Questions and answers of relevance for the exam June 12, 2013
Course: Economic Growth

General remark: What I write below is written without knowing which of the alternative exam problem sets handed in to the exam administration is selected for the coming exam. So, please, do not expect that you can infer anything about the particular contents of the exam assignments this time. My answers below are written from the perspective of the matter in principle.   

Question set 1 (more or less the same questions raised by two of you):

a) The lectures towards the end of the course about the R&D-based growth models treated this new stuff somewhat differently from the treatment in Acemoglu. My notes from these lectures are more incomplete than I expected. And I missed one class. Can you give a recommendation as to how to proceed?

b) There was an empirical conclusion by Jones and ?, related to the social planner's solution compared with the market solution. What was this conclusion?

Answer:

a) I certainly recommend that you do the exercise problems. Some of the stuff is also covered in the exam problems from June 2011 and August 2012 (the official suggested solutions can be found at the course website). In addition you may perhaps find the advice in footnote 1 in LN 13 helpful.

b) Jones & Williams, QJE 1998, concluded that the R&D investment-GDP ratio under laissez faire is typically only one fourth of the ratio in the social planner's solution for an industrialized economy.

Question set 2

a) In LN 10, p. 2, eq. (2), the first equality sign gives the technology level as the integral of net investment from minus infinity to t. I guess that for t > 0, it could alternatively be written as the value of K at time 0 plus the integral of net investment from time 0 to time t. Or the increase in the technology level could be expressed in terms of a differential equation together with an initial condition. These alternative ways of formulation seem closer to usual approach, so why is the first formulation used here?

b) In LN 12, p. 2, eq. (5), a minus is missing in two exponents.

Answer:

a) The first formulation provides better the intuition that learning occurs whenever (net) investment occurs. So the accumulated learning equals accumulated (net) investment. If a war at some earlier point in time had destroyed a lot of capital, K at time t would not be a good indicator of the level of technology. But the integral of net investment from minus infinity to t would preserve its validity. This said, it should be added that the second equality sign in equation (2) assumes that no shocks of that kind have ever occurred.

b) Yes, thank you.

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