Re: ISI ME II 2014

Posted by Ridhika on May 08, 2014; 7:08pm
URL: http://discussion-forum.276.s1.nabble.com/ISI-ME-II-2014-tp7587168p7589060.html

Makes sense.. and the steady state wage will become 0 or no ?

And as k declines it's rental rate will increase .. as for a given level of labor a single addition to k at low levels of k will increase output so mpk will increase.. and at steady state r will be infinite ?

----- Reply message -----
From: "subhayu [via Discussion forum]" <ml-node+[hidden email]>
To: "Ridhika" <[hidden email]>
Subject: ISI ME II 2014
Date: Fri, May 9, 2014 12:25 AM

In this case there is no accumulation of capital over time however labor is growing at a rate n, so what happens is that capital per worker ratio decreases which means that MP(L) for a fixed level of capital falls, as MP(L) falls the wage rate will also fall over time.

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