2) How is TFP growth affected by subsidies to R&D?
3) Does it make sense to have the government intervene to promote economic growth?
The Solow growth model CAN’T answer these questions – but a model of “endogenous” growth, where growth rates are explained by the model, potentially can.
In this model, the representative consumer allocates his or her time between supplying labor to produce output and accumulating human capital, where human capital is the accumulated stock of skills and education that a worker has at a point in time. The higher the human capital that workers have, the more they can produce. Therefore, a higher level of human capital means that the economy can grow at a faster rate.
How do we reconcile the predictions of the endogenous growth model concerning convergence with the facts?
The model appears consistent with the fact that:
1) there are persistent differences in per capita income among poorer countries
2) there are persistent differences in per capita income between the poorer countries of the world and the richer countries.
The model appears inconsistent with the fact that:
1) per capita incomes seem to have converged among the richer nations of the world
- Assignment status: Already Solved By Our Experts
- (USA, AUS, UK & CA PhD. Writers)
- CLICK HERE TO GET A PROFESSIONAL WRITER TO WORK ON THIS PAPER AND OTHER SIMILAR PAPERS, GET A NON PLAGIARIZED PAPER FROM OUR EXPERTS