Question: 3. Suppose that we are comparing two countries, . and _, that are similar in every respect I J except the education of their population.

 3. Suppose that we are comparing two countries, . and _,

that are similar in every respect I J except the education of

3. Suppose that we are comparing two countries, . and _, that are similar in every respect I J except the education of their population. The production function of both countries is represented by , where Y: output, A: productivity, K= capital stock, L: Y =AK \" (hL)1' 0' raw labor, and h = the quality (in the form of years of education) per worker. In Country . , all adults have an average of 10 years of schooling. In Country _, all adults 1 J have an average of 4 years of schooling. Assume that the return to education is 20% per year for the first four years of schooling (grades 1-4), 14% per year for the next four years (grades 5-8), and 7% per year for education beyond eight years. Using the Solow model of economic growth, calculate the ratio of output per worker in the steady state in the two countries

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!