We derive one way of measuring the speed of convergence to steady state in the Solow Growth model. This involves using a linear approximation of the equation of motion of capital. We can then solve this differential equation and calculate the half life of the transition from our initial condition to the steady state.
We then briefly discuss the scenarios where we might care more about the speed of convergence, as a slow transition to steady state will mean we need to consider the state of our economy on transition.
PS I really need to invest in a new laptop! Sorry if there is background noise from my laptop in the latter half of the video.
Check out the Solow Growth Model playlist for past videos to get up to speed with the assumptions and key equations.
Robert M. Solow, A Contribution to the Theory of Economic Growth, The Quarterly Journal of Economics, Volume 70, Issue 1, February 1956, Pages 65-94
Subscribe for more videos looking at everything to do with the subject of economics. Put suggestions for video ideas in the comments section below and any feedback offered would be greatly appreciated.
My videos are intended for educational and entertainment purposes. I try to credit the relevant parties for any work that I refer to in my videos (for example, citing relevant academic papers). If you believe a video does not observe good academic practice, please do not hesitate to contact me by email at everythingbetting@gmail.com
21 сен 2024
