Greenhouse and Leonhardt on Real Wages and Productivity
Econ 101b: Fall 2006: Problem Set 1

Econ 101b: Fall 2006: Handout: August 29 Lecture

Introduction to the Course, and Introduction to the Theory of Economic Growth

A few graphs:

A simple model, the Solow model, for analyzing an economy with labor L, capital K, and technology E...

  • The Solow model assumes:
    • The labor force grows at a constant proportional rate n
    • The rate of improvement of "technology" is a constant proportional rate g
    • Savings leads to investment of a fraction s of output Y in increasing the capital stock K
    • A constant proportion delta of the capital stock K wears out each period.
  • How much of the cross-country and cross-time pattern of economic growth can we explain with this simple model?

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