GEOG 148 Lecture Notes - Lecture 4: Production Function, Longrun, Marginal Revenue Productivity Theory Of Wages
Document Summary
Aim: look at central model that is quite old but still wildly used today. Saw that the solow growth model does a good job at replicating some essential characteristics of growth. Problem: in long-run without technology change, you can"t explain the long-run rise in productivity/gdp per capita. Solow used this as a model to capture the importance of technological change. Remember: productivity is a function of the capital-labor ratio. We are trying to understand output growth but specifically the productivity growth over time. Solow says output is a function of capital and labor inputs. Tells you for different levels of the ratio how much investment is occurring per unit of labor. How much investment per unit of labor you need to be. How much investment per unit of labor you need to be making. No change in capital-labor ratio, level of productivity is constant (where the two lines intersect)
