Question: In Hisui, the technology level is A = 2, the saving rate is s = 5%, and the depreciation rate is 8 = 1%.
In Hisui, the technology level is A = 2, the saving rate is s = 5%, and the depreciation rate is 8 = 1%. The initial level of capital is Ko = 500 and the level of labor is L = 10. In Kanto, the technology level A = 6, the saving rate is s = 5%, and the depreciation rate is 8 = 1%. The initial level of capital is Ko = 5,000 and the level of labor is L = 100 (a) Solve for the long-term equilibrium output per worker and capital per worker for both countries. Show your work. (b) The government of Hisui is trying to achieve a higher equilibrium output per worker by encouraging saving. What savings rate would Hisui need in order to reach the same equilibrium output per worker as Kanto? Show your work.
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