Solow model finished

Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
PARAMETERS
s (savings rate) 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030
n (labor force growth rate) 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015
g (labor productivity growth rate) 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010
d (capital depreciation rate) 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050
A (C-D technology index) 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
q (C-D parameter) 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300
EFFECTIVE LABOR SUPPLY
AN (AN(t)=AN(t-1) + DAN) 10.000 10.250 10.506 10.769 11.038 11.314 11.597 11.887 12.184 12.489 12.801 13.121 13.449 13.785 14.130 14.483 14.845 15.216 15.597 15.987 16.386 16.796 17.216 17.646 18.087 18.539 19.003 19.478 19.965 20.464 20.976 21.500 22.038 22.589 23.153 23.732 24.325 24.933 25.557 26.196 26.851 27.522 28.210 28.915 29.638 30.379 31.139 31.917 32.715 33.533 34.371
(n+g)AN (Change in effective labor supply) 0.250 0.256 0.263 0.269 0.276 0.283 0.290 0.297 0.305 0.312 0.320 0.328 0.336 0.345 0.353 0.362 0.371 0.380 0.390 0.400 0.410 0.420 0.430 0.441 0.452 0.463 0.475 0.487 0.499 0.512 0.524 0.538 0.551 0.565 0.579 0.593 0.608 0.623 0.639 0.655 0.671 0.688 0.705 0.723 0.741 0.759 0.778 0.798 0.818 0.838 0.859
BALANCED GROWTH PATH
K* (K*=Y* (s/(n+g+d)) 2.701 2.768 2.838 2.909 2.981 3.056 3.132 3.211 3.291 3.373 3.457 3.544 3.632 3.723 3.816 3.912 4.010 4.110 4.213 4.318 4.426 4.536 4.650 4.766 4.885 5.007 5.133 5.261 5.392 5.527 5.665 5.807 5.952 6.101 6.254 6.410 6.570 6.734 6.903 7.075 7.252 7.433 7.619 7.810 8.005 8.205 8.410 8.621 8.836 9.057 9.283
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 7.640 7.831 8.026 8.227 8.433 8.644 8.860 9.081 9.308 9.541 9.779 10.024 10.274 10.531 10.795 11.064 11.341 11.625 11.915 12.213 12.518 12.831 13.152 13.481 13.818 14.163 14.518 14.881 15.253 15.634 16.025 16.425 16.836 17.257 17.688 18.130 18.584 19.048 19.525 20.013 20.513 21.026 21.551 22.090 22.642 23.209
Y* growth rate (Y*(t) - Y*(t-1))/Y*(t-1) -- 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500%
K*/Y* (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400
ACTUAL GDP PATH
Investment
S (Total saving) 0.203 0.208 0.213 0.218 0.224 0.229 0.235 0.241 0.247 0.253 0.259 0.266 0.272 0.279 0.286 0.293 0.301 0.308 0.316 0.324 0.332 0.340 0.349 0.357 0.366 0.376 0.385 0.395 0.404 0.415 0.425 0.436 0.446 0.458 0.469 0.481 0.493 0.505 0.518 0.531 0.544 0.558 0.571 0.586 0.600 0.615 0.631 0.647 0.663 0.679 0.696
I (Gross investment) 0.203 0.208 0.213 0.218 0.224 0.229 0.235 0.241 0.247 0.253 0.259 0.266 0.272 0.279 0.286 0.293 0.301 0.308 0.316 0.324 0.332 0.340 0.349 0.357 0.366 0.376 0.385 0.395 0.404 0.415 0.425 0.436 0.446 0.458 0.469 0.481 0.493 0.505 0.518 0.531 0.544 0.558 0.571 0.586 0.600 0.615 0.631 0.647 0.663 0.679 0.696
dK (capital depreciation) 0.135 0.138 0.142 0.145 0.149 0.153 0.157 0.161 0.165 0.169 0.173 0.177 0.182 0.186 0.191 0.196 0.200 0.205 0.211 0.216 0.221 0.227 0.232 0.238 0.244 0.250 0.257 0.263 0.270 0.276 0.283 0.290 0.298 0.305 0.313 0.320 0.329 0.337 0.345 0.354 0.363 0.372 0.381 0.390 0.400 0.410 0.421 0.431 0.442 0.453 0.464
DK (Net investment) 0.068 0.069 0.071 0.073 0.075 0.076 0.078 0.080 0.082 0.084 0.086 0.089 0.091 0.093 0.095 0.098 0.100 0.103 0.105 0.108 0.111 0.113 0.116 0.119 0.122 0.125 0.128 0.132 0.135 0.138 0.142 0.145 0.149 0.153 0.156 0.160 0.164 0.168 0.173 0.177 0.181 0.186 0.190 0.195 0.200 0.205 0.210 0.216 0.221 0.226 0.232
Capital stock
K (K(t) = K(t-1) + DK(t-1)) 2.701 2.768 2.838 2.909 2.981 3.056 3.132 3.211 3.291 3.373 3.457 3.544 3.632 3.723 3.816 3.912 4.010 4.110 4.213 4.318 4.426 4.536 4.650 4.766 4.885 5.007 5.133 5.261 5.392 5.527 5.665 5.807 5.952 6.101 6.254 6.410 6.570 6.734 6.903 7.075 7.252 7.433 7.619 7.810 8.005 8.205 8.410 8.621 8.836 9.057 9.283
Output
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 7.640 7.831 8.026 8.227 8.433 8.644 8.860 9.081 9.308 9.541 9.779 10.024 10.274 10.531 10.795 11.064 11.341 11.625 11.915 12.213 12.518 12.831 13.152 13.481 13.818 14.163 14.518 14.881 15.253 15.634 16.025 16.425 16.836 17.257 17.688 18.130 18.584 19.048 19.525 20.013 20.513 21.026 21.551 22.090 22.642 23.209
Y growth rate (Y(t) - Y(t-1))/Y(t-1) -- 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500%
K/Y (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400
Comparison to steady state
(Y-Y*)/Y* 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000%
(K-K*)/K* 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000%
Ygrth-Y*grth -- 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000% 0.000%

Page 1
 Balanced growth and actual growth paths

25

20

Actual GDP path

Balanced growth path

15
Real GDP

10

0
0 5 10 15 20 25 30 35 40 45 50
Time period
 1 (b)

Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
PARAMETERS
s (savings rate) 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030
n (labor force growth rate) 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015
g (labor productivity growth rate) 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010
d (capital depreciation rate) 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050
A (C-D technology index) 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
q (C-D parameter) 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300
EFFECTIVE LABOR SUPPLY
AN (AN(t)=AN(t-1) + DAN) 10.000 10.250 10.506 10.769 11.038 11.314 11.597 11.887 12.184 12.489 12.801 13.121 13.449 13.785 14.130 14.483 14.845 15.216 15.597 15.987 16.386 16.796 17.216 17.646 18.087 18.539 19.003 19.478 19.965 20.464 20.976 21.500 22.038 22.589 23.153 23.732 24.325 24.933 25.557 26.196 26.851 27.522 28.210 28.915 29.638 30.379 31.139 31.917 32.715 33.533 34.371
(n+g)AN (Change in effective labor supply) 0.250 0.256 0.263 0.269 0.276 0.283 0.290 0.297 0.305 0.312 0.320 0.328 0.336 0.345 0.353 0.362 0.371 0.380 0.390 0.400 0.410 0.420 0.430 0.441 0.452 0.463 0.475 0.487 0.499 0.512 0.524 0.538 0.551 0.565 0.579 0.593 0.608 0.623 0.639 0.655 0.671 0.688 0.705 0.723 0.741 0.759 0.778 0.798 0.818 0.838 0.859
BALANCED GROWTH PATH
K* (K*=Y* (s/(n+g+d)) 2.701 2.768 2.838 2.909 2.981 3.056 3.132 3.211 3.291 3.373 3.457 3.544 3.632 3.723 3.816 3.912 4.010 4.110 4.213 4.318 4.426 4.536 4.650 4.766 4.885 5.007 5.133 5.261 5.392 5.527 5.665 5.807 5.952 6.101 6.254 6.410 6.570 6.734 6.903 7.075 7.252 7.433 7.619 7.810 8.005 8.205 8.410 8.621 8.836 9.057 9.283
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 7.640 7.831 8.026 8.227 8.433 8.644 8.860 9.081 9.308 9.541 9.779 10.024 10.274 10.531 10.795 11.064 11.341 11.625 11.915 12.213 12.518 12.831 13.152 13.481 13.818 14.163 14.518 14.881 15.253 15.634 16.025 16.425 16.836 17.257 17.688 18.130 18.584 19.048 19.525 20.013 20.513 21.026 21.551 22.090 22.642 23.209
Y* growth rate (Y*(t) - Y*(t-1))/Y*(t-1) -- 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500%
K*/Y* (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400
ACTUAL GDP PATH
Investment
S (Total saving) 0.203 0.208 0.213 0.218 0.224 0.229 0.235 0.241 0.247 0.253 0.259 0.266 0.272 0.279 0.286 0.293 0.301 0.308 0.316 0.324 0.332 0.340 0.349 0.357 0.366 0.376 0.385 0.395 0.404 0.415 0.425 0.436 0.446 0.458 0.469 0.481 0.493 0.505 0.518 0.531 0.544 0.558 0.571 0.586 0.600 0.615 0.631 0.647 0.663 0.679 0.696
I (Gross investment) 0.203 0.208 0.213 0.218 0.224 0.229 0.235 0.241 0.247 0.253 0.259 0.266 0.272 0.279 0.286 0.293 0.301 0.308 0.316 0.324 0.332 0.340 0.349 0.357 0.366 0.376 0.385 0.395 0.404 0.415 0.425 0.436 0.446 0.458 0.469 0.481 0.493 0.505 0.518 0.531 0.544 0.558 0.571 0.586 0.600 0.615 0.631 0.647 0.663 0.679 0.696
dK (capital depreciation) 0.300 0.295 0.291 0.287 0.283 0.280 0.278 0.276 0.274 0.273 0.272 0.271 0.271 0.271 0.271 0.272 0.273 0.274 0.276 0.278 0.280 0.283 0.286 0.289 0.292 0.296 0.300 0.304 0.309 0.314 0.319 0.324 0.330 0.335 0.342 0.348 0.355 0.361 0.369 0.376 0.384 0.392 0.400 0.409 0.418 0.427 0.436 0.446 0.456 0.466 0.477
DK (Net investment) -0.097 -0.087 -0.078 -0.069 -0.060 -0.051 -0.043 -0.035 -0.027 -0.020 -0.012 -0.005 0.002 0.008 0.015 0.021 0.028 0.034 0.040 0.046 0.052 0.057 0.063 0.068 0.074 0.079 0.085 0.090 0.096 0.101 0.106 0.112 0.117 0.122 0.128 0.133 0.138 0.144 0.149 0.155 0.160 0.166 0.171 0.177 0.183 0.189 0.195 0.201 0.207 0.213 0.219
Capital stock
K (K(t) = K(t-1) + DK(t-1)) 6.000 5.903 5.815 5.737 5.668 5.609 5.557 5.514 5.479 5.452 5.433 5.420 5.415 5.417 5.425 5.440 5.462 5.489 5.523 5.563 5.608 5.660 5.717 5.780 5.849 5.923 6.002 6.087 6.177 6.273 6.374 6.480 6.591 6.708 6.830 6.958 7.091 7.229 7.373 7.522 7.676 7.836 8.002 8.173 8.350 8.533 8.722 8.917 9.117 9.324 9.537
Output
Y* (Y*= A(K*^q)(AN)^(1-q)) 8.579 8.686 8.798 8.915 9.038 9.166 9.300 9.441 9.587 9.739 9.899 10.064 10.237 10.416 10.603 10.797 10.998 11.206 11.423 11.647 11.879 12.120 12.368 12.625 12.891 13.165 13.448 13.740 14.042 14.353 14.673 15.003 15.343 15.693 16.053 16.424 16.805 17.198 17.601 18.016 18.442 18.880 19.330 19.793 20.268 20.756 21.257 21.771 22.299 22.841 23.397
Y growth rate (Y(t) - Y(t-1))/Y(t-1) -- 1.245% 1.289% 1.333% 1.376% 1.420% 1.464% 1.507% 1.550% 1.592% 1.633% 1.674% 1.714% 1.753% 1.791% 1.828% 1.863% 1.898% 1.931% 1.963% 1.994% 2.023% 2.051% 2.078% 2.104% 2.128% 2.151% 2.173% 2.194% 2.213% 2.232% 2.249% 2.266% 2.281% 2.296% 2.310% 2.322% 2.335% 2.346% 2.356% 2.366% 2.376% 2.384% 2.392% 2.400% 2.407% 2.413% 2.420% 2.425% 2.431% 2.435%
K/Y (capital to output ratio) 0.699 0.680 0.661 0.644 0.627 0.612 0.598 0.584 0.572 0.560 0.549 0.539 0.529 0.520 0.512 0.504 0.497 0.490 0.484 0.478 0.472 0.467 0.462 0.458 0.454 0.450 0.446 0.443 0.440 0.437 0.434 0.432 0.430 0.427 0.425 0.424 0.422 0.420 0.419 0.417 0.416 0.415 0.414 0.413 0.412 0.411 0.410 0.410 0.409 0.408 0.408
Comparison to steady state
(Y-Y*)/Y* ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### 9.715% 9.070% 8.465% 7.896% 7.363% 6.864% 6.396% 5.957% 5.548% 5.164% 4.806% 4.472% 4.159% 3.868% 3.596% 3.343% 3.107% 2.887% 2.682% 2.491% 2.314% 2.148% 1.995% 1.852% 1.719% 1.596% 1.481% 1.374% 1.275% 1.183% 1.098% 1.018% 0.945% 0.876% 0.813%
(K-K*)/K* ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### 9.951% 9.223% 8.548% 7.923% 7.343% 6.806% 6.308% 5.846% 5.418% 5.022% 4.654% 4.314% 3.998% 3.706% 3.435% 3.183% 2.950% 2.734%
Ygrth-Y*grth -- -1.255% -1.211% -1.167% -1.124% -1.080% -1.036% -0.993% -0.950% -0.908% -0.867% -0.826% -0.786% -0.747% -0.709% -0.672% -0.637% -0.602% -0.569% -0.537% -0.506% -0.477% -0.449% -0.422% -0.396% -0.372% -0.349% -0.327% -0.306% -0.287% -0.268% -0.251% -0.234% -0.219% -0.204% -0.190% -0.178% -0.165% -0.154% -0.144% -0.134% -0.124% -0.116% -0.108% -0.100% -0.093% -0.087% -0.080% -0.075% -0.069% -0.065%

Page 3
 Balanced growth and actual growth paths

25

20

Actual GDP path

15
Balanced growth path
Real GDP

10

0
0 5 10 15 20 25 30 35 40 45 50
Time period
 1 (c)

Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
PARAMETERS
s (savings rate) 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030
n (labor force growth rate) 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015
g (labor productivity growth rate) 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010
d (capital depreciation rate) 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050
A (C-D technology index) 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
q (C-D parameter) 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300
EFFECTIVE LABOR SUPPLY
AN (AN(t)=AN(t-1) + DAN) 10.000 10.250 10.506 10.769 11.038 11.314 11.597 11.887 12.184 12.489 12.801 13.121 13.449 13.785 14.130 14.483 14.845 15.216 15.597 15.987 16.386 16.796 17.216 17.646 18.087 18.539 19.003 19.478 19.965 20.464 20.976 21.500 22.038 22.589 23.153 23.732 24.325 24.933 25.557 26.196 26.851 27.522 28.210 28.915 29.638 30.379 31.139 31.917 32.715 33.533 34.371
(n+g)AN (Change in effective labor supply) 0.250 0.256 0.263 0.269 0.276 0.283 0.290 0.297 0.305 0.312 0.320 0.328 0.336 0.345 0.353 0.362 0.371 0.380 0.390 0.400 0.410 0.420 0.430 0.441 0.452 0.463 0.475 0.487 0.499 0.512 0.524 0.538 0.551 0.565 0.579 0.593 0.608 0.623 0.639 0.655 0.671 0.688 0.705 0.723 0.741 0.759 0.778 0.798 0.818 0.838 0.859
BALANCED GROWTH PATH
K* (K*=Y* (s/(n+g+d)) 2.701 2.768 2.838 2.909 2.981 3.056 3.132 3.211 3.291 3.373 3.457 3.544 3.632 3.723 3.816 3.912 4.010 4.110 4.213 4.318 4.426 4.536 4.650 4.766 4.885 5.007 5.133 5.261 5.392 5.527 5.665 5.807 5.952 6.101 6.254 6.410 6.570 6.734 6.903 7.075 7.252 7.433 7.619 7.810 8.005 8.205 8.410 8.621 8.836 9.057 9.283
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 7.640 7.831 8.026 8.227 8.433 8.644 8.860 9.081 9.308 9.541 9.779 10.024 10.274 10.531 10.795 11.064 11.341 11.625 11.915 12.213 12.518 12.831 13.152 13.481 13.818 14.163 14.518 14.881 15.253 15.634 16.025 16.425 16.836 17.257 17.688 18.130 18.584 19.048 19.525 20.013 20.513 21.026 21.551 22.090 22.642 23.209
Y* growth rate (Y*(t) - Y*(t-1))/Y*(t-1) -- 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500%
K*/Y* (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400 0.400
ACTUAL GDP PATH
Investment
S (Total saving) 0.203 0.208 0.213 0.218 0.224 0.229 0.235 0.241 0.247 0.253 0.259 0.266 0.272 0.279 0.286 0.293 0.301 0.308 0.316 0.324 0.332 0.340 0.349 0.357 0.366 0.376 0.385 0.395 0.404 0.415 0.425 0.436 0.446 0.458 0.469 0.481 0.493 0.505 0.518 0.531 0.544 0.558 0.571 0.586 0.600 0.615 0.631 0.647 0.663 0.679 0.696
I (Gross investment) 0.203 0.208 0.213 0.218 0.224 0.229 0.235 0.241 0.247 0.253 0.259 0.266 0.272 0.279 0.286 0.293 0.301 0.308 0.316 0.324 0.332 0.340 0.349 0.357 0.366 0.376 0.385 0.395 0.404 0.415 0.425 0.436 0.446 0.458 0.469 0.481 0.493 0.505 0.518 0.531 0.544 0.558 0.571 0.586 0.600 0.615 0.631 0.647 0.663 0.679 0.696
dK (capital depreciation) 0.050 0.058 0.065 0.073 0.080 0.087 0.094 0.101 0.108 0.115 0.122 0.129 0.136 0.143 0.149 0.156 0.163 0.170 0.177 0.184 0.191 0.198 0.205 0.212 0.219 0.227 0.234 0.242 0.249 0.257 0.265 0.273 0.281 0.289 0.298 0.306 0.315 0.324 0.333 0.342 0.352 0.361 0.371 0.381 0.391 0.402 0.412 0.423 0.435 0.446 0.458
DK (Net investment) 0.153 0.150 0.148 0.146 0.144 0.142 0.141 0.140 0.139 0.138 0.137 0.137 0.137 0.137 0.137 0.137 0.138 0.138 0.139 0.140 0.141 0.142 0.144 0.145 0.147 0.149 0.151 0.153 0.155 0.157 0.160 0.163 0.165 0.168 0.171 0.174 0.178 0.181 0.185 0.188 0.192 0.196 0.200 0.205 0.209 0.214 0.218 0.223 0.228 0.233 0.239
Capital stock
K (K(t) = K(t-1) + DK(t-1)) 1.000 1.153 1.303 1.450 1.596 1.740 1.882 2.023 2.162 2.301 2.439 2.576 2.713 2.850 2.987 3.124 3.261 3.399 3.537 3.676 3.816 3.957 4.100 4.243 4.389 4.536 4.684 4.835 4.988 5.143 5.300 5.460 5.623 5.788 5.956 6.127 6.302 6.479 6.661 6.845 7.034 7.226 7.422 7.622 7.827 8.036 8.250 8.468 8.691 8.919 9.153
Output
Y* (Y*= A(K*^q)(AN)^(1-q)) 5.012 5.321 5.616 5.901 6.179 6.452 6.721 6.988 7.253 7.519 7.785 8.051 8.320 8.591 8.865 9.141 9.421 9.705 9.993 10.286 10.583 10.886 11.194 11.507 11.827 12.152 12.484 12.823 13.169 13.523 13.883 14.252 14.628 15.013 15.407 15.809 16.221 16.642 17.073 17.514 17.965 18.426 18.899 19.383 19.878 20.385 20.904 21.436 21.981 22.539 23.110
Y growth rate (Y(t) - Y(t-1))/Y(t-1) -- 6.171% 5.547% 5.075% 4.707% 4.411% 4.170% 3.970% 3.802% 3.659% 3.536% 3.430% 3.337% 3.256% 3.184% 3.120% 3.064% 3.014% 2.968% 2.928% 2.891% 2.858% 2.828% 2.801% 2.776% 2.754% 2.733% 2.715% 2.698% 2.682% 2.668% 2.655% 2.643% 2.632% 2.622% 2.612% 2.604% 2.596% 2.588% 2.582% 2.576% 2.570% 2.565% 2.560% 2.555% 2.551% 2.547% 2.544% 2.541% 2.538% 2.535%
K/Y (capital to output ratio) 0.200 0.217 0.232 0.246 0.258 0.270 0.280 0.289 0.298 0.306 0.313 0.320 0.326 0.332 0.337 0.342 0.346 0.350 0.354 0.357 0.361 0.364 0.366 0.369 0.371 0.373 0.375 0.377 0.379 0.380 0.382 0.383 0.384 0.386 0.387 0.388 0.388 0.389 0.390 0.391 0.392 0.392 0.393 0.393 0.394 0.394 0.395 0.395 0.395 0.396 0.396
Comparison to steady state
(Y-Y*)/Y* ### ### ### ### ### ### ### ### ### ### -9.939% -9.122% -8.380% -7.704% -7.089% -6.526% -6.012% -5.541% -5.109% -4.713% -4.350% -4.016% -3.708% -3.426% -3.165% -2.925% -2.704% -2.500% -2.312% -2.139% -1.979% -1.831% -1.694% -1.568% -1.451% -1.343% -1.243% -1.151% -1.066% -0.987% -0.914% -0.846% -0.784% -0.726% -0.673% -0.623% -0.577% -0.535% -0.495% -0.459% -0.425%
(K-K*)/K* ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### -9.423% -8.733% -8.094% -7.502% -6.953% -6.444% -5.973% -5.536% -5.131% -4.755% -4.407% -4.085% -3.786% -3.509% -3.252% -3.014% -2.794% -2.589% -2.400% -2.224% -2.061% -1.911% -1.771% -1.641% -1.521% -1.410%
Ygrth-Y*grth -- 3.671% 3.047% 2.575% 2.207% 1.911% 1.670% 1.470% 1.302% 1.159% 1.036% 0.930% 0.837% 0.756% 0.684% 0.620% 0.564% 0.514% 0.468% 0.428% 0.391% 0.358% 0.328% 0.301% 0.276% 0.254% 0.233% 0.215% 0.198% 0.182% 0.168% 0.155% 0.143% 0.132% 0.122% 0.112% 0.104% 0.096% 0.088% 0.082% 0.076% 0.070% 0.065% 0.060% 0.055% 0.051% 0.047% 0.044% 0.041% 0.038% 0.035%

