Question

Many demographers predict that the United States will have zero population growth in the twenty-first century, in contrast to average population growth of about 1 percent per year in the twentieth century. Use the Solow model to graphically explain what happens to the steady-state output per person when population growth slows down.

Answer 1

Answer and Explanation:

Different things being constant, a slowdown in population growth will lead to an increase in the availability of capital per worker and output per worker.

At the steady state, output per worker will grow at the rate of g while. Thus, steady state per person output growth will be same, however total output will increase at the rate n+g.

In case of transition between steady states, during the transition phase, output per worker will grow at a rate greater than g. Overtime in the long run with a fall in population growth, total output will fall while output per worker will increase.