B List of variables

This is just a short list of variables that are used in the text. If I’ve forgotten any, let me know!

Remember that capital letters represent aggregates, lower case letters represent per-worker quantities, and a $t$ subscript means at time $t$ (e.g., $x_t$ is the quantity of $x$ in year $t$.)

$Y_t$ - aggregate GDP
$L_t$ - Number of workers
$y_t$ - GDP per worker, $Y_t / L_t$
$K_t$ - aggregate stock of physical capital
$k_t$ - physical capital per worker, $K_t / L_t$
$H_t$ - Human capital
$h_t$ - human capital per worker, $H_t / L_t$
$A_t$ - Productivity (Note that we don’t think about ``productivity per worker.’’)
$I_t$ - Aggregate investment in physical capital
$i_t$ - Investment in physical capital per worker, $I_t / L_t$
$C_t$ - Aggregate consumption
$c_t$ - Consumption per worker, $C_t / L_t$.
$Y_t = f (A_t, L_t, K_t, H_t)$ is the production function
$\gamma$ (lower-case Greek letter “gamma”) - The fraction of output that is invested in a period, $I_t = \gamma Y_t$, $0 < 1 $
$\delta$ (lower-case Greek letter “delta”) - The fraction of the capital stock that wears out every period, $0 < \delta \leq 1$. The total capital that wears out in a period is $\delta K_t$.
$\alpha$ (lower case Greek letter “alpha”) - The exponent on physical capital in the Cobb-Douglas production function. $0 < \alpha < 1$