AL MULATION

FULL CAPITAL ACCUMULATION:

K=ALk, therefore K grows at rate (n+g)

Starts and ends at dk(t)/dt=0

slowly increases to new k=k*(new)

initial vertical jump, expodential decay to initial balanced growth path Y/L --> g
Output/worker permanently increased, but same growth rate, hence same slope to initial growth path

when MPk*>n+g +d, then dc*/ds is increasing.

GOLDEN RULE K**

As we are in steady state, therefore there is no growth in K/AL.

via "implicit" differentiation

f'(k*)= dy*/dk* f(k*) = y*, therefore: k*/y* x dy*/dk*

elasticity of output wrt k, where k=k*

INTUITION

dk/dt denotes speed of convergence? or does lambda?

second derivative:

elasticity of output wrt k, evaluated at k*

CONCLUSION

Strong convergence result.