Economics is not Mathematics, even though there is a lot of Math in it. Especially Calculus and Real Analysis are important for any serious student of economics and in that course you are likely going to get familiar with phrases like….

1. It is easy to see that…
2. Obviously…
3. Immediate. *
4. …and the result follows.
5. As a result, we find that…
6. One easily verifies that…
7.  The proof is left to the reader. *
8. The proof is left as an exercise.*
9. ….and the X theorem completes the proof.
10.  Clearly…
11. It can be shown that…
12. Trivially…
13. The proof is standard. 
14.  …the rest of the proof follows the same line.
15. …by a trivial argument…

Found on Urch.com.

I think I somewhat understood now finally theargument, how the speed of convergence in a simple Solow model is increased by access to world capital markets, if we are in a small, open-economy setup. Capital markets can be considered to be the “grease” for economies. They link savers to investors and create in a setup with risk-aversion a value-added due to their risk pooling abilities. In a simple Solow model, we can see how capital markets increase the speed of convergence.

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Essentially, a fundamental result of Solow is that “history does not matter“; furthermore, it also suggests that “inequality does not matter“. The Solow model predicts convergence in levels of capital stock per capita and also in GDP per capita with no long-run growth (all growth is exogeneous, e.g. due to technological progress etc.).

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Market frictions or market failures are seen as one of the most common reasons, why economies in developing countries suffer from a lack of growth. Some stylized facts indicate a huge disparity in the productivity especially in the primary argricultural sector. The primary sector occupies a key place in the economy of developing countries. According to the UNDP in 1996 agriculture employed 60% of the labour force while contributing 20% of GDP of less developed countries, in comparison to 2% of the labour force contributing 2 % of GDP of developed countries. This indicates that there is a huge productivity gap across countries. Read the rest of this entry »

It took me some time to understand the relationship between these two puzzles in the lecture material. Essentially, it can be best seen, assuming CRRA preferences, i.e. when individuals have a utility function of the form . In this small note, I would like to show the relationship between these two puzzles on basis of CRRA preferences.

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