What determines the long-run growth rate of an economy?
The theory of economic growth was developed to answer this question and has traditionally used dynamic models for the task. Starting from Solow (1956)’s neoclassical growth model, write a group report exaplaining how differential equations in continuous time can help building such models.
Your report should include:
- [Neoclassical model] A discussion of how differential equations and phase diagrams were used by Robert Solow to formalize his theory. Make sure to elaborate on the concepts of steady state and convergence in this context.
- [Alternative models] An examination of possible limitations and refinements of Solow’s contribution, including examples of alternative dynamic models of economic growth. The number of alternative models you consider should be equal to your total group members minus one (e.g. three refined models in a group of four).[unique_solution]
- [Simulation] An application of your selected models to an economy of your choice. Hint: collect reasonable values for all constant paramenters – e.g. labour force growth rate, saving rates etc.., and solve your models – either analytically or using an appropriate software if convenient.
- [Methodology] A comparison of adavantages and disadvantages of dynamic modelling in continuous and discrete time, relative to static modelling.
Please submit your report on Canvas at:
https://canvas.kingston.ac.uk/courses/13698/assignments/48340
| Submission deadline: | 4 February 2020 at 13.00 | ||
| Words limit: | 750 per group member (e.g. 3000 words for a group of four) | ||
| Style requirements: | Harvard referencing | ||
| Group membership: | See People section on Canvas | ||
| Suggested readings | |||
Hoy, M., Livernois, J., McKenna, C., Rees, R., & Stengos, T. (2011). Mathematics for Economics.
MIT Press.
Jones, C. I. and Vollarth, D. (2013) Introduction to Economic Growth 3rd ed. Norton
Solow, R. (1956). A Contribution to the Theory of Economic Growth. The Quarterly Journal of Economics, 70(1), 65-94. Retrieved from http://www.jstor.org/stable/1884513