A Comparative Lexicon of Ugaritic and Canaanite (Alter by Issam K. H. Halayqa

By Issam K. H. Halayqa

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Sample text

Iting capital-labor ratio is (s/q)l/l-a. The lim- The time paths of the other variables are obtained by straightforward substitutions. 3 Summary The major result obtained from the Harrod-Domar model is that when capital and labor have to be combined in a fixed proportion to obtain any given level of output, the economy cannot have full employment of both factors, in the long run, unless the warranted rate of growth which is the ratio of the saving rate to the capital-output ratio, equals the natural rate which is the rate of growth of labor force.

In the long run, capital, output and labor will all grow at the same rate n, and per capita output will be constant. This rate is independent of the saving rate and therefore policies to raise the long-run growth rate by stimulating saving will be ineffective although the level of per capita consumption can be maximized by adjusting the saving rate to equal the share of capital in output. In the next chapter it will be seen that per capita output can grow over time if there is technical progress.

What are the long run consequences of the above behavior? In particular, will there be growth with full employment of factors? If yes, describe the economic mechanism which brings it about. If not, explain what prevents it and suggest policies to achieve full employment and steady growth. Explain how your recommended policies will bring this about. Hint: Suppose w* is the equilibrium real wage rate in the If w* > unconstrained Solow-Swan case. not binding in the long run. w. the rigidity is The mechanism is the same as described earlier in this chapter.

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