Bilkent University, Department of Economics
EC453-EC454
THEORIES OF GROWTH AND DEVELOPMENT
Qui si convien lasciane ogni sospetto
Ogni vilta convien che qui sia
morta*
* "Here all mistrust must be left behind
/ Here all cowardices must be dead" K.
Marx quoting Dante in his
introduction to the Contribution
to the Critique of Political Economy.
"... I do not see how one can look at figures like
these without seeing them representing possibilities. Is there some
action a government of India could take that would lead the Indian economy to
grow like Indonesia's or Egypt's? If so, what exactly? If not, what is
it about the "nature of India" that makes it so? The consequences for
human welfare involved in questions like these are simply staggering: once one
starts to think about them, it is hard to think about anything else".
(Lucas, 1988: 5).
Course Syllabus: EC453 (Growth)
Course Syllabus: Ec454
(Development)
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Past Homeworks |
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Transitional dynamics of
theTurkish Economy towards Steady State
Suppose that the national output is given by a
Cobb-Douglas function with labor augmenting technological change. Barro and
Sala-i-Martin (1995) suggest that the gap between national output at any date
and the steady state of a given economy is closed at the constant rate: b =
(1-a)(x + n + d ) where a is share of capital in national output; x is rate of
technological productivity change; n is population growth rate; and d is rate of
depreciation.
Data from Turkish economy suggest the following
values for the selected variables: x = 0.015 (Uygur, 1991); n = 0.017 (SIS) ; a
= 0.55 (Mercenier and Yeldan, 1997); and d = 0.10. Given these estimates, we
calculate b = (1-0.55)(0.015 + 0.017 + 0.10) or b = 0.06. In other words
6% of the gap between the current level of national output and its steady state
is eliminated per annum.
We can further calculate the half life of this
distance as t (half life) = In0.5/-b = 11.7 years.
So half of this distance is to be covered in
aproximately 11.7 years. If we continue on this manner, we find that %75 of the
gap to the steady state of the Turkish economy is to vanish in 24 years; 87.5%
in 48 years; and 94% will vanish in 96 years.
Time to go lads....
