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by Vincent Q.

Name the two growth models and give one example each

How does a Cobb-Douglas production function with constant returns to scale and diminishing returns to per capita capital looks like?

Name short and long run implications of the Solow-Swan Model.

In the Solow-Swan model, what are the properties of the Cobb-Douglas production function?

Write down the production function and prove those properties.

Represent graphically the capital accumulation function of the Solow-Swan model showing
- the optimal level of per capita capital in the steady-state equilibrium
- What happens to the per capita capital 𝒈𝒌 when the saving rate s increases?

In what does the growth accounting approach consist of?

In growth theories, what is the relationship between the Total Factor Productivity (TFP), A, and the Solow residual?

Cobb-Douglas function:
- TFP is the total output after getting rid of the growth due to increase in factor inputs
- Represented by A
Solow-Swan model: A is exogenous

In the Solow-Swan model, what is the determinant of continuous growth even in the long run?

Per capita growth of capital (K) and output (Y) is zero for a fixed level of s,n and A
s and A can be varied over time —> affect steady state levels of K and Y
Increase in s —> temporarily increase the per capita output growth
Change in A (technological change) —> continuous growth in the long run
Decrease in n —> steady state level of k increases but no long-term growth

Explain Adam Smith’s vision

Technological change means labor specialization —>
- wealth,
- economic growth,
- evolution of society
Different productivity growth rates results from the introduction of new divisions of labor
Growth in one sector pulls other sectos until capital accumulation and economic growth reach their natural limit
—> Growth as an endogenous process
—> Technological change is also endogenous

Explain Simon Kuznets’ vision on technical progress and growth?

Mass diffusion of innovations is the base for further technical progress and therefore growth
Growth is self-fuelled thanks to the presence of positive feedbacks

Why is the Solow-Swan model limited?

Key parameters are exogenous or not modeled (e.g. human capital, technical change)
Externalities are not accounted for
No empirical evidence supporting the theory of convergence across countries

Explain the endogenous growth theory by Rebelo (1991)