The Solow Model With Technological Progress

This video contains a discussion of the Solow model of economic growth with technological progress and with population growth. I show that this version of the Solow model can explain convergence periods, long-run economic growth, and, to some extent, cross-country income differences.

The slides are based on chapter 4 of the book

Prettner, K., Bloom, D.E. (2020). Automation and Its Macroeconomic Consequences. Theory, Evidence, and Social Impacts. Elsevier, Amsterdam, NL.

For the simplified version of the Solow model without technological progress and without population growth, please see the following video:

You can find more material here:

[KlausPrettner]

Thank you for watching the video! You can find more material here:

[ianmcgettigan]

You have a true gift in education---your ability to explain all of this in such a clear manner in less than one half hour is incredible. I wanted a quick refresher of the mathematics behind the derivations and you did an excellent job, far better than many other online resources who do not care to explain the steps. Thank you very much.

[efekoc]

Undervalued video!! Simple and understandable👍🏻 Hello from Istanbul university economics👋🏻

[CarmenCristea-ptpp]

Very useful and clearly explained. Thank you!

[Ed-udqy]

Hey Klaus, Thanks for another great video! I just have one question about this.

Is it correct to say that all the parameters in the diagram only have level effects (s, n, delta). However, changing g_A has both growth and level effects, an increase in g_A will:
1. Cause the economy to move onto a steeper balanced growth path
2. But also cause a level effect: a drop in output through a dilution effect

If that's correct, point (2) seems quite unintuitive to me - why should an increase in technological progress cause a drop in output? is there any intuition you could offer here?

Thanks!