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4. (20%) Two countries, 11 and l , whose economies are well represented by the Solow model, have the same parameters, 3, n, as, and 6, the same labor force but differ in their level of total factor productivity, Ah > A 1. They are both in steady state but, as a result of their difference in the level of technology, Yh = 2Yl. a) By what factor do the two countries' levels of technology differ? By what factor do the two countries' capital stocks differ? Assume a = 1/2. b) Assuming that factor inputs are free to migrate without cost, will they (either, K or N or both) have an incentive to do so? Why? Let's assume that n = 0 and that Ah > A; is the result of some barriers that prevent the ow of knowledge between these two economies. Now both economies join a common economic market and as a result A; instantaneously increases to An. The rest of the parameters are unaffected. c) Let's allow for migrations of labor and capital ows across the two countries, sketch the path of output per capita in both countries before, at the time and after the barriers are lifted (do so in the same gure using one color for each country). (1) Let's allow only for capital flows, sketch the path of capital per capita in both countries before, at the time and after the barriers are lifted (do so in the same gure using one color for each country)? e) Compare the implications of c) vs. d) for wages and returns to capital. Who will oppose economic integration in this context? Who will favor economic integration in this context? Explain your answer carefully