Page 5
 Balanced growth and actual growth paths

25

20

Balanced growth path

15
Real GDP

Actual GDP path

10

0
0 5 10 15 20 25 30 35 40 45 50
Time period
 2

Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
PARAMETERS
s (savings rate) 0.030 0.030 0.030 0.030 0.030 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040
n (labor force growth rate) 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015
g (labor productivity growth rate) 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010
d (capital depreciation rate) 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050
A (C-D technology index) 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
q (C-D parameter) 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300
EFFECTIVE LABOR SUPPLY
AN (AN(t)=AN(t-1) + DAN) 10.000 10.250 10.506 10.769 11.038 11.314 11.597 11.887 12.184 12.489 12.801 13.121 13.449 13.785 14.130 14.483 14.845 15.216 15.597 15.987 16.386 16.796 17.216 17.646 18.087 18.539 19.003 19.478 19.965 20.464 20.976 21.500 22.038 22.589 23.153 23.732 24.325 24.933 25.557 26.196 26.851 27.522 28.210 28.915 29.638 30.379 31.139 31.917 32.715 33.533 34.371
(n+g)AN (Change in effective labor supply) 0.250 0.256 0.263 0.269 0.276 0.283 0.290 0.297 0.305 0.312 0.320 0.328 0.336 0.345 0.353 0.362 0.371 0.380 0.390 0.400 0.410 0.420 0.430 0.441 0.452 0.463 0.475 0.487 0.499 0.512 0.524 0.538 0.551 0.565 0.579 0.593 0.608 0.623 0.639 0.655 0.671 0.688 0.705 0.723 0.741 0.759 0.778 0.798 0.818 0.838 0.859
BALANCED GROWTH PATH
K* (K*=Y* (s/(n+g+d)) 2.701 2.768 2.838 2.909 2.981 4.609 4.724 4.842 4.964 5.088 5.215 5.345 5.479 5.616 5.756 5.900 6.048 6.199 6.354 6.513 6.675 6.842 7.013 7.189 7.368 7.553 7.741 7.935 8.133 8.337 8.545 8.759 8.978 9.202 9.432 9.668 9.910 10.157 10.411 10.672 10.938 11.212 11.492 11.779 12.074 12.376 12.685 13.002 13.327 13.661 14.002
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 8.642 8.858 9.080 9.307 9.539 9.778 10.022 10.273 10.530 10.793 11.063 11.339 11.623 11.913 12.211 12.516 12.829 13.150 13.479 13.816 14.161 14.515 14.878 15.250 15.631 16.022 16.423 16.833 17.254 17.685 18.127 18.581 19.045 19.521 20.009 20.509 21.022 21.548 22.086 22.639 23.205 23.785 24.379 24.989 25.613 26.254
Y* growth rate (Y*(t) - Y*(t-1))/Y*(t-1) -- 2.500% 2.500% 2.500% 2.500% ### 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500%
K*/Y* (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533 0.533
ACTUAL GDP PATH
Investment
S (Total saving) 0.203 0.208 0.213 0.218 0.224 0.346 0.354 0.363 0.372 0.382 0.391 0.401 0.411 0.421 0.432 0.443 0.454 0.465 0.477 0.488 0.501 0.513 0.526 0.539 0.553 0.566 0.581 0.595 0.610 0.625 0.641 0.657 0.673 0.690 0.707 0.725 0.743 0.762 0.781 0.800 0.820 0.841 0.862 0.883 0.906 0.928 0.951 0.975 1.000 1.025 1.050
I (Gross investment) 0.203 0.208 0.213 0.218 0.224 0.346 0.354 0.363 0.372 0.382 0.391 0.401 0.411 0.421 0.432 0.443 0.454 0.465 0.477 0.488 0.501 0.513 0.526 0.539 0.553 0.566 0.581 0.595 0.610 0.625 0.641 0.657 0.673 0.690 0.707 0.725 0.743 0.762 0.781 0.800 0.820 0.841 0.862 0.883 0.906 0.928 0.951 0.975 1.000 1.025 1.050
dK (capital depreciation) 0.135 0.138 0.142 0.145 0.149 0.153 0.162 0.172 0.182 0.191 0.201 0.210 0.220 0.229 0.239 0.249 0.258 0.268 0.278 0.288 0.298 0.308 0.318 0.329 0.339 0.350 0.361 0.372 0.383 0.394 0.406 0.417 0.429 0.442 0.454 0.467 0.480 0.493 0.506 0.520 0.534 0.548 0.563 0.578 0.593 0.609 0.625 0.641 0.658 0.675 0.692
DK (Net investment) 0.068 0.069 0.071 0.073 0.075 0.193 0.192 0.191 0.191 0.190 0.190 0.191 0.191 0.192 0.193 0.194 0.195 0.197 0.199 0.201 0.203 0.205 0.208 0.211 0.214 0.217 0.220 0.223 0.227 0.231 0.235 0.239 0.244 0.249 0.253 0.258 0.264 0.269 0.275 0.280 0.286 0.293 0.299 0.306 0.312 0.319 0.327 0.334 0.342 0.350 0.358
Capital stock
K (K(t) = K(t-1) + DK(t-1)) 2.701 2.768 2.838 2.909 2.981 3.056 3.249 3.441 3.632 3.822 4.013 4.203 4.394 4.585 4.777 4.970 5.164 5.359 5.556 5.755 5.956 6.159 6.364 6.572 6.782 6.996 7.212 7.432 7.656 7.883 8.114 8.349 8.589 8.833 9.081 9.335 9.593 9.856 10.125 10.400 10.680 10.967 11.259 11.558 11.864 12.176 12.496 12.822 13.156 13.498 13.848
Output
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 7.640 7.917 8.195 8.474 8.755 9.039 9.325 9.615 9.908 10.206 10.508 10.814 11.126 11.443 11.766 12.095 12.430 12.772 13.121 13.476 13.839 14.210 14.589 14.976 15.371 15.775 16.188 16.611 17.043 17.485 17.938 18.400 18.874 19.359 19.855 20.363 20.883 21.416 21.961 22.520 23.092 23.677 24.277 24.892 25.522 26.167
Y growth rate (Y(t) - Y(t-1))/Y(t-1) -- 2.500% 2.500% 2.500% 2.500% 2.500% 3.629% 3.510% 3.407% 3.317% 3.238% 3.169% 3.107% 3.052% 3.003% 2.959% 2.919% 2.883% 2.851% 2.822% 2.795% 2.771% 2.749% 2.729% 2.711% 2.694% 2.679% 2.665% 2.652% 2.640% 2.629% 2.619% 2.610% 2.602% 2.594% 2.587% 2.580% 2.574% 2.569% 2.563% 2.559% 2.554% 2.550% 2.547% 2.543% 2.540% 2.537% 2.534% 2.532% 2.529% 2.527%
K/Y (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.400 0.410 0.420 0.429 0.437 0.444 0.451 0.457 0.463 0.468 0.473 0.478 0.482 0.486 0.489 0.492 0.495 0.498 0.501 0.503 0.505 0.508 0.509 0.511 0.513 0.514 0.516 0.517 0.518 0.519 0.520 0.521 0.522 0.523 0.524 0.524 0.525 0.526 0.526 0.527 0.527 0.528 0.528 0.529 0.529 0.529
Comparison to steady state
(Y-Y*)/Y* 0.000% 0.000% 0.000% 0.000% 0.000% ### ### -9.745% -8.946% -8.220% -7.559% -6.955% -6.404% -5.900% -5.439% -5.016% -4.627% -4.271% -3.943% -3.642% -3.364% -3.109% -2.873% -2.656% -2.456% -2.271% -2.101% -1.944% -1.798% -1.664% -1.540% -1.426% -1.320% -1.222% -1.131% -1.047% -0.970% -0.898% -0.832% -0.770% -0.713% -0.661% -0.612% -0.567% -0.525% -0.487% -0.451% -0.418% -0.387% -0.359% -0.332%
(K-K*)/K* 0.000% 0.000% 0.000% 0.000% 0.000% ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### -9.991% -9.260% -8.583% -7.955% -7.373% -6.833% -6.333% -5.870% -5.440% -5.042% -4.673% -4.331% -4.014% -3.721% -3.448% -3.196% -2.962% -2.745% -2.545% -2.358% -2.186% -2.026% -1.878% -1.740% -1.613% -1.495% -1.386% -1.284% -1.190% -1.103%
Ygrth-Y*grth -- 0.000% 0.000% 0.000% 0.000% ### 1.129% 1.010% 0.907% 0.817% 0.738% 0.669% 0.607% 0.552% 0.503% 0.459% 0.419% 0.383% 0.351% 0.322% 0.295% 0.271% 0.249% 0.229% 0.211% 0.194% 0.179% 0.165% 0.152% 0.140% 0.129% 0.119% 0.110% 0.102% 0.094% 0.087% 0.080% 0.074% 0.069% 0.063% 0.059% 0.054% 0.050% 0.047% 0.043% 0.040% 0.037% 0.034% 0.032% 0.029% 0.027%

