2. In 1861 many southern US states seceded and formed the Confederacy. Treat the North and South as two separate countries, and analyze the effects of the secession and the Civil War using the Solow model . Suppose that the rate of population growth is the same in the North and South , but the North had a higher rate of productivity growth and a higher savings rate . (a) What does the model predict about the long -run comparative CCO - nomic performance (both levels of output and growth rates ) of the North and South ? Solution : The North has a higher g so will grow faster than the South in the long run in terms of both per capita output (since g is higher ) and total output (since g is higher and n is the same ). Note that the ranking of the steady states in per effective labor terms k = K /(AL ), which determines the balanced growth path, is ambiguous since the North has a higher s (which would increase k ) but also a higher g (which would reduce k)