1. The Solow-Swan model presents a few limitations, primarily because of its implication on convergence to a steady state. Explain what the issue is at the light of recent experiences of growth.
2. Use a diagram to explain how shifts in TFP can allow for continuous growth.
1. Present a Solow model where technology change impacts upon labour productivity (Labour Augmenting TC). What is the steady state condition?
2. Explain the notion of steady state and compare it to the steady state you would find in a model without labour augmentation;
3. Comments on the policy implications of this model.
Review the notion of Total Factor Productivity and what role TFP plays in the growth debate.
The growth rate of labour is 6 (percent) and the rate of growth of capital is 6 (percent). Suppose that the share of GDP that goes to capital is 0.4 and the share of GDP that goes to labour is 0.6. If constant returns to scale apply and markets are competitive, then what is the rate of growth of total factor productivity?