Question
Consider two countries (A and B), which are in the steady state of the Solow Model and have identical fundamentals, i.e. same parameters, such as
Consider two countries (A and B), which are in the steady state of the Solow Model and have identical fundamentals, i.e. same parameters, such as the capital depreciation rate , the technological growth rate g and the population growth rate n, same production functions, i.e. Y = F(K, AL) and same saving rates, s. This implies that the steady-states of the two countries are identical. As a consequence of a global pandemic which lasts only one period, 25% of the workforce dies in country A. Differently, the same pandemic implies the death of 10% of the workforce in Country B. Furthermore technology growth rate in country B decreases by 20%, forever. No effects on technology is registered in country A.
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