Page 7
 Balanced growth and actual growth paths

30

25

Balanced growth path

20
Real GDP

Actual GDP path

15

10

0
0 5 10 15 20 25 30 35 40 45 50
Time period
 3

Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
PARAMETERS
s (savings rate) 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030
n (labor force growth rate) 0.015 0.015 0.015 0.015 0.015 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055 0.055
g (labor productivity growth rate) 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010
d (capital depreciation rate) 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050
A (C-D technology index) 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
q (C-D parameter) 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300
EFFECTIVE LABOR SUPPLY
AN (AN(t)=AN(t-1) + DAN) 10.000 10.250 10.506 10.769 11.038 11.314 12.049 12.833 13.667 14.555 15.501 16.509 17.582 18.725 19.942 21.238 22.619 24.089 25.655 27.322 29.098 30.989 33.004 35.149 37.434 39.867 42.458 45.218 48.157 51.287 54.621 58.171 61.952 65.979 70.268 74.835 79.700 84.880 90.397 96.273 102.531 109.196 116.293 123.852 131.903 140.476 149.607 159.332 169.689 180.718 192.465
(n+g)AN (Change in effective labor supply) 0.250 0.256 0.263 0.269 0.276 0.735 0.783 0.834 0.888 0.946 1.008 1.073 1.143 1.217 1.296 1.380 1.470 1.566 1.668 1.776 1.891 2.014 2.145 2.285 2.433 2.591 2.760 2.939 3.130 3.334 3.550 3.781 4.027 4.289 4.567 4.864 5.180 5.517 5.876 6.258 6.665 7.098 7.559 8.050 8.574 9.131 9.724 10.357 11.030 11.747 12.510
BALANCED GROWTH PATH
K* (K*=Y* (s/(n+g+d)) 2.701 2.768 2.838 2.909 2.981 1.659 1.767 1.882 2.004 2.135 2.273 2.421 2.579 2.746 2.925 3.115 3.317 3.533 3.763 4.007 4.268 4.545 4.840 5.155 5.490 5.847 6.227 6.632 7.063 7.522 8.011 8.532 9.086 9.677 10.306 10.976 11.689 12.449 13.258 14.120 15.037 16.015 17.056 18.165 19.345 20.603 21.942 23.368 24.887 26.505 28.227
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 6.361 6.774 7.215 7.684 8.183 8.715 9.281 9.885 10.527 11.211 11.940 12.716 13.543 14.423 15.361 16.359 17.422 18.555 19.761 21.045 22.413 23.870 25.422 27.074 28.834 30.708 32.704 34.830 37.094 39.505 42.073 44.808 47.720 50.822 54.125 57.644 61.390 65.381 69.631 74.157 78.977 84.110 89.577 95.400 101.601 108.205
Y* growth rate (Y*(t) - Y*(t-1))/Y*(t-1) -- 2.500% 2.500% 2.500% 2.500% ### 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500%
K*/Y* (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261
ACTUAL GDP PATH
Investment
S (Total saving) 0.203 0.208 0.213 0.218 0.224 0.191 0.203 0.216 0.231 0.245 0.261 0.278 0.297 0.316 0.336 0.358 0.381 0.406 0.433 0.461 0.491 0.523 0.557 0.593 0.631 0.672 0.716 0.763 0.812 0.865 0.921 0.981 1.045 1.113 1.185 1.262 1.344 1.432 1.525 1.624 1.729 1.842 1.961 2.089 2.225 2.369 2.523 2.687 2.862 3.048 3.246
I (Gross investment) 0.203 0.208 0.213 0.218 0.224 0.191 0.203 0.216 0.231 0.245 0.261 0.278 0.297 0.316 0.336 0.358 0.381 0.406 0.433 0.461 0.491 0.523 0.557 0.593 0.631 0.672 0.716 0.763 0.812 0.865 0.921 0.981 1.045 1.113 1.185 1.262 1.344 1.432 1.525 1.624 1.729 1.842 1.961 2.089 2.225 2.369 2.523 2.687 2.862 3.048 3.246
dK (capital depreciation) 0.135 0.138 0.142 0.145 0.149 0.153 0.155 0.157 0.160 0.164 0.168 0.172 0.178 0.184 0.190 0.198 0.206 0.214 0.224 0.234 0.246 0.258 0.271 0.285 0.301 0.317 0.335 0.354 0.375 0.396 0.420 0.445 0.472 0.500 0.531 0.564 0.599 0.636 0.676 0.718 0.763 0.812 0.863 0.918 0.977 1.039 1.106 1.176 1.252 1.333 1.418
DK (Net investment) 0.068 0.069 0.071 0.073 0.075 0.038 0.049 0.059 0.070 0.082 0.094 0.106 0.119 0.132 0.146 0.161 0.176 0.192 0.209 0.226 0.245 0.265 0.285 0.307 0.331 0.355 0.381 0.408 0.438 0.469 0.501 0.536 0.573 0.612 0.654 0.698 0.746 0.796 0.849 0.906 0.966 1.030 1.098 1.171 1.248 1.330 1.418 1.511 1.610 1.715 1.828
Capital stock
K (K(t) = K(t-1) + DK(t-1)) 2.701 2.768 2.838 2.909 2.981 3.056 3.094 3.142 3.202 3.272 3.354 3.448 3.554 3.673 3.805 3.951 4.112 4.288 4.479 4.688 4.915 5.160 5.424 5.710 6.017 6.348 6.703 7.084 7.492 7.930 8.398 8.900 9.436 10.009 10.621 11.275 11.974 12.719 13.515 14.364 15.269 16.235 17.265 18.363 19.534 20.782 22.112 23.530 25.041 26.651 28.366
Output
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 7.640 8.014 8.414 8.843 9.302 9.793 10.320 10.883 11.486 12.132 12.823 13.562 14.353 15.198 16.101 17.067 18.098 19.200 20.376 21.632 22.973 24.403 25.929 27.558 29.294 31.146 33.121 35.227 37.471 39.864 42.414 45.132 48.029 51.116 54.405 57.909 61.643 65.621 69.858 74.373 79.183 84.306 89.763 95.577 101.769 108.364
Y growth rate (Y(t) - Y(t-1))/Y(t-1) -- 2.500% 2.500% 2.500% 2.500% 2.500% 4.895% 4.996% 5.095% 5.191% 5.285% 5.375% 5.461% 5.543% 5.621% 5.695% 5.764% 5.829% 5.889% 5.944% 5.996% 6.044% 6.087% 6.127% 6.164% 6.197% 6.227% 6.255% 6.279% 6.302% 6.322% 6.341% 6.357% 6.372% 6.385% 6.397% 6.408% 6.418% 6.427% 6.434% 6.441% 6.448% 6.453% 6.458% 6.463% 6.467% 6.470% 6.473% 6.476% 6.479% 6.481%
K/Y (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.400 0.386 0.373 0.362 0.352 0.342 0.334 0.327 0.320 0.314 0.308 0.303 0.299 0.295 0.291 0.288 0.285 0.283 0.280 0.278 0.276 0.275 0.273 0.272 0.271 0.270 0.269 0.268 0.267 0.266 0.266 0.265 0.265 0.264 0.264 0.264 0.263 0.263 0.263 0.263 0.262 0.262 0.262 0.262 0.262 0.262
Comparison to steady state
(Y-Y*)/Y* 0.000% 0.000% 0.000% 0.000% 0.000% ### ### ### ### ### ### ### ### 9.113% 8.212% 7.394% 6.652% 5.980% 5.371% 4.822% 4.326% 3.879% 3.476% 3.114% 2.788% 2.495% 2.233% 1.997% 1.786% 1.596% 1.427% 1.275% 1.139% 1.018% 0.909% 0.812% 0.725% 0.647% 0.578% 0.516% 0.460% 0.411% 0.367% 0.327% 0.292% 0.261% 0.232% 0.207% 0.185% 0.165% 0.147%
(K-K*)/K* 0.000% 0.000% 0.000% 0.000% 0.000% ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### 9.599% 8.562% 7.638% 6.813% 6.077% 5.421% 4.836% 4.313% 3.848% 3.432% 3.062% 2.731% 2.436% 2.173% 1.938% 1.729% 1.542% 1.376% 1.227% 1.095% 0.977% 0.871% 0.777% 0.693% 0.618% 0.552% 0.492%
Ygrth-Y*grth -- 0.000% 0.000% 0.000% 0.000% ### -1.605% -1.504% -1.405% -1.309% -1.215% -1.125% -1.039% -0.957% -0.879% -0.805% -0.736% -0.671% -0.611% -0.556% -0.504% -0.456% -0.413% -0.373% -0.336% -0.303% -0.273% -0.245% -0.221% -0.198% -0.178% -0.159% -0.143% -0.128% -0.115% -0.103% -0.092% -0.082% -0.073% -0.066% -0.059% -0.052% -0.047% -0.042% -0.037% -0.033% -0.030% -0.027% -0.024% -0.021% -0.019%

