Question

In the Solow growth model, suppose that the per-worker production function is given by y = zk.3, with s = 0.25, d = 0.1, and n = 0.02.
(a) Suppose that in country A, z = 1. Calculate per capita income and capital per worker.
(b) Suppose that in country B, z = 2. Calculate per capita income and capital per worker.
(c) As measured by GDP per capita, how much richer is country B than country A? What does this tell us about the potential for differences in total factor productivity to explain differences in standards of living across countries?



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  • CreatedDecember 05, 2014
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