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  • Print publication year: 2016
  • Online publication date: May 2016

3.5 - Technological Progress: TechProgress.xls

from 3 - The Solow Model

Summary

If a series of nuclear explosions were to wipe out the material equipment of the world but the educated citizens survived, it need not be long before former standards were reconstituted; but if it destroyed the educated citizens, even though it left the buildings and machines intact, a period longer than the Dark Ages might elapse before the former position was restored.

– Lionel Robbins

Quick Summary

To access TechProgress.xls, visit

http://www.depauw.edu/learn/macroexcel/excelworkbooks/SolowModel/TechProgress.xls

TechProgress.xls is the last of the workbooks in the Solow Model series. It includes population growth and exogenous, constant technological change. The EqPath sheet enables straightforward simulation to reveal clearly the steady-state solution in both efficiency and own units of per worker variables. Sophisticated comparative statics analyses, including transitional dynamics, can be easily performed. Real-world, Maddison data are used to calibrate and “test” the model. These applications are interesting, enjoyable, and thought provoking.

Screencasts

  1. • http://vimeo.com/econexcel/techproginitial: introduction stressing imaginary (efficiency units) and real economies

  2. • http://vimeo.com/econexcel/techprogcatchuptheory: catch-up growth and convergence; steady-state path as a magnet

  3. • http://vimeo.com/econexcel/techprogcalibrateusa: Solow Model calibrated to match U.S. economic performance in the twentieth century

  4. • http://vimeo.com/econexcel/techprogcatchupgermany: capital “destroyed” in the EqPath sheet and Germany's post–World War II performance replicated

  5. • http://vimeo.com/econexcel/techprograndom: stochastic disturbance term added via NORMALRANDOM(mean, SD)

  6. • http://vimeo.com/econexcel/techprogcompstatics: explores the effects of shocks in n, s, and g on the level and growth rate of steady-state y

  7. • http://vimeo.com/econexcel/techproggoldenrule: the Golden Rule with g > 0; as g rises, the transition period gets shorter

  8. • http://vimeo.com/econexcel/techprogconvergence: shows why CAGR as a function of log y is used; shows that the predicted relationship fails for large samples but is better for more similar countries

Introduction

Teaching and learning the Solow Model effectively and comprehensively is hard work. TechProgress.xls is the third (and final) step in a progression of models. Starting from the most primitive version of the model presented in KAcc.xls, a nonzero, constant rate of population growth was added in Population.xls.

The epigraph is from Robbins, L., The Robbins Report, Higher Education Report of the Committee appointed by the Prime Minister under the Chairmanship of Lord Robbins, Cmnd. 2154 (London: Her Majesty's Stationery Office, 1963), 205, http://www.educationengland.org.uk/documents/robbins/robbins1963.html.
Barro, R., and Sala-i-Martin, X.. 1992. “Convergence.” Journal of Political Economy 100, no. 2: 223–51, http://www.jstor.org/stable/2138606. Since this seminal paper is often cited by papers on convergence at various political and geographic levels, using it to find “items that cited this item” in JSTOR (or other databases) will produce papers on convergence with examples for the classroom, such as convergence in European states and Japanese prefectures.
Cowen, T., and Tabarrok., A. 2011. Modern Principles: Macroeconomics. 2nd ed. Worth.
Jones, C., and Romer., P. 2010. “The New Kaldor Facts: Ideas, Institutions, Population, and Human Capital.” American Economic Journal: Macroeconomics, 2, no. 1: 224–45, http://www.aeaweb.org/articles.php?doi=10.1257/mac.2.1.224.
Mankiw, N. 2013. Macroeconomics. 9th ed. Worth.
Novales, A., Fernández, E., and Ruíz., J. 2009. Economic Growth: Theory and Numerical Solution Methods. Springer.