Page 9
 Balanced growth and actual growth paths

120

100

80
Real GDP

60

Actual GDP path

40

Balanced growth path

20

0
0 5 10 15 20 25 30 35 40 45 50
Time period
 4

Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
PARAMETERS
s (savings rate) 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030
n (labor force growth rate) 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015
g (labor productivity growth rate) 0.010 0.010 0.010 0.010 0.010 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050
d (capital depreciation rate) 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050 0.050
A (C-D technology index) 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
q (C-D parameter) 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300
EFFECTIVE LABOR SUPPLY
AN (AN(t)=AN(t-1) + DAN) 10.000 10.250 10.506 10.769 11.038 11.314 12.049 12.833 13.667 14.555 15.501 16.509 17.582 18.725 19.942 21.238 22.619 24.089 25.655 27.322 29.098 30.989 33.004 35.149 37.434 39.867 42.458 45.218 48.157 51.287 54.621 58.171 61.952 65.979 70.268 74.835 79.700 84.880 90.397 96.273 102.531 109.196 116.293 123.852 131.903 140.476 149.607 159.332 169.689 180.718 192.465
(n+g)AN (Change in effective labor supply) 0.250 0.256 0.263 0.269 0.276 0.735 0.783 0.834 0.888 0.946 1.008 1.073 1.143 1.217 1.296 1.380 1.470 1.566 1.668 1.776 1.891 2.014 2.145 2.285 2.433 2.591 2.760 2.939 3.130 3.334 3.550 3.781 4.027 4.289 4.567 4.864 5.180 5.517 5.876 6.258 6.665 7.098 7.559 8.050 8.574 9.131 9.724 10.357 11.030 11.747 12.510
BALANCED GROWTH PATH
K* (K*=Y* (s/(n+g+d)) 2.701 2.768 2.838 2.909 2.981 1.659 1.767 1.882 2.004 2.135 2.273 2.421 2.579 2.746 2.925 3.115 3.317 3.533 3.763 4.007 4.268 4.545 4.840 5.155 5.490 5.847 6.227 6.632 7.063 7.522 8.011 8.532 9.086 9.677 10.306 10.976 11.689 12.449 13.258 14.120 15.037 16.015 17.056 18.165 19.345 20.603 21.942 23.368 24.887 26.505 28.227
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 6.361 6.774 7.215 7.684 8.183 8.715 9.281 9.885 10.527 11.211 11.940 12.716 13.543 14.423 15.361 16.359 17.422 18.555 19.761 21.045 22.413 23.870 25.422 27.074 28.834 30.708 32.704 34.830 37.094 39.505 42.073 44.808 47.720 50.822 54.125 57.644 61.390 65.381 69.631 74.157 78.977 84.110 89.577 95.400 101.601 108.205
Y* growth rate (Y*(t) - Y*(t-1))/Y*(t-1) -- 2.500% 2.500% 2.500% 2.500% ### 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500% 6.500%
K*/Y* (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261
ACTUAL GDP PATH
Investment
S (Total saving) 0.203 0.208 0.213 0.218 0.224 0.191 0.203 0.216 0.231 0.245 0.261 0.278 0.297 0.316 0.336 0.358 0.381 0.406 0.433 0.461 0.491 0.523 0.557 0.593 0.631 0.672 0.716 0.763 0.812 0.865 0.921 0.981 1.045 1.113 1.185 1.262 1.344 1.432 1.525 1.624 1.729 1.842 1.961 2.089 2.225 2.369 2.523 2.687 2.862 3.048 3.246
I (Gross investment) 0.203 0.208 0.213 0.218 0.224 0.191 0.203 0.216 0.231 0.245 0.261 0.278 0.297 0.316 0.336 0.358 0.381 0.406 0.433 0.461 0.491 0.523 0.557 0.593 0.631 0.672 0.716 0.763 0.812 0.865 0.921 0.981 1.045 1.113 1.185 1.262 1.344 1.432 1.525 1.624 1.729 1.842 1.961 2.089 2.225 2.369 2.523 2.687 2.862 3.048 3.246
dK (capital depreciation) 0.135 0.138 0.142 0.145 0.149 0.153 0.155 0.157 0.160 0.164 0.168 0.172 0.178 0.184 0.190 0.198 0.206 0.214 0.224 0.234 0.246 0.258 0.271 0.285 0.301 0.317 0.335 0.354 0.375 0.396 0.420 0.445 0.472 0.500 0.531 0.564 0.599 0.636 0.676 0.718 0.763 0.812 0.863 0.918 0.977 1.039 1.106 1.176 1.252 1.333 1.418
DK (Net investment) 0.068 0.069 0.071 0.073 0.075 0.038 0.049 0.059 0.070 0.082 0.094 0.106 0.119 0.132 0.146 0.161 0.176 0.192 0.209 0.226 0.245 0.265 0.285 0.307 0.331 0.355 0.381 0.408 0.438 0.469 0.501 0.536 0.573 0.612 0.654 0.698 0.746 0.796 0.849 0.906 0.966 1.030 1.098 1.171 1.248 1.330 1.418 1.511 1.610 1.715 1.828
Capital stock
K (K(t) = K(t-1) + DK(t-1)) 2.701 2.768 2.838 2.909 2.981 3.056 3.094 3.142 3.202 3.272 3.354 3.448 3.554 3.673 3.805 3.951 4.112 4.288 4.479 4.688 4.915 5.160 5.424 5.710 6.017 6.348 6.703 7.084 7.492 7.930 8.398 8.900 9.436 10.009 10.621 11.275 11.974 12.719 13.515 14.364 15.269 16.235 17.265 18.363 19.534 20.782 22.112 23.530 25.041 26.651 28.366
Output
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 7.640 8.014 8.414 8.843 9.302 9.793 10.320 10.883 11.486 12.132 12.823 13.562 14.353 15.198 16.101 17.067 18.098 19.200 20.376 21.632 22.973 24.403 25.929 27.558 29.294 31.146 33.121 35.227 37.471 39.864 42.414 45.132 48.029 51.116 54.405 57.909 61.643 65.621 69.858 74.373 79.183 84.306 89.763 95.577 101.769 108.364
Y growth rate (Y(t) - Y(t-1))/Y(t-1) -- 2.500% 2.500% 2.500% 2.500% 2.500% 4.895% 4.996% 5.095% 5.191% 5.285% 5.375% 5.461% 5.543% 5.621% 5.695% 5.764% 5.829% 5.889% 5.944% 5.996% 6.044% 6.087% 6.127% 6.164% 6.197% 6.227% 6.255% 6.279% 6.302% 6.322% 6.341% 6.357% 6.372% 6.385% 6.397% 6.408% 6.418% 6.427% 6.434% 6.441% 6.448% 6.453% 6.458% 6.463% 6.467% 6.470% 6.473% 6.476% 6.479% 6.481%
K/Y (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.400 0.386 0.373 0.362 0.352 0.342 0.334 0.327 0.320 0.314 0.308 0.303 0.299 0.295 0.291 0.288 0.285 0.283 0.280 0.278 0.276 0.275 0.273 0.272 0.271 0.270 0.269 0.268 0.267 0.266 0.266 0.265 0.265 0.264 0.264 0.264 0.263 0.263 0.263 0.263 0.262 0.262 0.262 0.262 0.262 0.262
Comparison to steady state
(Y-Y*)/Y* 0.000% 0.000% 0.000% 0.000% 0.000% ### ### ### ### ### ### ### ### 9.113% 8.212% 7.394% 6.652% 5.980% 5.371% 4.822% 4.326% 3.879% 3.476% 3.114% 2.788% 2.495% 2.233% 1.997% 1.786% 1.596% 1.427% 1.275% 1.139% 1.018% 0.909% 0.812% 0.725% 0.647% 0.578% 0.516% 0.460% 0.411% 0.367% 0.327% 0.292% 0.261% 0.232% 0.207% 0.185% 0.165% 0.147%
(K-K*)/K* 0.000% 0.000% 0.000% 0.000% 0.000% ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### ### 9.599% 8.562% 7.638% 6.813% 6.077% 5.421% 4.836% 4.313% 3.848% 3.432% 3.062% 2.731% 2.436% 2.173% 1.938% 1.729% 1.542% 1.376% 1.227% 1.095% 0.977% 0.871% 0.777% 0.693% 0.618% 0.552% 0.492%
Ygrth-Y*grth -- 0.000% 0.000% 0.000% 0.000% ### -1.605% -1.504% -1.405% -1.309% -1.215% -1.125% -1.039% -0.957% -0.879% -0.805% -0.736% -0.671% -0.611% -0.556% -0.504% -0.456% -0.413% -0.373% -0.336% -0.303% -0.273% -0.245% -0.221% -0.198% -0.178% -0.159% -0.143% -0.128% -0.115% -0.103% -0.092% -0.082% -0.073% -0.066% -0.059% -0.052% -0.047% -0.042% -0.037% -0.033% -0.030% -0.027% -0.024% -0.021% -0.019%

