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Grandpa Frank used to say, Out of the ashes of destruction have risen the wings of opportunity. We'll use the following questions to see if
Grandpa Frank used to say, "Out of the ashes of destruction have risen the wings of opportunity."
We'll use the following questions to see if we agree with this statement:
- First let's think theoretically about the model. (I.e., without referencing the details of the spreadsheet.) Think about the growth in capital-labor ratio in France. Given that France suffered a large drop in capital-labor ratio during WWII, what does the Solow model say about what growth should be in the 1950s? (I.e., fast? slow? can't tell?) What should happen to that growth rate over time and why? Would you expect the growth in France in the 1950s to be sustained forever? Why or why not?
- If France had not suffered a large drop in its capital-labor ratio during the war, what would we expect to see about its growth rate? Why? What does this tell you about the main reason for such strong growth rates in the years right after the war?
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