1. Endogenous Growth Theory Chapter 14

2. 2 ©1999 South-Western College Publishing Figure 14.2 GDP per Person Relative to U.S. GDP per Person for Five Countries 1960’65’70’75’80’85 United States Great Britain Mexico Turkey India GDP per person as percentage of U.S. GDP per person 20 40 60 80 100 0

3. 3 ©1999 South-Western College Publishing Box 14.1A Investment and GDP per Person Panel A GDP per capita as a percentage of U.S. GDP per capita 20 40 60 80 100 0 0.100.150.200.250.300.35 Ratio of investment to GDP Ghana Nigeria India Turkey S. Korea Chile MexicoJapan Italy U.K. Holland France Germany Sweden Canada U.S. Philippines

4. 4 ©1999 South-Western College Publishing Box 14.1B Investment and GDP per Person Panel B GDP per capita as a percentage of U.S. GDP per capita 20 40 60 80 100 0 12345 Investment ratio adjusted for population growth Ghana Nig. India Turkey S. Korea Chile Mexico Japan Italy U.K. Holland France Germany Sweden Canada U.S. Philippines

5. 5 ©1999 South-Western College Publishing Figure 14.4A The Social Production Function GDP Capital Panel A

6. 6 ©1999 South-Western College Publishing Figure 14.4B The Private Production Function GDP Capital Panel B

7. 7 ©1999 South-Western College Publishing Figure 14.5 Endogenous Growth K0K0 KtKt K t + 1 This economy will grow forever. K t + 1 = K t K t + 1 = (1 -  + As) K t

8. 8 ©1999 South-Western College Publishing Economy A K t + 1 = K t Figure 14.6 KtKt K t + 1 K0K0 A K0K0 B Two Economies with the Same Growth Rate but Different Initial Conditions K t + 1 = (1 -  + As) K t Economy B

9. 9 ©1999 South-Western College Publishing Figure 14.7 K t + 1 K0K0 A = K 0 B Two Economies with the Same Initial Condition but Different Savings Rates Economy B Economy A K t + 1 = (1 -  + s A A) K t K t + 1 = (1 -  + s B A) K t K t + 1 = K t

10. 10 ©1999 South-Western College Publishing Figure 14.8 Average Investment and Growth for 17 Countries, 1960–1988 Growth Rate of GDP per Person 0 2 4 6 8 -2 0.100.150.200.250.300.35 Ratio of investment to GDP Ghana S. Korea Japan Nigeria Chile U.S. U.K. Philippines India Mexico & Holland Turkey Canada Italy France, Germany, & Sweden

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