Moldova is a former Soviet republic that had a GDP per capita of $6,700 in 2017, which is lower than other former Soviet republics like Russia ($27,900) and Estonia ($31,700). Moldova’s main export is wine and about 18 percent of its GDP consists of agricultural goods and 20 percent consists of industrial goods, including manufactured goods. Suppose, hypothetically, that the president of Moldova proposes changes to the country’s laws that will discourage private firms from investing in factories. The president argues that slowing the country’s progress toward industrialization is necessary because of what happened with the former Soviet Union.

a. Do you agree with the president’s attempt to slow industrialization in Moldova?
What are the differences between Moldova’s economy today and the Soviet Union’s economy in the 1980s?

b. If Moldova and the former Soviet Union had the same production function, draw a graph to illustrate why increasing capital per worker may significantly increase Moldova’s income per worker today even though it did not significantly increase income per worker in the Soviet Union during the 1970s.