Given the values in columns 1 and 2, fill in columns 3 and 4. That is, compute per capita GDP and capital per person relative to the US values. b. In column 5, use the production model: Y = AKL , or equivalently: y = Ak , to compute predicted per capita GDP for each country relative to the US, assuming there are no TFP differences. C. In column 6, compute the level of TFP for each country that is needed to match up the model and the data. That is, in this part, we relax the assumption that there are no TFP differences across countries. d. Divide the values of US in columns 4, 5 and 6 by the values of other economies in the respective columns. Store the result in columns 7, 8 and 9 respectively. Explain how to interpret columns 7, 8 and 9. e. Comment on the general results you find. f. Suppose we modify the production function to y = AXIL! . That is, we now assume that the exponent on capital is ; instead of 3 , so that the diminishing returns on capital are less. How would you expect the general results to change? In 2011 USD Relative to the US values (US=1) 2 3 5 7 8 Implied TFP Capital per Per capita Capital per Per capita Predicted to match Country person GDP person GDP y*=k*#1/3 data 1/(column 4) 1/(column 5) 1/(column 6) US 141841 51958 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 South Korea 120472 34961 Indonesia 41044 9797 Ethopia 3227 1505 Figure 1: Empirical fit of the production model: the importance of TFP versus capital