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 5

Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52
PARAMETERS
s (savings rate) 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030 0.030
n (labor force growth rate) 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015 0.015
g (labor productivity growth rate) 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010 0.010
d (capital depreciation rate) 0.050 0.050 0.050 0.050 0.050 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090 0.090
A (C-D technology index) 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
q (C-D parameter) 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300 0.300
EFFECTIVE LABOR SUPPLY
AN (AN(t)=AN(t-1) + DAN) 10.000 10.250 10.506 10.769 11.038 11.314 11.597 11.887 12.184 12.489 12.801 13.121 13.449 13.785 14.130 14.483 14.845 15.216 15.597 15.987 16.386 16.796 17.216 17.646 18.087 18.539 19.003 19.478 19.965 20.464 20.976 21.500 22.038 22.589 23.153 23.732 24.325 24.933 25.557 26.196 26.851 27.522 28.210 28.915 29.638 30.379 31.139 31.917 32.715 33.533 34.371 35.230 36.111
(n+g)AN (Change in effective labor supply) 0.250 0.256 0.263 0.269 0.276 0.283 0.290 0.297 0.305 0.312 0.320 0.328 0.336 0.345 0.353 0.362 0.371 0.380 0.390 0.400 0.410 0.420 0.430 0.441 0.452 0.463 0.475 0.487 0.499 0.512 0.524 0.538 0.551 0.565 0.579 0.593 0.608 0.623 0.639 0.655 0.671 0.688 0.705 0.723 0.741 0.759 0.778 0.798 0.818 0.838 0.859 0.881 0.903
BALANCED GROWTH PATH
K* (K*=Y* (s/(n+g+d)) 2.701 2.768 2.838 2.909 2.981 1.659 1.701 1.743 1.787 1.832 1.877 1.924 1.972 2.022 2.072 2.124 2.177 2.232 2.287 2.345 2.403 2.463 2.525 2.588 2.653 2.719 2.787 2.857 2.928 3.001 3.076 3.153 3.232 3.313 3.396 3.481 3.568 3.657 3.748 3.842 3.938 4.036 4.137 4.241 4.347 4.455 4.567 4.681 4.798 4.918 5.041 5.167 5.296
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 6.361 6.520 6.683 6.850 7.021 7.197 7.377 7.561 7.750 7.944 8.142 8.346 8.555 8.769 8.988 9.212 9.443 9.679 9.921 10.169 10.423 10.684 10.951 11.224 11.505 11.793 12.087 12.390 12.699 13.017 13.342 13.676 14.018 14.368 14.727 15.096 15.473 15.860 16.256 16.663 17.079 17.506 17.944 18.393 18.852 19.324 19.807 20.302
Y* growth rate (Y*(t) - Y*(t-1))/Y*(t-1) -- 2.500% 2.500% 2.500% 2.500% -14.658% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500% 2.500%
K*/Y* (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261 0.261
ACTUAL GDP PATH
Investment
S (Total saving) 0.203 0.208 0.213 0.218 0.224 0.191 0.196 0.200 0.205 0.211 0.216 0.221 0.227 0.233 0.238 0.244 0.250 0.257 0.263 0.270 0.276 0.283 0.290 0.298 0.305 0.313 0.321 0.329 0.337 0.345 0.354 0.363 0.372 0.381 0.391 0.400 0.410 0.421 0.431 0.442 0.453 0.464 0.476 0.488 0.500 0.512 0.525 0.538 0.552 0.566 0.580 0.594 0.609
I (Gross investment) 0.203 0.208 0.213 0.218 0.224 0.191 0.196 0.200 0.205 0.211 0.216 0.221 0.227 0.233 0.238 0.244 0.250 0.257 0.263 0.270 0.276 0.283 0.290 0.298 0.305 0.313 0.321 0.329 0.337 0.345 0.354 0.363 0.372 0.381 0.391 0.400 0.410 0.421 0.431 0.442 0.453 0.464 0.476 0.488 0.500 0.512 0.525 0.538 0.552 0.566 0.580 0.594 0.609
dK (capital depreciation) 0.135 0.138 0.142 0.145 0.149 0.275 0.267 0.261 0.256 0.251 0.247 0.245 0.242 0.241 0.240 0.240 0.240 0.241 0.243 0.245 0.247 0.249 0.253 0.256 0.260 0.264 0.268 0.273 0.278 0.283 0.289 0.295 0.301 0.307 0.314 0.321 0.328 0.335 0.343 0.351 0.359 0.367 0.376 0.385 0.394 0.404 0.414 0.424 0.434 0.445 0.455 0.467 0.478
