3. According to the Solow model, if countries differed primarily in terms of their capital-labor ratios, with

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3. According to the Solow model, if countries differed primarily in terms of their capital-labor ratios, with rich countries having high capital-labor ratios and poor countries having low capital-labor ratios, then countries that have a lower real GOP per capita income should grow faster than countries with a higher real GOP per capita. (This prediction of the Solow model assumes that countries have similar saving rates, population growth rates, and production functions.) You can test this idea using the Penn World Tables at pwt.econ.upenn.edu. Pick a group of ten countries and examine their initial levels of real GOP per capita in a year long ago, such as 1950. Then calculate the average growth rate of real GOP per capita since that initial year. Do your results suggest that countries that initially have lower real GOP per capita indeed grow faster than countries that initially have a higher real GOP per capita?

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Macroeconomics Value Edition

ISBN: 978-0136114895

7th Edition

Authors: Andrew B. Abel ,Ben Bernanke ,Dean Croushore

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