Globalization, Divergence and Stagnation

use (7) to substitute for Wn■ Rearrange it to get:

p(i)¹^e

Φn (i) LnAn (i)^σ_ ^r fθ ^an ⁽^j Γ ^dj

^use^an⁽^j⁾ = ^an ⁽ⁱ⁾ [⅛⅛J] ^/⁽ σ

to elimnate An («)■ Integrate i over the interval

[0,1], use (3) and rearrange:

^r = |⁽^LNr jθ ^φN ⁽ⁱ⁾

-∣ 1— σ
σ

¹^-^σ di

₊ (ΘL_s)^σ J¹ Φs (i)

σ

¹^-^σ di

- 1—σ ^V^σ

Finally, use (22) to substitute for fj ^t Φs (i)^σ^¹^σ^ di^ The Euler equation g = r — ρ
then yields equation (23) in the text

35

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