3. What is the aggregate production function in this model? Is labour unproductive at the aggregate level (also when¢ < 1 )? Why is it that in this case there is no positive, semi-endogenous type of growth in GOP per worker in steady state?

The fact that the presence of the external effects does not produce (semi-)endogenous growth in the steady state this time may give the impression that¢ is not economically important, at least not for steady state. The size of¢ is, however, important both for the steady state levels and for the convergence process outside steady state, as the answers to the following two questions should reveal.