Suppose there are two countries. In the rich country, the representative consumer has Hr units of human capital, and total factor productivity is zr. In the poor country, the representative consumers has H p units human capital, and total factor productivity is zp. Assume that b and u are the same in both the countries, Hr > Hp, and zr > zp.

(a) How do the levels of per capita income, the growth rates of per capita income, and real wages compare between the rich and poor countries?

(b) If consumers could choose their country of residence, where would they want to live?

Answer rating: 100% (QA)

a Human capital in rich country is H units and total factor pro... View the full answer