DK (Net investment) 0.068 0.069 0.071 0.073 0.075 -0.084 -0.072 -0.060 -0.050 -0.040 -0.031 -0.023 -0.016 -0.009 -0.002 0.004 0.010 0.015 0.020 0.025 0.030 0.034 0.038 0.042 0.045 0.049 0.052 0.056 0.059 0.062 0.065 0.068 0.071 0.074 0.077 0.080 0.082 0.085 0.088 0.091 0.094 0.097 0.100 0.103 0.105 0.108 0.112 0.115 0.118 0.121 0.124 0.128 0.131
Capital stock
K (K(t) = K(t-1) + DK(t-1)) 2.701 2.768 2.838 2.909 2.981 3.056 2.972 2.900 2.839 2.789 2.749 2.717 2.694 2.678 2.670 2.668 2.672 2.682 2.697 2.718 2.743 2.772 2.806 2.844 2.885 2.931 2.980 3.032 3.088 3.147 3.208 3.274 3.342 3.412 3.486 3.563 3.643 3.725 3.810 3.898 3.989 4.083 4.180 4.280 4.382 4.488 4.596 4.708 4.822 4.940 5.061 5.185 5.313
Output
Y* (Y*= A(K*^q)(AN)^(1-q)) 6.752 6.921 7.094 7.272 7.453 7.640 7.708 7.785 7.871 7.965 8.069 8.181 8.302 8.432 8.571 8.719 8.875 9.040 9.213 9.395 9.585 9.783 9.990 10.205 10.429 10.660 10.900 11.148 11.405 11.669 11.942 12.224 12.514 12.813 13.120 13.436 13.762 14.096 14.439 14.792 15.155 15.527 15.909 16.301 16.703 17.116 17.540 17.974 18.420 18.878 19.347 19.828 20.321
Y growth rate (Y(t) - Y(t-1))/Y(t-1) -- 2.500% 2.500% 2.500% 2.500% 2.500% 0.894% 0.999% 1.102% 1.202% 1.299% 1.392% 1.481% 1.566% 1.646% 1.721% 1.791% 1.856% 1.917% 1.973% 2.024% 2.071% 2.114% 2.153% 2.189% 2.221% 2.250% 2.276% 2.300% 2.321% 2.340% 2.358% 2.373% 2.387% 2.399% 2.410% 2.420% 2.429% 2.437% 2.444% 2.450% 2.455% 2.460% 2.465% 2.469% 2.472% 2.475% 2.478% 2.481% 2.483% 2.485% 2.486% 2.488%
K/Y (capital to output ratio) 0.400 0.400 0.400 0.400 0.400 0.400 0.386 0.372 0.361 0.350 0.341 0.332 0.324 0.318 0.311 0.306 0.301 0.297 0.293 0.289 0.286 0.283 0.281 0.279 0.277 0.275 0.273 0.272 0.271 0.270 0.269 0.268 0.267 0.266 0.266 0.265 0.265 0.264 0.264 0.264 0.263 0.263 0.263 0.263 0.262 0.262 0.262 0.262 0.262 0.262 0.262 0.262 0.261
Comparison to steady state
(Y-Y*)/Y* 0.000% 0.000% 0.000% 0.000% 0.000% 20.104% 18.223% 16.492% 14.903% 13.448% 12.119% 10.907% 9.805% 8.805% 7.898% 7.078% 6.337% 5.669% 5.068% 4.528% 4.042% 3.607% 3.217% 2.867% 2.555% 2.276% 2.026% 1.803% 1.605% 1.428% 1.270% 1.129% 1.004% 0.892% 0.793% 0.705% 0.626% 0.557% 0.495% 0.439% 0.390% 0.347% 0.308% 0.273% 0.243% 0.216% 0.192% 0.170% 0.151% 0.134% 0.119% 0.106% 0.094%
(K-K*)/K* 0.000% 0.000% 0.000% 0.000% 0.000% 84.160% 74.718% 66.335% 58.892% 52.285% 46.419% 41.211% 36.587% 32.482% 28.838% 25.602% 22.730% 20.180% 17.916% 15.906% 14.121% 12.537% 11.130% 9.881% 8.773% 7.789% 6.915% 6.139% 5.450% 4.839% 4.296% 3.814% 3.386% 3.006% 2.669% 2.369% 2.104% 1.868% 1.658% 1.472% 1.307% 1.160% 1.030% 0.914% 0.812% 0.721% 0.640% 0.568% 0.504% 0.448% 0.398% 0.353% 0.313%
Ygrth-Y*grth -- 0.000% 0.000% 0.000% 0.000% 17.158% -1.606% -1.501% -1.398% -1.298% -1.201% -1.108% -1.019% -0.934% -0.854% -0.779% -0.709% -0.644% -0.583% -0.527% -0.476% -0.429% -0.386% -0.347% -0.311% -0.279% -0.250% -0.224% -0.200% -0.179% -0.160% -0.142% -0.127% -0.113% -0.101% -0.090% -0.080% -0.071% -0.063% -0.056% -0.050% -0.045% -0.040% -0.035% -0.031% -0.028% -0.025% -0.022% -0.019% -0.017% -0.015% -0.014% -0.012%

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