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I'm taking an macro-econ paper and I can't seem to work out the following simplification. Basically somehow by combining equation 4.14 and 4.15 we get 4.16.

$y_{t-1}$ denotes the previous year's output per capita, so $ln(y_{t-1})$ should be $a*ln(k_{t-1}) + ln(A)$, can't seem to explain the process even though I know the solution!

Equation 4.14

$ ln(k_{t+1}) = b + a*ln(k_t) + ln(A_t) $

Equation 4.15

$ ln(y_t) = a*ln(k_t) + ln(A_t) $

Equation 4.16

$ ln(y_t) = ab + a*ln(y_{t-1}) + ln(A) $

1 Answers 1

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$\ln k_{t+1}\stackrel{(4.14)(4.15)}{=}b+\ln(y_t)\implies\ln(y_t)\stackrel{(4.15)}{=}a\cdot(b+\ln(y_{t-1}))+\ln(A_t)$

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    Ahhh yep overlooked the first simplification that you made, thanks for your answer!2012-10-25