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According to the endogenous growth model. the steady-state rates of grth of human capital. H, and output. 1 are the same and equal Evil -
According to the endogenous growth model. the steady-state rates of grth of human capital. H, and output. 1" are the same and equal Evil - a} - l. The plot below provides data on the growth rates of H [measured as return to years of education} and 1"{measured as real GDP per capita} for a sample of 139I countries. Average Growth Rates off! me] Y s Growth Rate cfH ['] a. The evidence above appears to contradict the prediction of the endogenous growth model that Hand Y grow at the same rate. What do you see in this plot that leads us to conclude that the evidence contradicts the model? On the other hand. does the evidence suggest that the two rates of growth1 although not equal to one another1 are nonetheless positively correlated? 1|ilr'hy or why not']I b. Two key assumptions of the endogenous growth model are (i) physical capital is absent and {ii} the share of time spent producing goods, it. is constant. How might these two assumptions make it more likely that the data would be inconsistent with the model']I c. Despite the evidence shown above. why does the global evidence on convergence suggest that we ought to seriously consider the endogenous growth model as an alternative to the Solow growth model";I
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