AK model

The AK- model is a model of endogenous growth theory. The basic model goes back to the Portuguese Sérgio Rebelo economists (1991 ), the production function of the model has been used previously and later expanded manifold.

The linear production function used explains the production yield (Y) on the use of capital (K ) and an aggregate technology parameters (A):

Here, A is > 0

Under the concept of capital, both physical capital and human capital are summarized. Contrast, unskilled labor does not matter what is plausible for modern production techniques.

Testify

The increase in the technology parameter about by adaptation of external knowledge leads to a rise in long-term growth rate. Through the AK model also permanent differences in growth of economies can be explained.

Criticism

It is criticized as disregarding of unskilled labor. In industrialized countries, this may be plausible, but for less developed countries, this is problematic. Also, the aggregation of human capital and physical capital in itself is not without problems. Thus, the rate of capital accumulation must now be related to both physical capital and human capital. The acquisition of the investment in human capital seems difficult as the relevant expenses such as teacher salaries, cost of living of students, etc. recorded as consumption expenditure in national accounts. The totality of these needed for human capital formation expenditure is often called productive consumption.

Policy suggestions

From the AK model implies that an increase in the per capita income can be achieved by:

Consideration in an open economy

The AK- model in the case of an open economy was analyzed by different scientists.

In the case of equal interest rates at home and abroad, no capital movement would take place, So do not distinguish the equilibrium of the closed economy. Unlike in the case of different interest rates. These are caused by different rates of time preference of households. Capital would now be in the flow from the country with a lower interest rate with the higher. In the model, but not assumed decreasing marginal utility of capital. This capital would flow completely in the country with the higher interest rate with perfect capital mobility. This is an empirically ascertainable facts. Could you explain this fact with limited capital mobility, so that an outflow can not be made arbitrarily high.