00:01
So here we have a solo model, right? and we are told that it starts along its balanced growth path.
00:06
So if we think of a solo model along its balanced growth path, we know where we are, right? we must be starting off at this point where the force of depreciation is equal to the force of savings in terms of effective capital per work.
00:28
Sorry, what i should call capital per effective work, right? because i assume there is economic growth, we assume that there is an underlying time trend in productivity, and hence capital per worker is not stable, it's growing at the rate of productivity.
00:46
So now what we have is a fall in population growth.
00:51
So what's happening here is n is going down, right? the rate of population growth is falling, so we have a shift in this line, right? this now becomes n prime plus g plus delta k hat, right? that's the new population level.
01:08
So you see that that's consistent with a higher steady state.
01:12
The basic idea being fewer people is equal to more capital per worker, right? when the rate of population growth suddenly slows down, population growth is a force that spreads the capital out across more and more workers...