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Consider a Solow model with no population growth (i.e., n = 0). The production function has constant returns to scale and technology is neutral, Y
Consider a Solow model with no population growth (i.e., n = 0). The production function has constant returns to scale and technology is neutral, Y = AF (K, N). The production function takes the intensive form: Y/N = AF (K/N, 1) A f (K/N), where K/N is capital per worker and Y/N is output per worker. The saving rate of the economy is s and the depreciation rate is d. Explain graphically and intuitively (a) Can an increase in the saving rate sustain growth forever? (b) Can sustained increases in technological progress sustain growth?
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