0.5
1
 0.5  1− 0.5
y ss = 1
1 −0.5
  .
 0.05 
Simplifying the above equation, we get yss = 10.
To find the current output per worker, we substitute in k = 400 into the production function to
1 1
y = k = 400 = 20.
2 2
That is, the current output is 20 whereas the steady-state output level is 10. Therefore, we con
that y > y ss so the country is above its steady-state level of output per worker.
Gamificação • Central de ajuda •

Anuncie aqui • Blog • Política de
privacidade • Termos de uso
7 de 68 páginas   
© 2018 Passei Direto
https://www.passeidireto.com/arquivo/50061179/economic-growth-david-n-weil-respostas 1/1
3/17/2019 Economic Growth - David N. Weil - RESPOSTAS | Passei Direto

Economic Growth
Materiais - David N. Weil - RESP…
de estudo
Teoria Macroeconomica III • USP-RP 0 0 0 Anna
4. appropriate country subscript, we write Equation (3.3
Denoting each variable by the
ratio form. That is,
Minhas disciplinas
α
1
Matemática Financeira γ i  1− α
Ai 1 −α
 
Microeconomia
yi, ss
=  δi  .
α
yj, ss 1 γ  1 −α
Macroeconomia j
A j1 −α  
δ 
História Econômica G…  j
Econometria I Since productivity, A, and depreciation, δ, are the same, we can cancel them and rew
ratio with the appropriate values: γ 1 = 0.05, γ 2 = 0.2, and setting α = 1 / 3.
Meus materiais α  1 
(1 / 3 ) 1 −  
y1, ss  γ1 1− α  0.05   3 
1
 Listas 2 =  =  = (0.25) = 0.5.

2
y2, ss γ 2   0.2 
 Histórico
For α = 1 / 2, we get,
 Enviados
α   1 
(1 / 2 ) 1− 
y1, ss  γ1 1− α  0.05   2 
=  =  = (0.25)1 = 0.25.
y2,ss  γ 2   0.2 
Therefore, when α = 1 / 3, the ratio is 0.5 or 1 to 2 and when α = 1 / 2, the ratio is 0.
5. Since we know productivity, A, and depreciation, δ , are the same, we know that the
in our steady state ratio analysis. Therefore, with α =1/3, our equation of interest bo
α 1
y1, ss γ  1− α
γ  2
= 1  = 1  ,
y2,ss γ 2  γ 2 
for all three pairs of countries.

a. Using a subscript T for Thailand and a subscript B for Bolivia, we rewrite the pr
for Thailand and Bolivia as
1
yT ,ss  γ 2
= T  .
yB ,ss  γB 
Substituting in γ T = 0.303 and γ B = 0.099, we get the steady state ratio to be:
Gamificação • Central de ajuda • yT ,ss  0.303  2

=  ≈ 1.75.
Anuncie aqui • Blog • Política de yB, ss  0.099 

Materiais
8 de estudo
Weil • Economic Growth, Second Edition
The actual ratio is,
Minhas disciplinas yT  $14, 260

= ≈ 2.06.
yB  $6, 912 
Therefore, the Solow Model does a good job in predicting relative income for Thailand a
Microeconomia
Bolivia.
Macroeconomia
b. Using a subscript N for Nigeria and a subscript T for Turkey, we rewrite the previous equ
with γG…
História Econômica N
= 0.075 and γ T = 0.146 to get,
Econometria I 1 1
yN, ss  γ 2  0.075  2
= N  =  ≈ 0.72.
Meus materiais yT , ss  γ T   0.146 
The actual
2 ratio is,
 Listas
 Histórico yN  $3, 648 
= ≈ 0.21.
yT  $17, 491 
 Enviados
Therefore, the Solow Model does a poor job in predicting relative income for Nigeria and
c. Using a subscript J for Japan and a subscript N for New Zealand, we rewrite the previou
equation, with γ J = 0.313 and γ N = 0.207 to get,
1 1
yJ ,ss  γ  2  0.313  2
= J  =  ≈ 1.23.
yN, ss  γ N   0.207 
The actual ratio is,
yJ  $48, 389 
= ≈ 1.12.
yN  $43, 360 
Therefore, the Solow Model does a good job in predicting relative income for Japan and
New Zealand.
6. If output per worker is rising in Country X and output per worker is falling in Country Y, we
assured that both countries are not in their respective steady states. Instead, they are converg
their respective steady states. In addition, for Country X and Country Y, we are given inform
that depreciation, productivity, and output per worker are identical. By the process of elimina
only difference between the countries can and must be the level of capital stocks. Capital sto
follow the process:
Gamificação • Central de ajuda • ∆ki = γ i f (ki ) − δ i ki .


