Consider the two country model of technology and growth (in Section 8.3 of the text). Suppose that the cost-of-copying function is :

Assume that the two countries have labour force of equal size.

a. Using this function, solve for the steady-state ratio of technology in the leading country to technology in the follower country (i.e., (A1/A2)) as a function of the values of yA in the two countries. Show how this depends on the value oft), and explain what is going on.

b. Assume that

Calculate steady-state ratio of technology in country 1 to technology in country 2.

Transcribed Image Text:

Me=μi (A₁/A₂), where 0 B=1/2, μ-10, 7₁, 1=0.2 and 4, 20.1. Me=μi (A₁/A₂), where 0 B=1/2, μ-10, 7₁, 1=0.2 and 4, 20.1.

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In economics the steady state growth ratio we means that the ratio between consumpti... View the full answer