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 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
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