Materiais de estudo
Chapter 2 A Framew
As such, we can conclude that differences in investment rates are responsible for th
output per worker. Specifically, a rise in output per worker for Country X and a fall
Minhas disciplinasworker for Country Y imply that the ratio of steady-state output per worker is,
Matemática Financeira α
yX ,ss  γ  1−α
Microeconomia > 1; therefore,  X  > 1; implying, γ X > γY .
yY ,ss  γY 
Macroeconomia
Consequently, we can determine that Country X has a higher investment rate than th
História Econômicaand
G…these differences account for the falling and rising levels of output per worker.
Econometria I
7. a. First we find the steady-state level of capital per worker. Using the values for inv
depreciation, δ = 0.05, productivity, A = 1, and α = 0.5, we get,
Meus materiais
1 1
 Listas 2  Aγ  1−α  (1)(0.25)  1− 0.5

kss =   =  = 5 2 = 25.
 δ   0.05 
 Histórico
That is, the steady-state level of capital per worker is 25. Plugging in k ss into th
 Enviados function we get the steady-state level of output per worker to be:
1 1
yss = kss 2 = (25) 2 = 5.
That is, the steady-state level of output per worker is 5.

b. For year 2, using 16.2 as the value for capital per worker, calculate output, y, fo
investment γ y, depreciation δ k, and then change in capital stock. Add the value
capital stock to 16.2, the value for capital per worker in year 2, to get capital pe
year 3. Use year 3 capital to obtain all the values for year 3 and continue up to y
in table is below.
Change
Year Capital Output Investment Depreciation St
1 16.00 4.00 1.00 0.08 0
2 16.20 4.02 1.01 0.81 0
3 16.40 4.05 1.01 0.82 0
4 16.59 4.07 1.02 0.83 0
5 16.78 4.10 1.02 0.84 0
6 16.96 4.12 1.03 0.85 0
7 17.14 4.14 1.04 0.86 0
8 17.32 4.16 1.04 0.87 0
c. •The
Gamificação • Central de ajuda growth rate of output between years 1 and 2 is given by:
privacidade • Termos de uso y   4.02 
g = 2  −1 =   − 1 = 0.005.
 y1   4 

