Assume there are two countries, Country W is the technology leader and Country Z is the technology follower. Let W always have a larger share of the workforce in R&D than Z, and for simplicity assume each country has the same population size. The model is characterized by the following 5 equations:, (1 ) W W AW yA ? = ?, (1 ) Z Z A Z yA ? = ?A,W W i L? A ? = A,Z Z c L? A ? = W c Z AC A ?? = ?? ??

with C a declining function of W Z A A . This assumption for C means the cost of Z copying W's technology is smaller the greater W's technology is relative to Z's technology. Assume that all the parameters are positive and so are all the variables, and the each of the share parameters is less than one. Everything in this model is clearly defined in the lecture notes if you have forgotten.

Now suppose Country W permanently increases its share of workers involved with R&D.

A. Using a graph which has W Z A A

on the horizontal axis, SHOW and EXPLAIN how technology

GROWTH in each country will change in response to this change in the share of R&D workers.

B. On another graph with time on the horizontal axis, SHOW and EXPLAIN how the LEVEL of EACH county's technology changes over time in response to this change in the share of R&D workers.

C. On another graph with time on the horizontal axis, SHOW and EXPLAIN how the LEVEL of EACH country's output per worker changes over time in response to this change in the share of R&D workers.

4. Assume there are two countries. Country w is the technology leader and Eountry Z is the technology follower. Let w always have a larger share of the workforce in Mill than 2. and for simplicity assume each country has the same population size. The model is characterized by the following 5 equations: .. y L .. y L A maul-m) haze-r...) Aw: T A2: it uc=C[w] A with C a declining function of 14\" . This assumption for E means the cost of 2 copying W's Z technology is smaller the greater W's technology is relative to 2'5 technology. Assume that all the para meters are positive and so are all the variables, and the each of the share parameters is less than one. Everything in this model is clearlyr dened in the lecture notes if you have forgotten. Now suppose Country W pennanently increases its share of workers involved with Hall. A\" A. Using a graph which has on the horizontal axis. SHw and EXPLAIN how technology 2 GROWTH in each country will change in response to this change in the share of HELD workers. B. On another graph with time on the horizontal axis, SHOW and EXPLAIN how the LEVEL of EACH county' s technology changes over time in response to this change in the share of HELD- workers. C. {in another graph with time on the horizontal axis, SHOW and EXPLAIN how the LEVEL of EACH co u ntry's output pe r worker changes overtime in response to this change in the sha re nf REE! workers