Consider the simple innovation model studied in class. In this model, the society allocates a fraction "gamma" of workforce to innovation and the remaining fraction to production. Suppose that, for simplicity, total workforce is normalized to unity: L = 1. If the productivity growth rate is defined by d A t/dt = "theta"* "gamma" * A_t and real GDP per worker by yt = At* (1 - "gamma"), what is the long-run growth rate of y_t?
Consider the simple innovation model studied in class. In this model, the society allocates a fraction "gamma" of workforce to innovation and the remaining fraction to production. Suppose that, for simplicity, total workforce is normalized to unity: L = 1. If the productivity growth rate is defined by d A t/dt = "theta"* "gamma" * A_t and real GDP per worker by yt = At* (1 - "gamma"), what is the long-run growth rate of y_t?
Chapter20: Economic Growth In The Global Economy
Section: Chapter Questions
Problem 1P
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Consider the simple innovation model studied in class.
In this model, the society allocates a fraction "gamma" of workforce to innovation and the remaining fraction to production. Suppose that, for
simplicity, total workforce is normalized to unity: L = 1.
If the productivity growth rate is defined by
d A t/dt = "theta"* "gamma" * A_t
and real GDP per worker by
yt = At* (1 - "gamma"),
what is the long-run growth rate of y_t?
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