The Study of Economic Growth
August 6th, 2010
Studying the impact of economic growth to the mobility of workers and the impact of the labor mobility on the income distribution. This word focuses on the impact of a capital accumulation to the income distribution, in the context of over-lapping generation model with capital that refers to the model of Diamond (1965).
This word then developing the analytical model that includes various categories of workers, which those categories are based on the production capability of each individual. The model was developed based on the economic assumption in a perfect competitive market condition, where there are many companies and each company has two factors of production which are labor and capital.
All individuals are living for two periods, working during the first period and retired from the second period. Each individual is saving the income which is earned from the first period, and the savings including interest, financing their consumption on the second period.
During each period, both young people and old people are still alive and the rate of population growth is equal to zero. Based on the model development, this word is getting these following things: Supply and Demand of the Capital.
In every generation, the young entrepreneur has no capital and must borrow to the needs of their new company. The younger generation borrows from the older generation of the capital that equals to the value of depreciated capital from the previous generation plus all the savings from the previous generation.
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