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Suppose That Technological Change Is Not Labor-Augmenting, but Affects Only

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Essay

Suppose that technological change is not labor-augmenting, but affects only capital. Use the Solow growth model of Chapter 8 to graphically illustrate the impact of the slower rate of technological change that increases the rate at which capital wears out (the rate of depreciation increases) on the steady-state capital-labor ratio and the steady-state level of output per worker.
Be sure to label the: a. axes; b. curves; c. initial steady-state levels; d. terminal steady-state levels; and e. the direction curves shift.


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