Professor @@KlausPrettner. Could you please make a video for AK model as soon as possible? Due to your explanations are easy and show details graph and phase diagrams clearly, for understanding economics deeply....Thanks.
Here is a link to the Playlist on the endogenous growth framework that also contains further extensions (such as the semi-endogenous growth model and a semi-endogenous growth model with endogenous human capital accumulation): ruclips.net/p/PLHCd4G3qW92nPlJKqx-tcoOQ64jdOGkGk Please note that the AK growth model is often used as a shortcut formulation of the Romer (1990) model of endogenous technological progress that is discussed in the first two videos of the playlist. However, as compared to the Romer (1990) model, it has several shortcomings (e.g., it leaves no room for technological progress in explaining long-run growth and it implies a capital income share of one). I hope this is useful.
Thank you for the simple and clear explanation! Do you offer private lessons online? I am preparing my Master dissertation and the model I am building is based on MRW model.
Thank you! I am glad you find the explanations clear. I do not offer private lessons but if you have a specific question, you can email me and I will try to reply whenever possible.
Thank you so much sir for the nice explanation. However, I have a doubt about the per capita income equation. In the production function, the power of L was 1-alpha, then how did you cancel L to find out the per capita income equation? I look forward to hearing back from you. Thank you.
Thank you for your positive feedback and the question! Please note that the L^alpha is still in the denominator of the equation for per capita GDP (y) because k=K/L so that k^alpha = K^alpha / L^alpha. I hope this helps.
Hmmm...Is the equalisation assumption of returns on h and k reasonable...or just a convinience to get the results. Return on h and k are really equal across countries? More likely, they aren't...maybe.
In the model, the equalization of returns is a result. The assumption that leads to this result is the presence of rational households. If these rational households have two different assets to invest in, they would always invest in the one that yields the higher return. This would put downward pressure on the return of the asset with the higher return (and vice versa for the asset with the lower return). The equilibrium to which the market tends in this case is the one of equalized returns. However, in reality, there are many frictions that could drive a wedge between the returns of physical capital and human capital. For example, investing in human capital does not only imply monetary costs but also requires effort, time, ability, sometimes long commutes or even international migration and so on and so forth. In the presence of such frictions, the returns do not necessarily need to equalize.
Excellent video to understand well. Thanks
Thank you very much!
Professor @@KlausPrettner. Could you please make a video for AK model as soon as possible? Due to your explanations are easy and show details graph and phase diagrams clearly, for understanding economics deeply....Thanks.
Here is a link to the Playlist on the endogenous growth framework that also contains further extensions (such as the semi-endogenous growth model and a semi-endogenous growth model with endogenous human capital accumulation):
ruclips.net/p/PLHCd4G3qW92nPlJKqx-tcoOQ64jdOGkGk
Please note that the AK growth model is often used as a shortcut formulation of the Romer (1990) model of endogenous technological progress that is discussed in the first two videos of the playlist. However, as compared to the Romer (1990) model, it has several shortcomings (e.g., it leaves no room for technological progress in explaining long-run growth and it implies a capital income share of one). I hope this is useful.
thank you for putting your efforts into making all this video, love for India
Thank you for watching the video!
Thank you for the simple and clear explanation! Do you offer private lessons online? I am preparing my Master dissertation and the model I am building is based on MRW model.
Thank you! I am glad you find the explanations clear. I do not offer private lessons but if you have a specific question, you can email me and I will try to reply whenever possible.
@@KlausPrettner your email address please
Thank you so much sir for the nice explanation. However, I have a doubt about the per capita income equation. In the production function, the power of L was 1-alpha, then how did you cancel L to find out the per capita income equation? I look forward to hearing back from you. Thank you.
Thank you for your positive feedback and the question!
Please note that the L^alpha is still in the denominator of the equation for per capita GDP (y) because k=K/L so that k^alpha = K^alpha / L^alpha. I hope this helps.
Hmmm...Is the equalisation assumption of returns on h and k reasonable...or just a convinience to get the results. Return on h and k are really equal across countries? More likely, they aren't...maybe.
In the model, the equalization of returns is a result. The assumption that leads to this result is the presence of rational households. If these rational households have two different assets to invest in, they would always invest in the one that yields the higher return. This would put downward pressure on the return of the asset with the higher return (and vice versa for the asset with the lower return). The equilibrium to which the market tends in this case is the one of equalized returns. However, in reality, there are many frictions that could drive a wedge between the returns of physical capital and human capital. For example, investing in human capital does not only imply monetary costs but also requires effort, time, ability, sometimes long commutes or even international migration and so on and so forth. In the presence of such frictions, the returns do not necessarily need to equalize.