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3. Expropriation risk and standards of living. Consider a developing economy that can be represented by the Solow growth model. Suppose that in this economy
3. Expropriation risk and standards of living. Consider a developing economy that can be represented by the Solow growth model. Suppose that in this economy there is a risk of expropriation of capital in steady state. The government, although not explicitly modeled, can expropriate a fraction of the capital stock and such a fraction becomes useless in this economy. We can capture this change by an increase in the depreciation rate, 0
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