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13. Technology transfer in the Solow model one explanation for China's rapid economic growth during the past several decades is its expansion of policies that
13. Technology transfer in the Solow model one explanation for China's rapid economic growth during the past several decades is its expansion of policies that encourage "technology transfer". By this, we mean policies- such as opening up to international trade and attracting multinational corporation through various incentives- that encourage use and adoption in china of new ideas and new technologies. The question asks you to use the Solow model to study this scenario. Suppose China begins in steady state. To keep the problem simple, let's assume that the Sole result of this technology transfer policies is to increase A by a large and permanent amount, one time. Answer the following questions: a] Analyze this change using a Solow diagram. What happens to the economy over time? b] Drawing graph showing what happens to output in lChina over time. What happens in output per person in china in the long run? c} Draw a graph showing what happens to the growth rate of output in China over time? Explain. d] Discuss in a couple of sentences what your results imply about the effect oftechnology transfer on economic growth. 14. Suppose a country enacts a tax policy that discourages investment, and the policy reduces the investment rate immediately and permanently. Assuming economy starts in its initial steady state, use the Solow model to explain what happen to the economy over time and in the lang run and explain what happens to economic growth over time. Hint: You can draw a graph to show the effect of a decrease in investment rate
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