Transcript No Slide Title

Chapter 14
Endogenous Growth
Theory
GDP per person as percentage
of U.S. GDP per person
GDP per Person Relative to U.S. GDP
per Person for Five Countries
United States
100
80
Great Britain
60
40
Mexico
20
Turkey
India
0
1960
Figure 14.2
’65
’70
’75
’80
’85
2
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GDP per capita as a percentage of
U.S. GDP per capita
Investment and GDP per Person
Panel A
100
U.S.
Canada
Germany
80
60
U.K.
40
Chile
Sweden
France
Holland
Italy
Mexico
Japan
Turkey
20 Ghana
0
0.10
Box 14.1A
S. Korea
Nigeria
Philippines
India
0.15 0.20 0.25 0.30 0.35
3
Ratio of investment to GDP
©1999 South-Western College Publishing
GDP per capita as a percentage of
U.S. GDP per capita
Investment and GDP per Person
Panel B
100
U.S.
Canada
France
Germany Sweden
Holland
U.K.
Italy
80
60
40 Mexico
Chile
Turkey
Ghana
Nig.
20
0
1
Japan
2
S. Korea
Philippines
India
3
4
5
4
Investment ratio adjusted for population growth
Box 14.1B
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The Social Production Function
GDP
Panel A
Capital
Figure 14.4A
5
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The Private Production Function
GDP
Panel B
Capital
Figure 14.4B
6
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Endogenous Growth
Kt + 1 = (1 - + As) Kt
Kt + 1
Kt + 1 = Kt
This economy will grow forever.
Figure 14.5
K0
Kt
7
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Two Economies with the Same Growth
Rate but Different Initial Conditions
Kt + 1 = (1 -  + As) Kt
Economy B
Kt + 1
Economy A
Kt + 1 = Kt
A
K0
Figure 14.6
B
K0
Kt
8
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Two Economies with the Same Initial
Condition but Different Savings Rates
Kt + 1 = (1 -  + sAA) Kt
Economy A
Kt + 1
Kt + 1 = (1 -  + sBA) Kt
Kt + 1 = Kt
Economy B
A
K0 =
Figure 14.7
KB0
Kt + 1
9
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Growth Rate of GDP per Person
Average Investment and Growth
for 17 Countries, 1960–1988
8
6
4
2
0
Japan
France,
Germany, &
Canada
Italy
Sweden
Turkey
Mexico &
U.S.
Holland
U.K. India
Philippines
Chile
Nigeria
-2
0.10
Figure 14.8
S. Korea
Ghana
0.15 0.20 0.25 0.30 0.35
Ratio of investment to GDP
10
©1999 South-Western College Publishing
END