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Does the basic Solow growth model with labour-augmenting technology fit well with the data? In your answer, be sure to explain important predictions made by this theory and describe to what extent the evidence supports or refutes the qualitative and quantitative predictions of the basic model. Does the fit of the model improve when we consider human capital as an additional input factor?
In the article ‘Why do some countries produce so much more output per worker than others?’ by Hall and Jones (1999), around 50% of the differences in output per worker across countries are due to the Solow residual. What factors are identified as the causes of these large differences in the Solow residual?
Consider theneoclassical growth model with overlapping generations of young and old agents.What is the effect on capital accumulation of the government financing publicconsumption by (a) taxing the young agents, (b) taxing the elderly, or (c)borrowing from the young and taxing them in old-age? Are the effects in thesecases the same or different? Explain.
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