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 / d t = "theta" * "gamma" * A_t and real GDP per worker by y_t = A_t * ( 1 - "gamma" ), what is the long-run growth rate of y_t ?
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 / d t = "theta" * "gamma" * A_t and real GDP per worker by y_t = A_t * ( 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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Question
Consider the simple innovation model.
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 / d t = "theta" * "gamma" * A_t
and real
y_t = A_t * ( 1 - "gamma" ),
what is the long-run growth rate of y_t ?
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