Consider the two-country model of technical progress analyzed in the course, where YA1 et YA,2 represent...

  

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Consider the two-country model of technical progress analyzed in the course, where YA1 et YA,2 represent the proportion of labor employed in R&D in country 1 and 2, respectively, and YA,1 > YA,2- The total quantity of labor is equal to L in each country. The rate of technological progress (and growth in output per worker) is equal Â₁ = YA,1L/M₁ in the innovating country (country 1), where Mi is the cost of innovation, and is equal to YA,2L/Hc in the imitating country (country 2), where Hc Â₂ is the cost of imitation. It is assumed that the imitation cost decreases as technology ratio increases. In stationary equilibrium, the A₁/A₂ i.e. Â₁ ¤ Â₂.. rate of technological progress is equal in the two countries, = Using a graph, explain why an increase in the proportion of labor employed in R&D in the innovating country will lead to a permanent increase in the rate of technological progress in the imitating country. Consider the two-country model of technical progress analyzed in the course, where YA1 et YA,2 represent the proportion of labor employed in R&D in country 1 and 2, respectively, and YA,1 > YA,2- The total quantity of labor is equal to L in each country. The rate of technological progress (and growth in output per worker) is equal Â₁ = YA,1L/M₁ in the innovating country (country 1), where Mi is the cost of innovation, and is equal to YA,2L/Hc in the imitating country (country 2), where Hc Â₂ is the cost of imitation. It is assumed that the imitation cost decreases as technology ratio increases. In stationary equilibrium, the A₁/A₂ i.e. Â₁ ¤ Â₂.. rate of technological progress is equal in the two countries, = Using a graph, explain why an increase in the proportion of labor employed in R&D in the innovating country will lead to a permanent increase in the rate of technological progress in the imitating country.