Advanced Macro & Growth · intermediate
What moves on the Endogenous Growth (AK Model) diagram
A permanently higher saving rate widens the permanent gap between saving and break-even investment: in AK models, saving policy is growth policy.
A compulsory super scheme channels more of every paycheque into saving.
The saving line rotates up: more investment at every capital level.
In Solow this would only buy a temporary growth spurt on the way to a higher level.
Here the lines never converge, so the growth rate stays permanently higher. Whether the realrealAdjusted for inflation, measured in actual purchasing power. world is more Solow or more AK is one of macro's biggest questions.
Examiners ask this as: superannuation, compulsory saving, pension scheme, national saving rises, super guarantee.
Other scenarios on Endogenous Growth (AK Model)