The Holy Grail of Macro: Finding Solutions to Barro & Sala-i-Martin’s Economic Growth

If you are a graduate student in economics, or an ambitious undergraduate taking a master's level course, you have likely encountered the "Bible" of growth theory: "Economic Growth" by Robert J. Barro and Xavier Sala-i-Martin.

  1. Optimal size of government: Set ( f_g = 1 ).
  2. For a Cobb-Douglas function ( y = Ak^1-\alphag^\alpha ), the optimal tax rate is ( \tau^* = \alpha ).
  3. Growth is maximized when the share of government spending (as a % of GDP) equals the output elasticity of public goods.

An official, standalone solutions manual for Barro and Sala-i-Martin’s "Economic Growth" (2nd Edition) is not published, but the full text is available via Piketty's website. Academic repositories like NZDR offer partial chapter solutions, while MIT Press provides official publication details. Access the text and related resources through MIT Press and the NZDR repository. Economic Growth - Thomas Piketty

The Problem: In a vacuum, economies should stop growing once they reach a "steady state" due to diminishing returns on capital.

One of the greatest limitations of neoclassical models is that growth eventually grinds to a halt due to the diminishing returns of capital. Barro and Sala-i-Martin provide extensive coverage of Endogenous Growth Theory (pioneered by Paul Romer and others), which eliminates diminishing returns. AKcap A cap K If we assume that the production function is linear, is a constant reflecting technology and