Donald Harris,a retired economics professor at Stanford, did decades of research on growth and incomes in developing countries such as Jamaica where he was born. His daughter, Kamala, will soon be nominated to run for Vice President of the US so I was thinking about Don recently and he inspired this problem.

Suppose that Jamaicahas the production functionwith K = 120 and L = 200. Many people live on the island but we will just focus on the three people inthe table below.

NameAmount of LAmount of K

Hamilton Brown15Don Harris31Jay Smith20

i. Calculate the income of each person in the table.

ii. Many economists believe that foreign direct investment (FDI) will help developing countries grow. FDI involves foreign companies setting up operations in a country such a McDonald's in Jamaica or China. This would increase the amount of capital since the foreign firms bring substantial amounts of capital. Perhaps K would rise to K = 180 for our example.

How would this FDI impact income inequality in Jamaica? You can measure inequality using the ratio of the highest income to lowest income. Briefly explain your results in words.

see picture

Donald Harris, a retired economics professor at Stanford, did decades of research on growth and incomes in developing countries such asJamaica where he was born. His daughter, Kamala, will soon be nominated to run for Vice President of the US so I was thinking about Don recently and he inspired this problem. Suppose thatjamaica has the production function Y= 2K0'6L0'4 with K = 120 and L = 200. Many people live on the island but we will just focus on the three people in the table below. Name Amount of L Amount of K Hamilton Brown '1 5 Don Harris 3 1 Jay Smith 2 0 i. Calculate the income of each person in the table. ii. Many economists believe that foreign direct investment (FDI) will help developing countries grow. FDI involves foreign companies setting up operations in a country such a McDonald's injamaica or China. This would increase the amount of capital since the foreign firms bring substantial amounts of capital. Perhaps K would rise to K = 180 for our example. How would this FDI impact income inequality inJamaica? You can measure inequality using the ratio of the highest income to lowest income. Briey explain your results in words