The document discusses the Solow growth model and the concept of convergence. It summarizes the key equations of the Solow growth model, which show that the change in capital per worker depends on the saving rate, productivity, depreciation rate, and population growth rate. It also states that one important question is whether poorer countries will converge and catch up to richer countries. Finally, it indicates that the document will examine convergence and transition paths for two economies starting with different levels of capital per worker.

1. Growth Convergence
EC4004 Lecture 3

2. Recap
Convergence
World Income

3. Key Equations
Solow Growth Model
∆k/k= s· (y/k) − sδ − n
–k is capital per worker
–y is real gross domestic product (real GDP)
per worker
–y/k is the average product of capital
–s is the saving rate
–δ is the depreciation rate
–n is the population growth rate.
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4. Production function
y = A · f (k)
Solow Growth Equation
∆k/ k= s A· f( k)/k − sδ − n
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5. k* = k*[ s, A, n, δ, L(0) ]
(+) (+) (−) (−)(0)
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6. One of the most important questions about
economic growth is whether poor countries
tend to converge or catch up to rich
countries.
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