Tuesday, January 26, 2010

Convergence, Divergence

"Economic Convergence shows that if two countries at different stages of development (e.g. one rich and one poor) move towards the same steady state level of capital per worker (k*), due to decreasing returns to K, the richer country is projected to grow at a much slower rate than does the poor one, which is at an initial stage of development where any additional increase in k produces much higher returns and thus, a much higher y."

Legend: K = capital; L = labor
              k = capital per worker (K/L)
              k* = steady state level of capital per worker
              Y = output
              y = output per worker (Y/L)
This is just the first sentence I wrote for a problem set. I'm quite proud of its length... and somewhat scared I may be turning into one of those people... You know who you are!

No comments:

Post a Comment