Summary

Economics of Growth Revision and Summary Notes

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Module
ECON0028 - Economics of Growth (ECON0028)

Institution
University College London (UCL)

Revision and summary notes created during exam preparation, with all key equations, derivations and diagrams of different growth models included.

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Uploaded on May 15, 2024
Number of pages 23
Written in 2023/2024
Type Summary

Week 1 Intro & Facts of Economic Growth

Gross Domestic Product total income rents interests ,
profits
=

,
wages , ,

(GDP) value of all
goods & services
produced
standardized basket of traded
purchasing power /carity (PPP) & non-traded
goods (eg haircut
·

change rates differences
Echeaper
↳
market ex overstate between countries countries
in
poor
GDP of standard of
per calcita living
measure
GDP worker of
per measure
productivity
x measure
welfare/wellbeing
·

GDP Growth Growth
Exponential Yt-Yt-1 100% % "doubles
meaning every period
=

gt
=

Yt -

1
x 100
g

Linear Growth
Yt =
Yt -

1 + a

logscale- =

logyt- logyt-
Rule of 72
(doubling time

Instantaneous rowth rate
g Y
ig =
continuous version of Y
g 7
=

Yt-Yt-1 dY
" =
lim I

Xt >
-

0 Xt dt

derivative of of z"take derivatives"
z
growth rate
logs then
=

7

co3y
0 .

egz
logy)
=

0 7
take log,
log z 03
logi
=
+ .

= 3 0 .
+
075 differentiate

T
growth rate

,Production Function Y =
F (K L , , ) output perworker
·

assumes constant return to scale F(z-K ,
z .
)) =
z .

Y +
concave
4 Y/L
y
=

4k =
k/L

diminphing MP FR > 0 FIk > O factors
per worker
·

Cobb-Douglas Y =
Akd(19
-

worker Alt( Ak" f(k)
output per
= = =
=

y
=

xAk * 0
*2
Mk =
fl =
fRk =
<(x-1)k < 0

share of income MPK; K
capital
= = <

, Week 2
Capital & the Solow Growth Model
Accumulation

Assumptions competitiveomarket w MPL r MPK
= =

tech constant
population
·

Capital 1
(endogenous
·

depreciation
↳

↳ investment

Capital Accumulation Equation -K =
investment
depreciation
-

investment =
s .

Y s= constant fraction of income saved for investment
S
depreciation S K constant fraction of
capital depreciates
= .
=

in continuous time :
OK =
K = =
SY-SK

k =
k/L

logk logk-logh
=

= E -

E constant
↳ =

=> k =

Sy
-

Sk
is sf(k)-Sk
horcapital per worker change over time
=

Depreciation ,

output f(k)
investment ,

e
outputas Y SS - . . . . . . . .
-
-

-

depreciation Sk
slope
=
S

consumption

·
investment sf(k)

iTrestments
>>> <)/(

depreciation
capital per worker (k)

investment
consumption output
+ =

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