general saving rate rules
- saving rate has no effect on long-run growth
- output growth in long run is equal to 0
- converge to specific K/N in long run >> converge to specific Y/N >> no growth w/ constant Y/N
- saving rate determines level of output
- higher savings rate >> higher output per worker in long run
- increase saving rate >> higher growth of output for a short while
- by increasing saving rate, output per worker must also increase to new steady state
different saving rates
- note that different saving rates lead to different steady states
- lower saving rate (dotted line) leads to a lower steady state and lower output per worker
- however, note that at either steady state, the growth rate is still 0
saving rate and consumption
- increase in saving >> decrease in consumption initially
- increase in saving >> increase in output per worker, not necessarily consumption
- saving rate = 0 >> output at 0 >> 0 consumption in long run
- saving rate = 1 >> no one spending money >> 0 consumption in long run
- golden rule of capital - capital level that results in highest level of consumption at the steady state
- C/N = Y/N - d K/N
human capital - as opposed to physical capital
- increase in worker skill acts similar to increase in capital per worker
- Y/N = f(K/N, H/N)
- H/N = human capital per worker
- H increases w/ experience, education
- education - partly consumption, partly investment
- postsecondary education - costs include cost of education (tuition) and opportunity cost (lost wages)
- endogenous growth - steady growth w/o technological progress
- increase in both physical and human capital per worker
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