Savings and government deficits.

a. The World Bank has a database on gross domestic savings (as \% of GDP) available on its Web site. Using the data (for 2014), find the savings rates for France, Germany, and Italy, for the latest year available. With a depreciation rate of \(10 \%\), and using equation (11.8), calculate the steady-state levels of output and capital per worker for each of the three countries.

b. The OECD regularly publishes detailed data on government finances on its Web site, https://data.oecd.org/gga/ general-government-deficit.htm. Find the data on government deficits as percentage of GDP for France, Germany, and Italy for the year used in part (a). Assume the two worst-performing countries permanently reduce their deficit to the level of the best performing country. Moreover, the private savings remain unchanged. How would these changes affect the long-run levels of capital per worker and output per worker for the two worst performers?

c. In terms of output per worker, how do the performance of the two worst-performing countries compare to that of the best performer after the deficit reduction?