Question
Consider the endogenous growth model with human capital accumulation. Suppose there are two countries: rich and poor. The rich country has a higher GDP as
Consider the endogenous growth model with human capital accumulation. Suppose there are two countries: rich and poor. The rich country has a higher GDP as well as a higher income per capita than the poor country at the moment. Suppose the poor country has a higher population growth rate n than the rich, but the efficiency on human capital b is lower than the rich. Time allocated to human capital investment 1 u is the same for both countries. (a) How do the levels of income per capita and the growth rates of income per capita compare between the rich and poor countries? (b) In terms of GDP, can the poor country catch up with the rich? Why or why not?
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