Re: ISI 2010

Posted by dhruv on May 04, 2015; 4:01am
URL: http://discussion-forum.276.s1.nabble.com/ISI-2010-tp7354483p7596571.html

No, we have to assume depreciation = 0. Here, capital/capita depreciates by the rate of growth of labour force which should be equal to rate of growth of capital/capita, i.e., savings rate or investment.

What we have to keep in mind is that at steady state something should remain constant. Here, it is per capita output and capital.

If depreciation is not given, then it implies that capital itself doesn't depreciates which corresponds to the theory of growth where we were trying to find how economies maintain constant growth of output, but here instead of technology we have zero depreciation and labour growth rate to maintain constant growth. Maybe, technology growth rate just offsets the depreciation rate.