The Solow Model With Technological Progress

This video contains a discussion of the Solow model of economic growth with technological progress and with population growth. I show that this version of the Solow model can explain convergence periods, long-run economic growth, and, to some extent, cross-country income differences.
The slides are based on chapter 4 of the book
Prettner, K., Bloom, D.E. (2020). Automation and Its Macroeconomic Consequences. Theory, Evidence, and Social Impacts. Elsevier, Amsterdam, NL.
For the simplified version of the Solow model without technological progress and without population growth, please see the following video:
• The Solow Model
You can find more material here:
• Intermediate Macroecon...
• Advanced Macroeconomics
• Absolute Convergence, ...
• The Ramsey-Cass-Koopma...

[@KlausPrettner]

Thank you for watching the video! You can find more material here: - Intermediate Macroeconomics: kzbin.info/aero/PLHCd4G3qW92luj-FDhyVQgyrXjIuj_N0N - Advanced Macroeconomics: kzbin.info/aero/PLHCd4G3qW92kRLjoJN32TNz5QyhftE83j - The Ramsey-Cass-Koopmans model: kzbin.info/www/bejne/r6u4nmmAoMiWjsk

[@ianmcgettigan03]

You have a true gift in education---your ability to explain all of this in such a clear manner in less than one half hour is incredible. I wanted a quick refresher of the mathematics behind the derivations and you did an excellent job, far better than many other online resources who do not care to explain the steps. Thank you very much.

[@KlausPrettner]

Thank you very much for your positive feedback! I am very happy that you like the material and the explanations.

[@efekoc625]

Undervalued video!! Simple and understandable👍🏻 Hello from Istanbul university economics👋🏻

[@KlausPrettner]

Thank you very much! I am glad you like the video.

[@CarmenCristea-pt3pp]

Very useful and clearly explained. Thank you!

[@KlausPrettner]

Thank you for the positive feedback!

[@johnmaynardkeynes6188]

What a marvellous lecture !

[@KlausPrettner]

Thank you very much!

[@maxrisher2304]

Outstanding video, Klaus

[@KlausPrettner]

Thank you very much!

[@Ed-ud4qy]

Hey Klaus, Thanks for another great video! I just have one question about this. Is it correct to say that all the parameters in the diagram only have level effects (s, n, delta). However, changing g_A has both growth and level effects, an increase in g_A will: 1. Cause the economy to move onto a steeper balanced growth path 2. But also cause a level effect: a drop in output through a dilution effect If that's correct, point (2) seems quite unintuitive to me - why should an increase in technological progress cause a drop in output? is there any intuition you could offer here? Thanks!

[@maxrisher2304]

This is half baked, but let me have a go. It is not the case that: An increase in technological progress causes a drop in output It is the case that: An increase in technological progress causes a drop in output per worker per technology (output per effective labor unit) growth in output per effective labor unit = growth in output - growth in technology - growth in capital This could be totally wrong, but hopefully it's not.

[@KlausPrettner]

Dear Ed, Yes, the interpretation is correct. The somewhat counterintuitive effect simply comes from the definition of capital per unit of effective labor in which technology A shows up in the denominator. So if g_A increases, this reduces - ceteris paribus - the accumulation of capital per unit of effective labor and, thus, reduces its steady-state level. This, in turn, has a negative effect on output per unit of effective labor, which is a positive function of capital per unit of effective labor. However, output per capita, which is the product of technology and output per unit of effective labor grows faster in the long run.

[@Umarkhan-vh5wy]

❤❤❤❤❤❤❤keep up brother