Materiais de estudo
d. The growth rate of output between years 7 and 8 is given by:
y   4.16 
g = 8  −1 =  − 1 = 0.0048.
 y7   4.14 
Minhas disciplinas
That is, output per worker grew at a rate of 0.48 percent between years 7 and 8. (Using e
values, the growth rate is approximately 0.52 percent for years 7 and 8.)
Microeconomia
e. The speed of growth has changed from 0.50 percent to 0.48 percent implying that growth
slowed down at a rate of 4 percent. Thus, as a country reaches their steady-state value, th
Macroeconomia
of growth slows.
8. Before beginning the analysis, we define two new variables. The level of capital per worker
Econometria I
necessary to achieve consumption level c* is denoted k*. Technically, k* is given by f − 1(c *).
Therefore, if the initial level of capital, ki is above k*, savings will be positive, and if ki is bel
savings will 0. The second variable I is denoted k (refer to second figure). It is the level of c
Meus materiais
which depreciation is equal to savings and distinct from the steady-state level of capital, if it
 Listas We are now 2ready to begin our analysis. There are two cases.
 HistóricoCase 1. Depreciation is always greater than Saving; δ k > γ f (k ),∀ k
 EnviadosIn the figure below, at any initial level of k i ,depreciation is always greater than savings. The
of capital falls over time, as does the level of income per worker. Consequently, the economy
continue to stagnate until the level of income and the capital stock are zero.
Case 2. Depreciation is not always greater than Saving; δ k ≤ γ f (k ), for some k
The figure below shows two possible scenarios. If the initial level of capital, k i , is equal to o
k*, then savings in the economy will be zero. The level of capital in the economy falls due to
depreciation and we achieve the same result as in the first case. On the other hand, if k i ≥ k , t
Gamificação • Central de ajuda
the level •
of savings exceeds or will exceed the level of depreciation and the capital stock rise
time. The capital stock will reach a state-state value as will income. If k * < ki < k , then the a
of savings
privacidade • Termos de uso does not exceed the amount of depreciation. The level of capital stock begins to fa
we are in the first case where both income and capital go to zero levels. In the end, the ultima
determinant of where the economy rests is determined by the initial level of capital, commen
ih h i ii ll l fi

Chapter 2 A Framewo
Materiais de estudo
Minhas disciplinas
Microeconomia
Macroeconomia
Econometria I
Meus materiais
 Listas 2
9. First, in a steady-state level that maximizes consumption per worker, the change in
 Histórico be zero. That is,
 Enviados ∆k = 0 = γ f (k ) − δ k.
Rearranging the previous equation, we know that investment must equal depreciatio
γ f (k ) = δ k .
Second, given that any output not saved is consumed, we can write an equation for
C = y − γ f (k ) = A(k ) α − δ k .
In the last part of the previous equation, we replace savings with depreciation and w
functional form. In this form, we are able to take the derivative to find the necessary
will guarantee consumption maximization. Taking the derivative with respect to k a
d d
C = A (k ) α − δk = α A (k ) α− 1 − k .
dk dk
aA(k ) α −1 = δ.
That is, the marginal product of capital must equal the rate of depreciation. Combinin
maximization condition (aA( k )α −1 = δ.) with the steady-state condition (γ f (k ) = δ k
saving = γ y = γ f (k ) = δ k = α A( k )α −1 × k = α A(k )α = α f ( k ) = α y.
Therefore, it is easy to see the γ must equal α by the above string of equalities. In a
level of consumption per worker, the investment/saving rate must equal the value α
Gamificação • Central de ajuda •

Cap 3 Weil - Solutions

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Cap 3 Weil - Solutions

Uploaded by

Copyright:

Available Formats

3/17/2019 Economic Growth - David N.

Weil - RESPOSTAS | Passei Direto

Plugging in values: A = 1, α = 0.5, γ = 0.5, and δ = 0.05, we get:

Simplifying the above equation, we get yss = 10.

Gamificação • Central de ajuda •

 Listas 2 =  =  = (0.25) = 0.5.

Therefore, when α = 1 / 3, the ratio is 0.5 or 1 to 2 and when α = 1 / 2, the ratio is 0.

for all three pairs of countries.

Gamificação • Central de ajuda • yT ,ss  0.303  2

© 2018 Passei Direto

Minhas disciplinas yT  $14, 260

The actual ratio is,

Gamificação • Central de ajuda • ∆ki = γ i f (ki ) − δ i ki .

© 2018 Passei Direto

 Listas 2  Aγ  1−α  (1)(0.25)  1− 0.5

That is, the steady-state level of output per worker is 5.

Case 2. Depreciation is not always greater than Saving; δ k ≤ γ f (k ), for some k

© 2018 Passei Direto

You might also like