Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

3. Suppose that we are comparing two countries, . and _, that are similar in every respect I J except the education of their population.

image text in transcribed
image text in transcribed
3. Suppose that we are comparing two countries, . and _, that are similar in every respect I J except the education of their population. The production function of both countries is represented by , where Y: output, A: productivity, K= capital stock, L: Y =AK \" (hL)1' 0' raw labor, and h = the quality (in the form of years of education) per worker. In Country . , all adults have an average of 10 years of schooling. In Country _, all adults 1 J have an average of 4 years of schooling. Assume that the return to education is 20% per year for the first four years of schooling (grades 1-4), 14% per year for the next four years (grades 5-8), and 7% per year for education beyond eight years. Using the Solow model of economic growth, calculate the ratio of output per worker in the steady state in the two countries

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Macroeconomics

Authors: Paul Krugman, Robin Wells

4th Edition

1464110379, 9781464110375

More Books

Students also viewed these Economics questions