term 2 lecture 4- endogenous growth

Question 1

what is an endogenous growth model?

Answer 1

a model in which the long run growth rate of technology depends on basic model parameters such as savings rates population growth rates or other fundamental characteristics in the economy

Question 2

what is the groqth rate of output per capita in the AK model?

Answer 2

g_y = sA - δ where s is savings rate, δ is deprecaition rate and A is a constant

Question 3

what does the AK model assume about growth?

Answer 3

the AK model has non diminishing marginal productivity of capital so there is constant returns to scale and positive long run growth

Question 4

what is the marginal product of capital equal to in the AK model?

Answer 4

the constant A

Question 5

why is long run growth endogenous in the AK model?

Answer 5

it is endogenous to the extent that s, A and δ can be influenced by policy/ behaviour of economic agents

Question 6

what is the effect of an increase in the savings rate for the AK model?

Answer 6

there will be a permanent acceleration in the growth as capital is being accumulated faster

Question 7

what is a learning by doing externality?

Answer 7

productivity gains coming from investment and production, firms learn better way to produce as an accidental by product of the production process, input requirements decrease as a result of production experience

Question 8

what is the empiracle evidence of learning by doing?

Answer 8

there is empiracle evidence from shipbuilding, airframe manufacturing etc

Question 9

what are the traits of human capital?

Answer 9

it consists of the acquired skills and knowledge of particular workers, it is rival and excludable and as a result of investment in education, human capital is embodied into a worker, this knowledge cannot be employed in another frim

Question 10

what are the traits of ideas?

Answer 10

it can be used in one activity without making its use in another activity more difficult or less productive, it is non rival but can be partially excludable

Question 11

what are ideas

Answer 11

they are the sum of various technological and scientific discoveries

Question 12

why are ideas non rival?

Answer 12

once invented they can be used by any number of people simultaneously

Question 13

why are ideas partially excludable?

Answer 13

the extent to which someone has property rights over a good and can legally restict its use

Question 14

what does the constant represent in romers framework of the production function?

Answer 14

the index of the stock of knowledge

Question 15

what does replication imply for the returns to scale?

Answer 15

replication implies constant returns to scale of objects

Question 16

what occurs to the returns to scale if the stock of ideas increase?

Answer 16

the stock of ideas increasing indicates increasing returns to scale assuming constant returns to objects

Question 17

how is the labour force allocated between the production of goods and services and the production of knowledge (R&D)

Answer 17

they use a simplifying assumption that a fraction Sa of workers will be allocated to research and development

Question 18

what are the resource constraint for the labour applied to R&D

Answer 18

LA=SA x L

Question 19

what is the resource constraint for the labour applied to output?

Answer 19

LY=(1-SA) x L

Question 20

what is the linear knowleedge production function?

Answer 20

Ȧ=θ(L_A)A

Question 21

what ist he research effort LA?

Answer 21

it is the labour devoted to research

Question 22

what is the scaling parameter θ

Answer 22

how th enumber of innovations translates into the actual effect of higher knowledge

Question 23

what is the gerneral case for the knowledge production function?

Answer 23

Ȧ=θ * (L_A)^λ * A^φ where λ is the elasticity of new knowledge to the number of R&D workers and φ captures the impact of the current stock of ideas on the flow of new knowledge

Question 24

what occurs when the φ is between 0 and 1?

Answer 24

having more knowledge lets a researcher create knowledge faster eg printed books, internet, computers microscopes etc

Question 25

what occurs when the φ is lower than 0?

Answer 25

there are no more low hanging fruit, the higher the stock of ideas the smaller the flow of new knowledge, prior research has already found all the relatively easy ideas and what is left is much harder problems
we acquire new ideas and that actually makes it harder to find the next new idea

Question 26

what is the production function when ideas are included?

Answer 26

Y = A^σ * L_Y where L_Y is the labour allocated to production of goods and services, A is the stock of ideas and σ captures the degree to which increase in knowledge increases productivity in production of goods and services

Question 27

what is the productiion function per worker when ideas are included?

Answer 27

y= A^σ * (1-sA) where sA is the proportion of workers allocated to R&D, A is the stock of ideas and σ is the impact those ideas have on the production of goods and services

Question 28

what are the key takeaways from the romer model?

Answer 28

the romer model can explain permanent growth in living standards by emphasising the role of innovations and R&D, countries with higher TFP growth should grow faster. devoting a bigger share of workers to R&D will increase TFP and make the economy richer, but it wont increase th growth rate of per capita incomes on BGP.
countries with faster population growth should have higher TFP and higher economic growth -

Question 29

what endogenously determines the growth of ideas?

Answer 29

g_A = (θ * s_A^λ * L^λ)/(A^(1-φ)) where

Question 30

what is the formula for the balanced growth rate of ideas?

Answer 30

g_A* = λn/(1 − φ)

Question 31

what is the formula for the balanced growth rate of output?

Answer 31

g_y* = σ λn/(1 − φ)

Question 32

what are the characteristics of growth of output when ideas are included?

Answer 32

it is proportional to the population growth rate n
it is increasing in λ - how large are the returns in terms of ideas to additional labour inputs in R&D
increasing in φ - how easy it is to use the existing stock of ideas for creating new knowledge
increasing in σ - how large are returns to final output from additional ideas

Question 33

are ideas harder to find>?

Answer 33

the growth rate of ideas falls as the stock of knowledge gets higher holding the proportion of labour allocated to R&D constant. this is because we don’t see the growth rate of TFP accelerating over time
bloom et al 2020: the evidence suggests that ideas are indeed harder to find

Question 34

what is the evidence of semi conductors for ideas being harder to find?

Answer 34

in the semi conductor, the growth rate of ideas increased however the labour percentage applied to R&D increased dramatically. under A rising, research productivity was declining.