ECON 330 Problem Set 11 (Due in class by the date stated on the syllabus) You can work the problems in groups and turn in a single answer sheet with your names on it. 1. State Kaldor's stylized facts (4 of them). Derive their implications for the share of national income paid to the owners of capital, the capital income share. Assume rms combine capital and labor to produce output according to Y = K \"N 1'\" where a is the elasticity of output to capital, i.e. the percentage change in output for a given percentage change in capital. What type of data would be informative of the value this elasticity? Explain your answer and any assumptions you may need to reach your conclusion. 2. The Solow model makes two important assumptions. First, it assumes that as population increases so does employment. As a result of this assumption we can equate population, the labor force, and employment. Second, it assumes that the saving rate (or investment rate) is constant. Given that growth theory focuses on long periods of time, discuss the relevance of both assumptions. The following two gures may be useful to answer the question. Figure A112: Net domestic investment rates 1870-2010 as! ms in] 1975 not was me 1115 mu m -20% swwMNmU-SW SWMU'W'WW-EWMH 1870 1690 1910 1930 1950 1970 1990 2010