Question

For the SGM use a savings rate of 0.3, a depreciation rate of 0.1, n = 0.1 and g=0.05 and a starting capital labor ratio of 2. Assume A (total factor productivity) = 1.

How would you model the increase in ? in the SGM? Compare the results of the SGM and Yt = Ynt + Yct models.

Answer 1

For this case, we have a Structuralist Growth model which is somehow, like a Solow Growth model, where we can develop a system to model the conduct of our system.

In this sort of models, the venture (I) has a twofold part, as a segment of the aggregate demand, and as a stream that expands capital.

We have to recall that

Where K is capital, L denotes labor and G is government expenditures, and this is a production function with consistent comes back to scale

G=T, government expeditures is equivalent to taxes, and

Our law of capital development is, when we transformed into a for every capital amounts we have,

The taxes enter in the method for this equivalence where is the per capita taxes.

What's more, with this equivalence we can model the impacts of this variable after some time. Any adjustment in will be caused to some extent by the conduct of the taxes