Economic growth and economic development 518

Introduction to Modern Economic Growth
(2) Determine transformed variables that will remain constant in a steady state
allocation.
(3) Characterize the steady state equilibrium and the transitional dynamics.
(4) Why does faster technological progress lead to more rapid accumulation of
human capital?
Exercise 10.14. * Characterize the optimal growth path of the economy in Section
10.4 subject to the additional constraints that ik (t) ≥ 0 and ih (t) ≥ 0.
Exercise 10.15. Derive equation (10.25).

Exercise 10.16. Derive equations (10.32) and (10.33).
Exercise 10.17. Provide conditions on f (·) and γ (·) such that the unique steadystate equilibrium in the model of Section 10.5 is locally stable.
Exercise 10.18. Analyze the economy in Section 10.6 under the closed economy
assumption. Show that an increase in a1 for group 1 will now create a dynamic
externality, in the sense that current output will increase and this will lead to greater
physical and human capital investments next periods.
Exercise 10.19. Prove Proposition 10.5.

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