Kung_Schmid.pdf (859.9 KB) Hey guys, this is my first time posting on this forum. I’ve been studying Kung & Schmid (2015) , but i have trouble replicating Table II—— Determinants of Steady-State Growth(on page 1018). According to Kung & Schmid (2015), this paper sets capital adjustment costs to zero at deterministic steady state, so, based on physical capital stock equation( on page 1006), the steady state growth of K should be depreciation rate— delta. Therefore, based on the first-order condition for investment ( equation 16), ss growth of Y should equal to ss growth of K. So, ss growth should depend on depreciation rate only. It’s a naive question but i don’t know where i went wrong.
What exactly is your question? In a standard model, there is no growth in steady state at all coming from the capital side. Net capital accumulation in steady state stops and all growth just comes from technology growth. Why should the depreciation rate play a role?